Chicago State University faces year-end deficit, needs to slash expenses

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In messages to prospective students and the public, Chicago State University officials are promising an optimistic future — one that might someday even include a school football team.

In documents submitted to state officials responsible for funding, however, the same administrators are painting a picture of financial distress. They describe how the university will burn through its cash reserves before the end of the school year and be forced to make additional cuts unless more money comes from Springfield.

This is the fine line that Chicago State officials have walked as they create a sense of financial urgency, while, in the face of declining enrollment, also try to assure current and prospective students that the nearly 150-year-old university’s future is strong.

“We are adequately reserved for any contingencies we may have,” Cecil B. Lucy, the university’s interim president, said in an interview earlier this month. “What you have to realize is that if you look historically we have never gone without an appropriation of some sort from the state.”

For the past 18 months, throughout a protracted state budget stalemate, those appropriations have been irregular, at best. There are currently no plans for state dollars to flow to Chicago State — or to any other public college or university — next year.

Documents obtained by the Tribune through a public records request show the university could exhaust its $26 million of cash reserves by May and end the academic year short $3.5 million — about one month’s payroll. The financial projections were submitted to the Illinois Board of Higher Education, which approved just more than $3 million in emergency funding for Chicago State last month.

Of all the public universities in Illinois, Chicago State has been among the hardest hit by the budget gridlock that has cut off regular appropriations for higher education, social services and other areas. The school receives about one-third of its funding from the state.

Through two stopgap budgets, Chicago State has received about $32.5 million during the past year and a half. That compares with the $36.1 million it received from the state during 2014-15, the last year of full state funding.

In response, Chicago State trustees declared a state of financial exigency, or emergency, in February. The university laid off about 40 percent of its employees in the spring, reduced library hours and shaved spending on travel and campus supplies.

The trustees voted earlier this month to lift the emergency designation in a resolution stating Chicago State was in a stronger financial position. However, there was no discussion and no financial documents presented to support that assertion.

It’s been a difficult year in other ways for the Far South Side university, which serves mostly a minority population from Chicago. A new president arrived in January only to resign nine months later. Enrollment dropped this fall to under 3,600 students, less than half of what it was six years ago. There were fewer than 90 new full-time freshmen when school started in September.

The fiscal problems also led to the university being sanctioned by its accrediting body; the Higher Learning Commission will visit the campus in January to determine whether the sanction can be lifted or if other penalties are needed.

To analyze the university’s finances, the Tribune obtained various financial documents through public records requests, including those submitted to the higher education board last month to qualify for the $3 million in emergency funding.

IBHE provided Chicago State, along with Eastern Illinois University and Western Illinois University, with the equivalent of one month’s payroll. Western received about $8.4 million and Eastern about $5.6 million.

Without further state funding this school year, Eastern would spend $19 million from its cash reserves, while Western would burn through $16 million of unrestricted cash and begin spending restricted funds set aside under bond covenants, according to documents submitted to the IBHE.

None of the universities will have reserves of this magnitude next year and will need to find new sources of funding to continue operations for another school year.

Even after receiving the state funds in late November, Chicago State is projected to still be in the red by $3.5 million, according to the cash flow statements the university submitted to the state.

Chicago State will receive tuition revenue throughout the remainder of the year, but the amount is not enough to offset the projected deficit. As the school’s enrollment has declined, so has its tuition revenue. Last year, the school billed $26.5 million for classes and fees and this year only expects to bring in $20.6 million. Fall enrollment was down 25 percent.

Lucy disputed the contention that the university is financially vulnerable. He said the university’s forecast to IBHE included some “wish list” items and about $4 million earmarked for emergency repairs that could be eliminated to make ends meet.

Administrators later gave the Tribune an amended list labeled “possible cost levers to reduce spending.” The document included more than $9.6 million of construction projects and program reductions that administrators could cut to eliminate the potential deficit.

But those same items are ones that administrators said were “critical unfunded needs to rebuild CSU” in documents submitted to the higher education board. The cuts, which totaled $26.9 million, would come in areas that school leaders are trying to emphasize in their efforts to revitalize Chicago State.

The reductions would include $6.6 million in maintenance projects, including fixing emergency generators instead of replacing them and canceling library roof repairs.

Rather than $1 million originally planned for marketing — deemed a critical component to drive enrollment — the department would only be allotted $200,000. A $1.5 million software update for the enrollment management department would be postponed. A $750,000 plan to expand on-campus child care provided to students, teacher and staff would be tabled.

If all the cost savings were successful, the belt-tightening combined with the emergency funding would leave Chicago State with a surplus of about $6 million rather than a deficit of $3.5 million, officials said. There are no plans for further staff layoffs, Lucy said.

Michael LaFargue, a Chicago State alum who sits on an advisory council to the school, said such sacrifices would not be ideal but may be unavoidable.

“You always want to maintain the integrity of your property,” LaFargue said of the proposed changes to maintenance spending. “But in this situation, it’s a reality that the state has financial problems. This is what has to be done.”

But instead of focusing on possible cuts, Chicago State officials are making big plans for the future.

In a letter sent to the campus community last week, Lucy said the university is “rebuilding” and encouraged everyone to “spread the word widely that CSU is alive and well,” including by encouraging students to apply for admission.

“Now is the time to roll up our sleeves and work even harder to build on the legacy of quality education for our students,” Lucy wrote.

At a board meeting on Dec. 9, when trustees declared an end to the school’s financial emergency, school leaders outlined plans to move the school ahead.

The plans include advertising in Chicago’s northern suburbs and several nearby states to attract new students. There was talk about purchasing space on billboards and sending direct mailings. Administrators and trustees discussed the idea of creating a football team with an accompanying marching band and cheerleading squad as a potential enrollment booster.

There was no talk, however, of management’s plan to slash spending in all of those areas in order to make it through the school year.

Darren Martin, student government president, said students will be watching. He said Lucy and Provost Angela Henderson have improved community outreach but said more transparency would improve the student experience, restore confidence in the leadership and reassure students that administrators are doing everything they can to help Chicago State prosper.

“For students, they’ve lost faith in the Legislature and the governor to actually come up with a budget. Now they’re looking to Chicago State to solve the problem internally and externally,” Martin said. “They want the school to respect them as students and they’re willing to do what it takes to help Chicago State succeed. But Chicago State has to help them succeed in the same way.”

Ann Kuzdale, an associate professor who has taught at the university for 20 years, said that at a recent faculty meeting, administrators did not mention further reductions for the current year or a broader solution to the fiscal crisis.

“If there’s a plan I don’t know it. It seems like they have their finger in the dam, but there’s not a lot of big thinking going on to come up with creative solutions,” Kuzdale said. “There’s not a culture of shared governance in place at Chicago State, so if there is a plan — God love them, but my feeling is they are just flying by the seat of their pants.”

pmatuszak@chicagotribune.com

drhodes@chicagotribune.com

Twitter @PeterMatuszak

Twitter @rhodes_dawn

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Chicago State University faces year-end deficit, needs to slash expenses

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