Can public regional members get out of financial trouble?

ENew Jersey City University was founded eight years ago several ambitious efforts expand its campus locations through real estate deals and public-private partnerships to bring in more students and money.

But the university’s grand vision has been eroded by the pandemic: Enrollment has dropped more than 14 percent in the past two years, the university ended the last fiscal year with a $14 million budget deficit (more than 10 percent of its total budget), and the president who helped guide the expansion plans unexpectedly resigned in June. College leaders are preparing to cut programs and faculty, and the state’s governor has called for an investigation into the institution’s finances. Some state lawmakers are even questioning whether the university, commonly referred to as NJCU, should remain open.

NJCU’s story is a cautionary tale for similar institutions — small public regional colleges with ambitions to expand in a crowded higher education market. While its real estate deals have drawn adverse scrutiny, the university responded to challenges facing peers in northern New Jersey and across the country: increased competition for declining high school graduates.

“It made sense for them to grow,” said Robert Kelchen, a professor and chair of the Department of Educational Leadership and Policy Studies at the University of Tennessee at Knoxville. “But the total number of potential students is much smaller than anyone expected, and students generally want to go to larger and more selective institutions.”

The university’s fiscal situation will not improve any time soon. Enrollment is projected to decline again next year, and officials estimate a deficit of nearly $13 million in fiscal year 2023, according to a September report to the university’s Board of Trustees.

How did things get so bad? Faculty who objected to the expansion plans accused the former president of mismanagement and betting the university’s future on risky ventures. A no-confidence motion by the university’s senate, approved a year ago, said none of the projects “have so far demonstrated a proper return on investment, and it is not clear when or if they ever will.”

University officials acknowledged the deals didn’t go as planned, but said the deals weren’t entirely to blame for their budget woes.

“Could you have predicted a once-in-a-lifetime pandemic?” said Andrés Acebo, the university’s general counsel, describing the impact of Covid-19 on admissions. “Since fall 2018, the university has lost nearly 1,300 students,” Acebo said. “It would have a seismic impact on any institution. It would make life easier to say real estate is the problem.

public regional universities like NJCU enroll about 40 percent of all in-state college students and a much higher percentage of minority, low-income, and first-generation students than do more well-known flagship and top research universities. At NJCU, for example, more than 70 percent of students qualify for Pell Grants, according to federal data, and two-thirds are Hispanic or black, reflecting Jersey City’s extraordinary diversity.

But a lack of state support, a limited ability to attract students from outside the region and sparse fundraising have left the university vulnerable to economic downturns and demographic changes that have led to fewer high school graduates, particularly in the Northeast and upper Midwest.

In Connecticut, for example, the state’s college and university system faces a budget deficit of nearly $270 million, according to news accountslargely due to declining enrollments and increased labor costs.

In Michigan, public districts are closing dormitories or selling buildings to developers to make up for declining tuition revenue, while enrollment at flagship universities, the University of Michigan in Ann Arbor and Michigan State, has remained strong and is even growing.

NJCU has fared worse than many similar institutions. Between 2016 and 2021, undergraduate enrollment dropped by more than 21 percent, according to the university.

University figures show that this fall, the number of universities fell by nearly 5 percent compared to a year ago, and according to a September report sent to the university board, it will fall again by 8 percent next fall.

AAt one point, the university had a plan to position itself better, serve more students in the region and diversify its revenue.

In 2014, President Susan Henderson, signed a 20-year lease The 70,000-square-foot building to house its business school carries an annual rent of $2.3 million.

In 2017, Henderson was among the officials who broke ground on the 22-acre development, which would include a university dormitory, a performing arts venue and several commercial spaces for apartments, retail and parking. The land is owned by the university, but under a public-private partnership, the developers will not begin paying rent until fiscal years 2023 and 2024.

University in 2018 signed a 40-year lease for space at a former U.S. Army base about 50 miles from campus that was being redeveloped by the state. The deal cost NJCU about $1.6 million per year starting in 2021.

At first, these plans seemed to work. In the years 2014–2016, the number of students enrolled in bachelor’s studies increased by 7 percent, according to the university.

But then registration dropped. The real estate deals led to financial problems over time, in part because NJCU’s early enrollment projections were too rosy, according to financial analysts at Moody’s Investors Service, the university’s audit and bond rating agency.

For example, the university’s foundation created a separate limited liability company to finance the construction of a dormitory in the 22-acre University Place development. But because the university didn’t fill the dorm, it has “decided” to pay the company nearly $3.5 million starting in 2020 and has spent $3 million more this year, according to the auditor’s report.

Acebo, the university’s top lawyer, also blamed the financial problems on the university’s financial aid program, which he said has grown from $3 million to $14 million in recent years. The program guarantees that in-state high school graduates from families earning less than $65,000 a year can complete their degree without student loans if they study full-time. This was another expense that was difficult to cover due to reduced tuition revenue and increased operating costs.

Henderson did not respond to a request for comment.

WAt NJCU, enrollment has declined, the ability to recruit more students in the area is being reduced by the overcrowded higher education market around Jersey City.

Within just a few miles of the university are several other institutions — Essex County College, Hudson County Community College, Rutgers University Newark and the New Jersey Institute of Technology — that compete for the same students who typically attend NJCU.

Some institutions openly promote students from NJCU’s own community. Saint Peter’s University, the Jersey City campus famous for its surprising run to the 2022 NCAA men’s basketball tournament, is even advertising at bus stops around campus, said Francis Moran, NJCU political science professor and university senate president.

Montclair State University, about a 20-mile drive from NJCU, offers a seamless transfer program With Hudson County Community College just two miles away. Students in certain majors may begin at Hudson and be guaranteed admission to complete their bachelor’s degree at Montclair. Unlike NJCU, Montclair’s enrollment has declined only slightly during the pandemic.

For competitive reasons, NJCU should consider ways to add other locations as expansion projects, said Tennessee Kelchen, formerly a professor at Seton Hall University, just 15 miles from NJCU. “If they didn’t try to grow, other universities would eat their lunch,” he said.

But the university, he said, needs to be realistic about which projects and area students it competes for.

DDespite enrollment and competition issues, New Jersey’s elected officials have chalked up the university’s financial woes to mismanagement and questioned whether it can stay open.

“I strongly believe that an independent investigation into school finances and operations would be in the public interest at this time,” Gov. Phil Murphy said in a news release last summer. announcing your wish the State Auditor for such an inquiry.

In the announcement, the Democratic governor cited news reports that the university’s “2014 surplus of $108 million disappeared in one year due to pension obligations and bond issuance for more expansion.”

The governor did not respond to a request for comment.

University officials have denied the claims, explaining that the governor and reporters have confused the net position with a cash surplus. Instead, they have said the negative net position stems from 2015 changes in accounting rules that required NJCU to deduct the cost of pension obligations paid by the state.

Audits and financial analysts have noted other problems in the university’s development plans. Over the past two years, the university has paid $1.4 million Strategic Development Groupa real estate development and consulting firm owned by former NJCU Foundation Board of Directors member Anthony V. Bastard.

“For both fiscal years 2021 and 2020, the university incurred $0.7 million in monthly retainer fees related to real estate consulting and project management services,” according to the university’s audit.

Acebo said Bastard’s company was hired through a competitive bidding process and had no conflict of interest.

Bastardi, who was on the foundation’s board from 2016 to 2020, said in an email that his company has “acted as a special advisor to the president and the board of trustees on real estate issues. Our services were procured through a state-specific competition, and our contract with the university was approved by the board of trustees.

NWhatever the cause, a university’s financial woes have a profound effect on staff morale and the student experience.

Professor Moran said campus leaders consider up to 30 percent of academic programs, including many non-degree offerings. More than 20 teaching positions could also be eliminated, he said, in addition to the more than 40 positions lost in recent years. NJCU has about 250 full-time faculty members, according to the university.

Many faculty and staff who keep their jobs will see pay cuts. The faculty union and the university have agreed to unpaid leave five to 18 days, depending on the employee’s salary.

Moran said many of his campus colleagues are frustrated by the perception that NJCU is being singled out for a problem that affects many other public regional colleges in the state.

For example, near William Paterson University cut $30 million from its budget last year and has planned to eliminate 100 teaching positions.

At the same time, the governor added 100 million dollars to the state budget renovate athletic facilities at Rutgers University’s flagship campus. NJCU’s total budget is less than $140 million.

“We’re losing faculty,” Moran said, “but Rutgers is getting $100 million for the football stadium.” In contrast, he said, NJCU’s request for state money is a drop in the bucket.

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