KU Financial Sustainability Plan
My warmest greetings to the Kutztown University community.
I’ve recently returned from several days of meetings in Harrisburg, wherein the chancellor and university presidents of the State System discussed the continued financial challenges we are facing as individual institutions and collectively. The chancellor will soon be sending letters to the PASSHE community and State System presidents to outline the expectations the State System has with regard to the financial health of each institution. These letters will be distributed in the coming days. The following information is unique to Kutztown University:
Last semester the State System put in place a financial risk assessment process wherein each university examined its recent financial results and, if required, developed a Sustainability Plan based on projected data over a five-year period. The process included universities being placed in one of four categories, based on the level of financial risk for each university. The criteria used were Enrollment Indicators (the pattern of Student FTE over previous years), Operating Margin Indicator/Ratio (annual revenues minus annual expenses divided by the annual revenues), Primary Reserve Indicator/Ratio (expendable financial resources--unrestricted plus temporary restricted--divided by annual operating requirements--total expenses), and University Minimum Reserves (cash within all funds, with the exception of restricted and agency, to cover at a minimum 90 days of operating expenses based on prior year financial statements).
While KU was strong in two of these areas, it was determined that we were at risk resulting from falling enrollment, a negative operating margin, and our declining reserves (a result of using one-time funds to balance our E&G budget in past years, and also due to funding necessary deferred maintenance projects in Lytle Hall, Old Main, and the renovation of a number of our residence halls). As a result, KU was asked to submit a Financial Sustainability Plan.
Over the last six months, the components of this plan were shared with campus and student leaders with the final version being approved by the State System this week. Matt Delaney, our CFO, and Natalie Cartwright from Institutional Research, are presenting the final version of this plan to university groups (Council of Trustees, University Senate, APSCUF general meeting, Student Government, Strategic Planning Committee, and others). The plan is attached to this memo. Below is a summary of actions already taken, and actions to be taken in the future to attain full financial sustainability:
Kutztown University’s plan toward financial sustainability began with fiscal year 2018/19, when we balanced our E&G budget without the use of cash reserves for the first time in eight years. Budget reductions have been a common occurrence on our campus for the past several years, but they were typically done to a lesser degree and coupled with the use of one-time funds, as we hoped for enrollment to improve the following year. While we essentially broke even in our headcount last year, we have continued to lose student FTE since 2011. We have established the following four goals to move us toward financial stability: Recruitment, Persistence, Continue to Right-Size our Annual Budget, and a reliance on our Comprehensive Campaign to provide additional funding for scholarships and building projects.
1) Recruitment - Increase freshmen enrollment to 1,600 and transfer enrollment to 575 by fall 2021. These are levels that we have achieved in four of the past five years. More importantly we have funding and strategies behind these targets.
- First, we are working with Ruffalo Noel Levitz (RNL) on a Financial Aid Optimization Plan that will commence this upcoming fall but will have an even greater impact in future years, when we will have time to fully implement all phases of the new financial aid strategy. We have placed an additional $2 million per year into student aid to account for this new approach.
- Next, we have enhanced our Admissions staff. We hired a new director of Admissions in May, we have added a second out-of-state recruiter, and we are in the process of adding an additional Admissions recruiter to increase our focus on minority students in our surrounding area.
- Finally, we continue to expand our reach and add new avenues toward attracting students. We have completely redesigned our website, we have completed a rebranding initiative, we have joined the common application, we have increased high school visits and bus trips, and we have developed new partnerships with local community colleges and surrounding high schools.
2) Persistence – Increase university persistence rate to 68% by fall, 2023. Increase freshmen cohort retention by 1%, annually, fall 2020 to fall 2023. Achieving this goal would bring the university back to 78%. Retention efforts have been expanding over the past few years at KU, and now include many best practices.
- We recently added a First-Year Seminar course intended to help students succeed as they transition to college. This program includes an investment in peer mentors to assist students in their transition to college.
- Next, the university continues to tweak and expand its early intervention and early warning systems, including a mid-term grades initiative. Identifying students in academic jeopardy and getting them the necessary help in a timely fashion is clearly a key to success.
- We are reducing the students’ financial burden by adding new scholarships and increasing student employment opportunities across campus. The new scholarships are a result of our work with RNL and will be provided over a four-year period. Student employment at KU has proven to be a successful driver of retention on our campus.
- Other programs in place increase the number of connections students make and increase the time that they have with our dedicated faculty. These include KU Bears summer research, undergraduate research and creativity programs, and Summer Talent Academy for Rising Stars (STARS). We have also invested in targeted equipment purchases to stimulate student participation in research, such as the IDEA Lab and the Scanning Electron Microscope.
- Please keep in mind that a 1% improvement to our retention rate equates to keeping an additional 14 to 16 students per year. Therefore, targeted programs that impact smaller, more specific populations of students will also play an important part in achieving this goal.
3) Continue to right-size the annual operating budget in order to ensure Financial Sustainability.
- We have maintained a hiring freeze for all staff positions since January 2019. This has resulted in the elimination of 57 positions across the E&G and Auxiliary operations, redistribution of work, in some cases reduction of services, and careful review of any proposal to fill a vacant position by the President’s Cabinet.
- We have cut $1.1 million from operating budgets across the university and asked departments to reevaluate all nonessential spending.
- The University has also reduced spending on non-deferred maintenance projects.
- We have made significant reductions to the temporary faculty pool as enrollment has declined. In future years, we plan to make cuts to tenure track positions that are filled with temporary faculty as we move towards a more financially sustainable student to faculty ratio, as expected by the State System.
- We have scheduled a retreat to discuss space allocation across campus. In conjunction with that meeting, we intend to develop a more comprehensive plan toward revising our campus footprint. We do have plans to take one residence hall off-line for the upcoming semester (with a projected annual savings of over $500,000).
- We have no plans to use unrestricted net assets or cash reserves to balance our annual operating budget.
4) Kutztown University Foundation Comprehensive Campaign will raise over $6 million annually.
- The campaign will focus on student scholarships and enhancing the student experience.
- The campaign is intended to help the university achieve the three previously outlined goals.
- The foundation had its highest fundraising threshold last year with $6.1 million being raised. This year, they have already surpassed that amount with five months yet to go in the fiscal year. The continued success by the foundation in fundraising and alumni engagement activities, along with the investment in the new Hampton Inn & Suites of Kutztown project, will allow the foundation to continue growing its support of our students in future years.
These four goals are the basis of our financial projection set forth in the sustainability template. We firmly believe the projection is attainable and as displayed will lead to small but steady improvement in our financial indicators. This will return Kutztown University to good standing with the State System criteria for financial sustainability.
The following link will lead to our Financial Sustainability Plan and also our Goal Alignment Strategy documents. These links require Kutztown University credentials; you will need to be on campus or connected via a VPN.
We look forward to sharing more information with you all in the weeks ahead.