SLIPPERY ROCK, Pa. -Cheryl Norton, president of Slippery Rock University, is looking for anyone with a spare $5.2 million; ideas how the University can generate such funds; or suggestions about how SRU can save that amount so she can balance the 2013-14 budget.
Norton delivered a slide-filled "State of the University Address" Thursday in the Smith Student Center Ballroom to faculty, staff and students that methodically laid out the financial challenges the University faces.
The 50-minute presentation began on a positive note as Norton recalled many of SRU's successes during the last fiscal year.
"For SRU, 2012-13 was a very good year," Norton said.
Among those highlights, she said the University remained a "best choice, first choice institution." She listed a number of accolades received from outside evaluators, including U.S. News, the Princeton Review, GI Jobs magazine, the Pittsburgh Post-Gazette, the Online Colleges report, the Corporation for National Community Service, the Daily Beast and the Chronicle of Higher Education, among others.
"These accolades validate the work we are doing at Slippery Rock University," she said. Norton also cited a sampling of accomplishments by faculty, staff and students. She noted the faculty continues to produce great scholarly research and have published some 70 books, chapters and articles and have presented at 225 local, state, regional and international conferences. She also cited the national awards won by the University Public Relations Office, the awarding of nearly $1 million in grants to SRU and the academic accreditations awarded in the 2012-13 by national accrediting bodies.
"Our fundraising efforts exceeded our $2 million goal with almost $2.5 million donated to SRU, and the results of that meant $4.2 million was awarded in scholarships," she said.
"For the first time since the performance indicators have been used by the Pennsylvania State System of Higher Education, SRU scored more points than any of our sister institutions. You should be very proud of the work you did to help us reach that goal, " she said. That could result in an award of nearly $500,000 from PASSHE.
"SRU ended the 2012-13 fiscal year in the black by $300,000 despite a loss of $500,000 in funding from enrollment decline, a personnel cost increase midway through the year and increased pension contribution and healthcare rates," she said. Factors contributing to the budget surplus included a 3 percent increase in tuition approved by the PASSHE board of governors and strong winter and summer online sessions that generated an additional $1.7 million.
Norton said the University's nearly 82 percent retention rate helped offset the enrollment decline.
The president also highlighted a number of student successes, including the team of exercise science major who won the National American College of Sports Medicine Exercise Science Student "College Bowl"; the sport management student team that took first place in the inaugural Sports Entertainment and Venues Tomorrow Conference Case Study Competition; and The Rocket, the weekly student newspaper, which won numerous awards. Norton took time to recognize Alex Mowrey, The Rocket photo editor, who won two first place national awards for his work. She also noted that SRU continued its tradition of providing volunteer services to the community and outlined a list of honors won by SRU student athletes included having 17 student-athletes named to All America teams.
"It takes a village of caring staff and educators to prepare the next generation of scholars," Norton said.
"But while this may be 'the best of times,' it also has the potential to be 'the most challenging of times'...at least financially," she said.
"The perfect financial storm is upon us, a storm we have not experienced before," she said, listing three "storms" that are colliding to create the budget situation. They are: flat state funding with the potential for minimal or no tuition increases; declining enrollment due to demographic trends in the University's primary market area; and increased expenses and rising personnel costs.
SRU has weathered individual challenges in the past, but the combination of these factors will require a new way of thinking and a new reality for the University, she said.
"While we are grateful for the support we receive from the state, it is a fact that our appropriation per FTE has been reduced by almost 50 percent since 1997/98, from $7,100 to $3,200 in 2012/13," she said.
"When there were financial challenges in fiscal years 10 and 11 we had federal fiscal stabilization funds. In fiscal 10, 11 and 12, the board of governors also passed record tuition increases of 3.7 percent, 4.5 percent and 7.5 percent to offset the loss of stabilization funds and decreases in state appropriation. Folks, that is just not going to happen again," she said. "As we plan for the future, we need to plan for flat funding, at best, from the state and little or no tuition increase."
"Enrollment is critical to our financial stability because with the decrease in state funding, we have become increasingly dependent upon tuition and fees to operate the institution. In fact, nearly 70 percent of our operating budget now comes from tuition and fees. For each 100 student decrease in enrollment, the institution loses $765,220," she said.
Although the numbers are changing on a daily basis, Norton said the University would most likely experience an overall enrollment decline of nearly 3.2 percent, which includes a decline in the freshman class of nearly 8 percent. "That smaller freshman class becomes a smaller sophomore class and so on. You can see why this is a multi-year problem," she said.
SRU primarily draws 69 percent of its students from a 10-county area. "When you look at the projections from those counties for the next three or four years, the students just aren't there," she said.
Among the list of future enrollment concerns she described was the slow recovery of the Pennsylvania economy, greater enrollment decrease than high school graduation numbers would suggest, declining freshman enrollment affecting subsequent year's enrollment, declining numbers of high school graduates eventually decreasing transfer enrollment and maintaining current retention percentages.
However, she said, there was one bright spot. Online summer credit hours increased 5.7 percent and graduate headcount is up this fall by 8.6 percent.
"The lesson," she said, was "the market we have historically served is shrinking, but new markets are emerging, including adult students, on-line students and those who want year-round education opportunities outside the traditional semester delivery system."
She said the third storm was increased expenses and climbing personnel costs brought about by recent contracts and other factors not controlled by the University. "Our personnel costs, which include salaries, wages and benefits, now consume 79 percent of the budget. Nearly 81 percent of our expenses relate to personnel costs and debt payment. If would be disingenuous of me to stand here and not say that we will have to address personnel costs in our budget planning scenarios."
In looking at the projected budget numbers for this year, Norton said, SRU is facing a $5.2 million gap between expected revenues and expenses. She said that University reserves could be used, but that within three years that money too would be exhausted, leaving the University in even worse shape. "We'd be using one-time money to try to deal with a structural budget problem and that simply does not work," Norton said.
Although the numbers at this time are very preliminary, Norton said based upon planning assumptions that state support would remain flat, enrollment would decline and expenses would increase, the projected deficit for 2014-15 could be $10 million, and for 2015-16, $13.5 million. "That would mean a cumulate potential deficit over the next three years amounting to $28.9 million if we did nothing," she said.
Norton said, "There is no golden bullet," just hard work, planning and focus to address the structural budget problem.
"We must redouble our efforts to bring students to this institution including first year, transfers, graduate and international students; develop curriculum that addresses 21-st century needs; focus on non-traditional educational opportunities; reach out to the community to create innovative partnerships that support educational access; utilize the institution's mission and data to guide our decisions; work together in a spirit of shared governance recognizing that decisions to contain costs and increase revenues lie within the administration, but we must all have a voice," she said.
"Logically, the deficits can only be reduced by increasing revenues and containing costs. In reality, personnel is our primary cost. And, furlough and retrenchment, while a last option, must be considered in our planning," Norton said.
Norton said the budgeting process would continue to be driven by four basic principles:
Students come first. Educating students is always the highest priority.
Consultation with faculty, students and administration on matters of the strategic plan and budget decisions are an inherent integral part of the shared governance of the University.
Cuts and/or increase are not made "across-the-board." Doing so violates the purpose of the strategic plan and is a formula for mediocrity; and
The University cannot be all things to all people. The budget reinforces the strategic priorities of the University to preserve the overall quality of the institution.
She asked, "Will we get through this?," then answered, "Yes. After all, next year this institution is 125 years old. It has learned to adapt and to change. As I tell everyone, Slippery Rock University is rich in its history, strong in its roots, with unlimited potential for the future."
The complete PowerPoint file is available at:http://www.sru.edu/budget/Documents/StateoftheUniversity91213.ppt.
Slippery Rock University is Pennsylvania's premier public residential university. Slippery Rock University provides students with a comprehensive learning experience that intentionally combines academic instruction with enhanced educational and learning opportunities that make a positive difference in their lives.