Kentucky State budget shortfall: $23 million needed to get ‘back to square one’
At meetings this week, more details about Kentucky State University’s multimillion-dollar deficit were discussed by the Council on Postsecondary Education.
The council approved its budget request for 2022-2024, which includes funds to assist KSU, at meetings on Thursday and Friday. CPE is the state’s coordinating agency for higher education. The overall budget request includes a 10% increase in operating funds for performance funding, pension relief for several schools, and $700 million to repair and maintain state-owned campus buildings.
The budget request also includes $23 million in special appropriations to cover the current budget shortfall at KSU. The shortfall includes $15.5 million from last year’s budget, as well as a $7 million shortfall for this year’s budget. Previously, university officials told state lawmakers that the university did not have enough cash to operate after April 2022.
“The $23 million is really just to get us back to square one for this current budget year,” CPE President Aaron Thompson said.
The money for KSU would be placed in a trust that would require the school to get approval from CPE before spending the funds.
For nearly two hours on Thursday, the council discussed KSU’s financial state. The university’s budget shortfall was caused by poor financial management and “overspending every year in a variety of areas,” said Travis Powell, vice president and general counsel for CPE.
KSU Chief Financial Officer Greg Rush said KSU previously had an “overall lack of budgetary control, pretty much top to bottom.”
Powell gave several examples of poor financial management, including the former president’s office spending $850,000 over its budget and an accounting system used by the school that is inadequate.
CPE also found that the university would frequently not pay vendors, and earlier this year, had significant debts to pay vendors. In CPE’s report, some KSU staff members were “told to ‘not answer their phones’ when vendors called.”
“They also indicated that they were threatened with termination if they disclosed that the university did not have sufficient cash for its obligations,” the report said.
Additionally, CPE will request $1 million per year for the next two years for KSU to establish specialty programs. Thompson said having innovative programs at KSU, like teaching and government programs, will help attract new students. Thompson said he envisions having programs at the school that are as successful as its landgrant programs.
“Those dollars are really designed to help KSU thrive in the future, to be able to build a consistent student pipeline,” Thompson said.
In a statement from the KSU Board of Regents sent Friday afternoon, regents said the school has started to work through the recommendations made by CPE.
“Kentucky State understands it will no longer be business as usual. The management and improvement plan will guide the institution’s work. Together, we will work diligently with our stakeholders—faculty, staff, students, alumni and supporters—to reposition the institution,” the statement said.
The statement noted that KSU has “some difficult decisions ahead.”
“Failure is not an option. Failure to pay vendors on time is no longer an option. Failure to reimburse state construction accounts is no longer an option. Failure to follow the institution’s policies and procedures related to the collection of students receivables is not an option,” the statement said.
CPE’s budget request also includes a 10% increase in operating funds for performance funding and pension relief for six schools in the state. It is also requesting $700 million, or $350 million each year for the next two years, for capital investment for state-owned campus buildings.
Also included in the budget request is $60 million for Bucks for Brains, a program that helps fund research at Kentucky colleges.
Funding this budget request would be an investment in the future of Kentucky, Thompson said.
“Kentucky’s economy is strong right now, and the only way that is became strong and can remain strong is to have an educated workforce,” Thompson said. “The most direct correlation to an educated work force is a strong higher education system.”
This story was originally published November 5, 2021 at 1:49 PM.