NKU facing $18M budget shortfall, with plan to address budget needs in the coming years
Northern Kentucky University is facing a budget shortfall of more than $18 million, the board of regents learned last month.
Declining in-person enrollment, increasing amounts spent on scholarships and increasing expenditures all contributed to the deficit, chief financial officer Jeremy Alltop said at the Nov. 9 board meeting.
The deficit is about 7% of NKU’s overall budget for the current fiscal year. The university used about $5 million from reserves to help cover part of the shortfall, meaning the current budget is $23 million out of alignment with the original budget.
“While overall revenues increased by $11 million this year, compared with (fiscal year) ‘21, the university’s expenditures increased by over $13 million,” Alltop said. “Overall revenue levels have not kept pace with expenses over the last few years.”
NKU’s total budget is $277.4 million, according to materials from the board meeting. Board of Regents chair Richard Boehne said while the shortfall is significant, he views this as a time to reposition the university’s finances with its priorities. The student population has changed, with about one-third of NKU students attending exclusively online, and more non-traditional students enrolled.
“We came out on the other side of COVID, and virtually no NKU student goes full-time in-person,” Boehne told the Herald-Leader. “It’s a very different model than what it was a few short years ago.”
NKU’s overall enrollment decreased this school year, with 15,827 students enrolled. Of those students, nearly 11,100 are considered full-time. NKU’s full-time enrollment decreased by 3.1% this school year, and has dropped 6.1% over the last three years, according to materials from the meeting.
The majority of the university’s revenue comes from tuition, so a declining enrollment has an impact on the overall budget, Alltop said. The number of part-time students has also grown. In total, changing enrollment at NKU resulted in a $5 million deficit in the budget.
The largest area of overspending was student financial aid, which went over budget by about $8 million. The university will honor scholarships given to students over the next four years, while also evaluating how the financial aid budget needs to change in the future, Boehne said.
‘Financial position is very strong’
Boehne, who has been on the board for 10 years, said there have been previous budget shortages, but none as large as this one. Still, he said he is approaching it as an opportunity to re-align the budget with the university’s priorities and evaluate where spending needs to take place.
Boehne said he does not view the university as financially unstable at this point.
“Overall, our financial position is very strong,” Boehne said. “We’ve been disciplined managers of the resources that are entrusted to us.”
In addition to outspending what the university takes in, Alltop said at the meeting that several budget changes made and approved by the board were “not operationalized,” meaning some departments did not make necessary changes to adjust their updated budget.
At the meeting, Alltop said he expects it will take several years to dig out of the deficit, and next year could show a larger deficit than this year. When asked how long it would take to get the university back to a balanced budget, Alltop said it would not happen immediately.
“I don’t think it can be done in the current year, completely, that we are sitting in,” Alltop said. “I think we are going to see 2023 losses that are greater than the losses from 2022, to be completely honest, with where we are now … We have to make considerable changes over the next two and a half years, and aggressive changes over the next couple of years in particular.”
Plan to address finances includes reorganization, layoffs
The university also presented a repositioning plan for its finances, which aims to address both short- and long-term budget concerns. Part of the plan includes two phases of personnel reorganization, which will include some layoffs. The first phase took employees and moved them into new departments in similar, but vacant roles.
Phase two of the reorganization will include wider-spread layoffs in 2023, which will go into effect for the fall 2023 semester. The total number of layoffs that will occur is not known at this time.
There will be some reorganization of employees, and in the new year, some positions will be cut. Additionally, the university will re-evaluate its scholarship offerings to make sure the budget aligns with what they are spending.
One week after the November board meeting, NKU announced that Vaidya would leave his position at the university on Dec. 19 as the university addresses its finances.
“The NKU Board of Regents and Dr. Vaidya determined that the time is now for a leadership transition as the university embarks on a multi-year repositioning effort in response to changing market and financial pressures impacting all of higher education,” the university said in a press release.
NKU is not the only state university to face a multi-million dollar budget deficit in recent years. Earlier this year, Kentucky State University received $23 million from the state to cover its budget shortfall. The university is on a multiple-year improvement plan, designed to get the university financially back on track and evaluate current university policies and procedures.
KSU is also undergoing a special examination by the Office of the Auditor of Public Accounts, evaluating the governance and financial activity of the university from July 1, 2018 to June 20, 2021. The audit is expected to be completed by next year.