By: Bailey Wachter
For months there have been rumors that Bellarmine University is facing a financial crisis. However, Bellarmine President Dr. Susan M. Donovan said she wants to reassure the university community that these claims are not accurate.
“We do not have a budget deficit,” Donovan said. “We had a budget ‘gap,’ which we have rectified with cost reductions, new revenues and reallocations.”
Bellarmine’s Vice President of Finance Robert Zimlich said that in the past Bellarmine had “gaps” in the budget, but Donovan’s call for transparency and collaboration has brought current budget issues to light.
This $3.5 million “gap” in the budget has been caused by revenue sources not meeting their projections. These revenue sources include tuition from undergraduate and graduate programs and residence halls.
On average, Bellarmine expects about 20 percent of freshmen not to return as sophomores. In the 2017-18 school year, around 177 of the 635 (27.9%) freshmen did not return as sophomores, 50 students more than the 127 that were projected not to return.
“The last five-year average retention from freshmen to sophomore year has been an average of 80.2 percent,” Zimlich said. “This year, the actual retention was 72.2 percent, which was 8 percent less than average.”
Projections for graduate school attendance also have not lived up to the university administration’s expectations. All graduate-level programs, with the exception of the doctorate of physical therapy program, are not at capacity.
Fewer graduate students receive financial aid or scholarships from Bellarmine, resulting in more revenue for the university, Zimlich said. He also said Bellarmine officials are interested in expanding the programs and marketing them better.
“In the past 10 years, 75 percent of our net tuition revenue, after financial aid, came from under-grads and 25 percent of our revenues came from graduate students,” Zimlich said. “Now, two-thirds of our income comes from undergrad and a third comes from grad, and that number is growing. So growth in the future is probably going to come from graduate programs as opposed to undergraduate, and that would help supplement revenue.”
In addition to expanding graduate programs, Zimlich said Bellarmine plans to reduce a large portion of the $3.5 million “gap” through bond refinancing and selling the Glenview mansion where the previous president, Dr. Joseph J. McGowan, lived.
“Before the new president was hired the Board [of Trustees] had already agreed that we were going to sell [the President’s home]. Actually, we were going to put the money back into the quasi-endowment potentially, but we are going to use that to eliminate some of that debt,” Zimlich said.
If Bellarmine is not able to overcome the “gap,” the quasi-endowment can be used.
“The quasi-endowment are unrestricted funds that the Board of Trustees have transferred into the Endowment Fund Investments and they function like Permanently Restricted Endowment Funds. These unrestricted funds are unrestricted funds that can be taken out of Endowment Investments by the Board of Trustees if they want to,” Zimlich said.
This money comes from unrestricted gifts, estates and reserves.
Zimlich also said that although the quasi-endowment is an option to help decrease the “gap,” the Board expects the university to live within its income.
Donovan called for collaboration to help the university eliminate the ‘gap,’ leading to the creation of the Resource Management Advisory Committee, which requested input from staff and faculty. Led by Bellarmine Provost Dr. Carol Pfeffer, the committee included 14 faculty members from across the university.
“Sometimes people who don’t live in the budget all the time have some really fresh, good ideas,” Pfeffer said. “And people who ask questions make you think about things, too. I found [the committee] very helpful.”
The goal of the committee was to brainstorm ideas about how Bellarmine could make money, save money or reallocate funds. Committee members were encouraged to talk to those within their departments to come up with additional ideas.
Bellarmine also created a website that allowed any faculty or staff member to submit ideas, and it generated more than 250 submissions. The committee members were each asked to pick the three ideas they thought were the best, and these were given to Donovan who took them to the Board.
“Dr. Donovan is someone who embraces collaborative governments, not just somebody at the top or somebody [at the top] making decisions and then flow down,” Pfeffer said. “She wanted faculty and staff to come together and hear what was going on with the budget. We are no different than any other tuition-driven institution. Sometimes we’ll miss our marks.”
The biggest decisions that came from the committee and were implemented by Donovan were the discontinuation of faculty and staff raises, decreases in the funds matched by Bellarmine in faculty and staff retirement accounts and the elimination of two interdisciplinary courses (IDC).
“Faculty and staff have received raises every year, but due to budget constraints no raises were given on Jan. 1 of this year. We hope this will only be a one-year salary freeze, but it will all depend on revenues next fiscal year,” Zimlich said.
Bellarmine’s contribution to the employee defined contribution plan (retirement plan) also decreased this year. These changes are supposed to be temporary, but it will depend on next year’s revenues.
“In the most recent past, the employee has been required to contribute 5 percent of their salary and Bellarmine has contributed an additional 10 percent for a total of 15 percent of an employee’s salary. Beginning Jan. 1, 2018, the Bellarmine contribution was reduced to 8 percent,” Zimlich said.
Some decisions have benefitted students, such as the decision to cut the hours needed to graduate from 126 to 120 because of the elimination of the two IDC classes. This decision will lessen the course load for students and make it easier for transfer students to graduate on time. This will save money by decreasing the need for part-time professors and possibly bring in more revenue through transfer students.
“Almost all of our competitors only require 120 hours, so if you’re trying to get transfer students, why would you come here if you have to have to take six more hours?” Pfeffer said. “We have been talking about doing that for a long time. Now it seemed like a timely thing because maybe we would eliminate required coursework.”
Refinancing Bellarmine bonds will also help with the “gap.” These tax-exempt bonds are sponsored by the city of Louisville and bought by the public on the open market. The money made through the purchase of these bonds has been used to fund Bellarmine projects such as building residence halls.
Bellarmine pays buyers about 2 to 3 percent in interest on these bonds, a number that is expected to rise to 4 to 6 percent by 2038 or 2039. To keep rates low, Bellarmine refinanced these bonds.
“We have projections that this will save approximately $800,000 for the next two years, $400,000 for the [following] next two years, and $250,000 from that point to 2038-39,” Zimlich said. “We are not extending the life [of the bond]. We are still paying them off exactly how we planned. We’re just paying less interest on those as we move forward for the entire next 20 years.”
Zimlich said the best interests of the students are the top priority when making decisions about the budget.
“Tuition is not going to be raised more than usual and scholarships will not be cut,” Zimlich said.
From academic year 2005-06 to academic year 2017-18, the average tuition increase was 5.3 percent. The highest increase occurred in academic year 2006-07 at 12.3 percent, and the lowest increase was during academic year 2017-18 at 2.5 percent. The increase for academic year 2018-19 was less than average at 3.6 percent.
The Board of Trustees, which ultimately approves university decisions, has expressed its support of the ideas developed by the Resource Management Advisory Committee and Donovan.
Bill Mudd, chairman of the Bellarmine University Board of Trustees, said: “The Board of Trustees fully supports President Donovan and her team and their university-wide approach to finding ways to get our costs structure in line with our revenues.”
Hunter Boschert also contributed to this story.