Baldwin Wallace Thought It Faced a $3 Million Budget Deficit. Then It Discovered It Was Actually $20 Million

Significant cuts to programs and staff are likely

click to enlarge Major cuts are expected as BW deals with a $20 million budget deficit - Erik Drost/FlickrCC
Major cuts are expected as BW deals with a $20 million budget deficit
Baldwin Wallace University this year was already planning on how it would address a $3 million budget deficit accrued from July 2022 to June 2023 — a product of rising costs, decreased revenue from enrollment, and other factors — when it learned its deficit was actually much higher: a little over $20 million.

The Northeast Ohio private university is now both trying to learn exactly how it flew so blindly for so long and figure out how to reduce costs next year, which will likely include the elimination of programs and sizable staff cuts.

According to notes from an Oct. 2 Senate Executive and President Meeting reviewed by Scene, the school's new CFO discovered the hole and an "updated financial report" from BW submitted to the Higher Learning Commission was flagged. BW has now hired Ernst & Young to audit the books going back three to four years.

"There are a series of financial ratios that get reported to HLC," BW President Robert Helmer said at the meeting. "One of those ratios triggered HLC's attention."

Meeting notes also show the university discovered that money had been moved from various sources, including from the endowment, to cover losses. Updated procedures, including budget sign-offs from the president and new policies regarding withdrawals from the endowment, have since been put in place. Helmer was quoted in meeting minutes saying nothing criminal or nefarious is suspected.

Accounting issues were first reported by the BW Exponent, the school's student newspaper. In a late September story, the administration vaguely acknowledged that some recent mid-year reports were inaccurate, giving the university an incorrect snapshot of its budget.

“During the year, reports are generated or were generated, and it would pass by the [Chief Financial Officer’s] office and in some of those reports there has been accurate reporting as to the current status to our expenses versus our revenue,” Dan Karp, assistant vice president and director of University Relations, told the Exponent. “And in some of those indicated, [they] did not reveal the amount of spending we had. So it did not clearly show the full expenses.”

With a new CFO, BW grad Gregory Cingle, who replaced Bill Reniff (Crain's 2015 CFO of the Year) after his retirement earlier this year, Karp said reporting will be enhanced and chalked it up as a minor issue.

“Just like in any other area, you’re constantly improving your ability,” Karp told the Exponent. “In the ability of our finance department, it’s being able to automate, use technology, and to put in multiple controls that allow us to have actually even more accurate budget reports,” Karp said.

But the Oct. 2 meeting notes provide a more clear picture of the dire atmosphere internally.

A higher education consultant was to be hired to identify cost-saving and consolidation efforts, and $3.9 million in savings had already been identified. And, notably, those savings reduce "the deficit to around $16 million."

A participant asked if a meeting had taken place with former CFO Reniff, ostensibly to figure out what went wrong under his tenure.

"That meeting has not taken place," Helmer said.

A September 13 memo from BW Provost Steven Stahl outlines steep changes for faculty and staff to come:  slicing travel expenses by half, limiting academic presentations and meetings with "elected officers," a $750,000 cut of courses not regularly offered; a requirement for the Dean to approve all catering food for off-campus guests visits.

But the brunt of the cuts could come to programs and staff as BW eyes an "enrollment cliff." The school earns about 40 percent of its revenue from tuition.

Ernst & Young-Parthenon, the consultants hired to examine BW's budget, proposed about an $8 million cutback, according to notes from a Nov. 6 executive meeting.

"To reflect," the document reads, "expenses and decline in students."

The result, as seen in other campuses, and recently at Lakeland Community College in Kirtland, is an inevitable slashing of jobs.
"While the goal is not to affect any tenure or tenure-track faculty, we are going to lose term faculty and we are going to lose adjunct faculty," Stahl is recorded saying at the meeting. "Many of these are long-serving faculty, and these cuts will be painful.”

What economists see as a reflection of declining birthrates during the Great Recession is starting to lay imprint upon the accounting of major universities, especially those dotted along the Great Lakes. A 2018 study from Carleton College in Minnesota found that 19 states in the Midwest and Northeast will suffer a 15 percent drop in students from 2012 to 2029.

At BW, where a little over 3,000 students fill its classrooms, the decline has been steady since the start of the Obama Administration. A chart provided by the Academic Affairs office showed an 11-percent drop in undergrads in the last decade, from 3,365 in 2009 to 2,994 in 2018. (Its 2027 class, meanwhile, was its largest since 2015.)

"We have to find a way to cut expenses," Stahl told The Exponent, BW's student newspaper, after a similar financial episode in 2018. “In academic affairs, the vast majority of what we expend our money on is the number of sections we teach, so we have to find a way to cut the number of sections we teach.”

In an interview with Scene, Dan Karp, BW's director of university relations, denied that any major layoffs were imminent, and described the results of the budget deficit as more of a routine financial procedure.

"There's no direction that has been given and there is no outline for actions that might be taking place. This is all part of a regular process of evaluating the efficiencies of the university," he said in a call. "Any healthy university is always evaluating its programs, and programs do go away, do get sunsetted, while new programs are added."

"So right now, if there's going to be any reductions in programs," he added, "we don't have an action item for that right now."

Again, meeting notes paint a different picture.

In the heap of Ernst & Young's downsizing recommendations comes the proposal to end courses and majors with lower sign-ups and graduation rates. According to the Nov. 6 meeting notes, German, French and Italian may go, along with other languages. ("Do not offer Arabic or Chinese.") Over the next few years, faculty wages could be lowered in Philosophy, Religion, Public Relations, Physics and a slew of other majors with lower enrollment. (Any class under six students will be automatically closed.)

BW may also look to reshape its Core curriculum, reducing the number of credit hours undergrads need in humanities classrooms, to reduce expenses, meeting notes read, "by $1.1 million." Bachelors of Arts would be shortened to 33 hours; Bachelors of Sciences to 42 hours. Faculty may end up voting to cancel, it was suggested, this year's holiday luncheon. (Next year's is still on, though.)

Any cuts and program changes won't go into effect until next fall, the memo said, following an in-depth review in the spring before. In the meantime, BW's admins, like those across the country, will be making careful decisions.

"The key question will be, 'Who do we want to be as an institution?'" Stahl said.

As students and faculty worry about what further cuts will do to future class sizes and offerings, Scott Schulz, BW's vice president for enrollment management, told the Exponent: “The reality is we’ve been outperforming our market. We’re number one, you can’t be a lot more than number one or higher than that. Realistically, you’re not going to grow your way out of a budget situation.”

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Mark Oprea

Mark Oprea is a staff writer at Scene. For the past seven years, he's covered Cleveland as a freelance journalist, and has contributed to TIME, NPR, the Pacific Standard and the Cleveland Magazine. He's the winner of two Press Club awards.
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