Chicago State's Financial Situation: Are We In Difficulty and if so Why?

Trying to figure out Chicago State’s finances is sometimes akin to untying the Gordian Knot. Not because there is insufficient information, but because often different sources provide very different financial information. In an attempt to cut the knot, I offer here a layman’s analysis of our financial situation.

Some background: First, the administration is apparently now wringing its hands over our declining revenues. I understand that one of our financial wizards commented that we have been losing $5 million a year for the last couple of years (or something like that, I welcome any more accurate information). This is apparently the precursor to another bloodbath round of layoffs–undoubtedly of our most poorly paid and vulnerable employees–to meet the possible financial crisis engendered by Bruce Rauner’s election. As I have said earlier, I think the university’s existing financial liabilities, particularly pending judgment(s) are at least an important component of our purported financial exigency. Taking the long view and examining the university’s financial position since 2009, I again must wonder why we are in financial difficulty.

Ostensibly, the most accurate sources of information relative to Chicago State’s financial position are the audit reports produced by the Illinois Auditor General’s Office. I have used the 2009 through 2014 reports to reveal the figures I will discuss. These reports are available here: http://www.auditor.illinois.gov/Audit-Reports/ABC-List.asp. I will also use the ISL forms submitted to the Illinois State Legislature by Chicago State and the recent financial report submitted to the Chicago State Board of Trustees by the Interim Vice President of Administration and Finance. I must note that many of the final report’s figures for 2013 do not match the audited figures for 2013, although the net position is identical.

These reports catalog a number of financial dealings: the university’s general revenues and expenses, the university’s net asset position, breakdowns of revenues and expenses by category; and numerous other items. Here are some of the highlights of our financial history.

First, our net position since 2009 (assets vs. liabilities) has increased by $20 million dollars, from $126 to $146 million (the current figure reported by Administration and Finance).

Second, our total revenue has mirrored the change in our net position–a $20 million dollar increase from $129 million in 2009 to $149 million in 2014.

Third, our expenses have increased $24.6 million since 2009, rising from $131 million to nearly $156 million. One of the major sources of that rise is an increased amount for fringe benefits which the university pays and for which it receives reimbursement from the state. Since this results in a zero sum, the adjusted revenues and expenses look like this:

Revenues have increased slightly since 2009, rising from $110 to $111 million. At the same time, expenses have increased from nearly $112 million to $117 million. Notably, since 2012, revenues have declined from $119 to $111 million while expenses have increased from just under $110 million to $117 million. This while our enrollment declined by 21.2 percent between 2009 and 2014 and by 14.7 percent between 2012 and 2014. Again, one must ask why our expenses have increased out of proportion to the university’s enrollment.

A more detailed analysis of the expenses reveals that expenditures for instruction declined by 4.8 percent, while reported scholarship expenditures increased 14.3 percent, expenditures for the physical plant increased 21.4 percent and for “support” services, the increase reaches 35.7 percent. The audit reports also indicate the amount of cash on hand in university coffers at the end of the fiscal year. This has risen dramatically since 2009, from $5.5 million to $14.8 on June 30, 2014. All this financial data translates into a 43 percent increase in the cost/per student at Chicago State University, from $6631 per student in 2009 to $9494 in 2013 (2014 figures are not yet available).

To summarize, while the university’s enrollment has declined precipitously since 2009, its revenues have not mirrored that decline and its expenses have risen out of proportion to the enrollment decrease, resulting in the cost-per-student skyrocketing. If I were an Illinois legislator, I would want to know why this school seems to be in the process of squandering a surplus that resulted in a $23 million cash balance at the end of fiscal 2012.

Part of each audit report is a discussion by Chicago State’s management that provides an evaluation of the data. In every audit report, our administration offers this: “The University’s financial position remained strong.” In the most recent audit report (through June 30, 2013), the discussion included this:

“Looking forward into the future, the management of the University believes it is well positioned to continue its strong financial condition and level of excellence in service to its constituents.” (So why all the talk of layoffs and excruciating cuts?) A crucial element to the University’s future will continue to be its relationship with the State of Illinois as the University relies on State appropriations to finance its higher education mission which includes maintaining enrollment (of course, we know how that is going) . . . The University continues to monitor the State’s financial condition and the factors that may influence the State economically and politically which may in turn impact the level of support the State is willing or able to continue to provide to its universities generally and to Chicago State University in particular.” If that’s the case, why do these state fiscal issues apparently come as a surprise?

The discussion concluded with this:

“[T]he University is alive and vibrant and is focused on continuing its mission by leveraging all the resources required to do so. Management believes these efforts focus the University on a
path of enhancement and a path of financial sustainability.”

So there’s the contradiction. The administration tells the auditors and the state legislators that we’re “well-positioned” and “strong” financially. They tell us that we’re struggling. As an untrained and possibly even ignorant observer, I wonder where the hell all the money has gone. Another one of the many questions about the Watson administration that at this point remain unanswered. Of course, the figures are what they are, but they raise at least this question for me: how do you spend lots more money on lots fewer students?

If we indeed need to lay off people, I would suggest we begin with that cadre of worthless, highly-paid administrators who have gotten us into this situation.