NDSU budget deficit reaches $2.5 million
FARGO -- "The first thing I ask myself almost every day is how did we get here?" North Dakota State University's interim President Dick Hanson said Monday, referring to the $2.5 million budget shortfall that he's trying to find cash to fill.
This is an increase from the $1.8 million shortfall Hanson found himself inheriting when he started his job last month, after the resignation of longtime President Joseph Chapman.
Hanson's response then was to put a freeze on new hires. Now, he said he's looking for savings in other operating funds, though he won't know which ones until the end of the month.
He indicated that it won't be easy. "When you rob Peter to pay Paul, not everybody will be happy about that," he said.
Speaking to the State Board of Higher Education's finance committee meeting held at NDSU, he portrayed the shortfall as an unexpected consequence of rapid growth. "In a way, this is a good problem to have because NDSU has pushed hard for North Dakota."
Enrollment, in particular, has grown so rapidly that it seems to have broken some sort of administrative speed limit. For example, NDSU evidently had not anticipated the number of students mixing face-to-face classes with online classes. Online credits are cheaper, so the more students who stay out of the classroom, the less tuition the university collects.
Finance committee members expressed their satisfaction that Hanson was on the right track.
"We deal with the situation before it gets out of hand," board President Richie Smith told the Herald.
"That's what Dr. Hanson's saying. There has to be accountability in the system. So, when there's a problem, you meet it head on. You account for it and detail it and figure out a way to fix it. And that's what we're trying to do."
In fact, Smith said, "We'd heard rumors it was worse."
To get a picture of how NDSU got from there to here, consider that from fall 2005 to fall 2009, the number of students leaped from 12,954 to 14,189, an increase of 17.3 percent. The North Dakota University System average in that period was only 8.9 percent.
Most of that growth came in the past two fall semesters when enrollment increased 5.6 percent and 7.3 percent, respectively. In fall 2009 alone, it added 960, which is more than the increases in fall 2005 and fall 2007 combined.
A significant chunk of that growth was online, especially this past fall. As a result, even though NDSU got 560 more students last fall than its budget projected, it collected $439,408 less in tuition than projected.
Still, there were enough new students that NDSU ran short of classroom space and had to lease more, adding $1.1 million to the budget.
Also growing faster than projected was tuition waivers. The amount given out so far is $2.6 million over the budget. That's not an additional cost to the university, but it's money NDSU might have collected.
Hanson said Monday the system of waivers is very complex with 10 different kinds of waivers, from waivers for children of university staff to waivers for children of prisoners of war and those missing in action.
His administration, he told the Herald, would study all of them carefully to see if they're in the university's best interest. "That's a lot of money; that's a lot of tuition being discounted," he said.
Hanson said he'll report back to the board at the end of the month how he intends to balance the budget, but that he won't have the tuition waivers figured out by then.
Besides explaining the overall shortfall, Hanson focused on what's called the "president's local fund," which comprises money raised locally, such as through parking fees, that's used at his office's discretion. It's in the red by just $3,700, but that's only after a $2.3 million transfer from another local fund.
Over and over Monday, Hanson seemed at pains to differentiate his administration from that of his predecessor's.
Joseph Chapman had been widely praised for NDSU's unprecedented expansion, but he resigned under a cloud of scandal stemming from the public perception that he wasted money, from the $1 million cost overrun in the construction of his official residence to the $22,000 he spent taking his family to the presidential inauguration in January.
Hanson stressed his desire for more "transparency" and "accountability" several times to the board.
He talked about how he had to slow NDSU's expansion this year for the sake of many years to come. "As you know, I slowed down a lot of the processes on campus intentionally. Had I not done we could've avoided publicity and things like that. But I'm glad I did because I think we'd be in a worse mess if I hadn't done what I did. The problems would've been repeated next fiscal year and I'm not going to let that happen."
Asked if he meant to imply that Chapman's administration wasn't quite so transparent or accountable, Hanson said he was speaking of leadership style. "People are different. People are different in the way they lead. People are different in the way they communicate. I prefer a system that is accessible by people. They understand why we make decisions the way we make them. I just don't make them."
Board members asked Hanson what he thought of suggestions from some in the public that NDSU hire outside auditors to get a more accurate financial picture. They let the matter drop after the president said he has a good understanding of the picture already.
"I'm very experienced at this kind of forensic auditing," Hanson said, "and I think we've uncovered what we need to uncover."