the problem with money, part III

May 4, 2019

Is Stetson University in danger? Based solely upon the state of higher education, I believe that we can rationally say yes. One hundred eighty private, non-profit college and university campuses have shut down in the last five years, displacing in excess of 80,000 students, several of these campuses in Florida.


How exactly do we determine the state of a university that does not have to make public a majority of its data? We need to begin with the larger picture. In August of 2018, professor of business at Harvard University Clayton Christensen said that half of the over 4,000 colleges and universities in the United States are “bound for bankruptcy in the next few decades.” Robert Kelchen, professor of higher education at Seton Hall contests this by advocating for the tenacity of small, private non-profits and noting the dedication of alumni bases and student bodies in cases such as that of Sweet Briar, a non-profit women’s college that declared bankruptcy and was saved in part by alumnae donations in 2015.


On April 12, 2019, The University of Tulsa, a private university in Oklahoma comparable to Stetson in size with a $1.1 billion endowment, announced a total restructuring, turning away from its liberal arts base to become a STEM university with a social justice core. This was after faculty went four years without raises, and after it was found that the university was “running a structural deficit of about $16 million,” mostly due to its Division I athletics program. Stetson, based on the last several years of audited financial reports to S&P and Moody’s, a stock market index and financial services company, respectively, is in a financial situation deemed “stable.”


What is difficult here is figuring out what is being used to make this determination.  


In my last piece, I dealt exclusively with information that is publicly available to paint a picture of what exactly Stetson’s financial policies are. It seems that from a comprehensive look at survey results, tax returns, and NCAA data, we were able to conclude that Stetson is putting money toward programs with the hope that they will improve retention, but this has been unsuccessful judging by our 76.4 percent retention rate, our lowest since 1996. Though the claim stands that the programs are student-supported, according to survey data, the ideas behind these programs rank last in importance to students as they evaluate their experience at Stetson–primarily in regards to athletics.


In this follow-up, I will be expanding upon that basis using information from sources not as immediately available to the student body, including unreleased PowerPoint presentations from a Faculty Senate meeting on March 15, 2019 and the very recently released ‘Friday Group’ Report, which has existed in some form since the spring of 2018. I was initially able to access this report, but the page it was on has since become unavailable.


On March 15, 2019, the Faculty Senate met to discuss the state of university finances, inviting Bob Huth, the VP and Chief Financial Officer of Stetson University, to present his own findings during the proceedings. The Finance Committee presented the following to those in attendance:  


“The state of Stetson University’s finances is strained despite being in a period of good economic times for the nation. This stress is coming from higher discounts and a lower retention rate. Additionally, rapidly growing Athletic Department expenditures and scholarships drain resources from academic expenditures and aggravates the deletion of the University’s contingency fund. The Administration remains optimistic, but their future budget projections seem overly optimistic to the Faculty Finance Committee.”


This information was originally presented within the December 2018 report from the Finance Committee to the Senate, but was additionally included in the report to the Board of Trustees in February of 2019.


There are two PowerPoints. The first was compiled by the Faculty Finance Committee and contains information that points to the conclusion that with a rising discount rate, which averages 76.29 percent for athletes and 55.75 percent for non-athletes as of 2017, and a falling retention rate, which is most recently pegged at 76.4 percent and can be broken down to 74.7 percent for athletes and 76.8 percent for non-athletes as of 2017, the university is looking at hard times if the current model is maintained. When Bob Huth went over this piece with me prior to publication, he noted that “the number of athletes that matriculated in Fall of 2017 was approximately 120. So a 2.1% difference in retention (76.8% less 74.7%) equates to 2.5 students.” That said, the faculty report indicates that “we could increase retention and net revenues by more efficiently targeting discount,” and this in addition to reducing overall expenditures could put Stetson on more solid financial ground.


The second PowerPoint was presented by Bob Huth and broke down expenses and revenue as of 2018, setting up a comparison to previous years and demonstrating that faculty salaries and the endowment have both grown. He also confirmed that budgeting must be conservative, noting that the endowment spending rate will be reduced by “0.1% per year until it reaches 4.5%.” In addition, he indicated that the performance of the endowment fund over the past 10 years has been “at the 92nd percentile of almost 600 other Colleges and Universities surveyed nationwide,” and that Stetson’s fundraising campaign has been incredibly successful, and will likely “more than meet its campaign goals that total $200 million.”


On March 19, I met with Bob to discuss the rest of what was spoken about that afternoon.


In particular, we looked at a series of numbers given in the Faculty Finance Committee’s presentation that stated that the Athletics department had surpassed its budget by $513,231 in 2016 and by $436,507 in 2017, even with a budget that since 2011 has expanded by $5.8 million. Between 2011 and 2018, net athletics operating expenses have grown at a compounded rate of 15 percent. Bob pointed at these figures, letting me know that “the actual information in the report provided to the Faculty Finance Committee had not included the appropriate authorized athletic scholarship budget.”


What this immediately tells us is that we have many different numbers that stand for similar things for different corporations and companies. Bob determined that although the most important numbers are those which are audited, there are several other sets of numbers that draw from these original figures in part that are not—thus, in exploring Stetson’s finances, we have several sets of often vastly different numbers that we must interpret.


We are given more figures by the ‘Friday Group’ Report, which was created by the Faculty Senate last spring with the intention of analyzing the budget and strategic plans currently in place and to re-evaluate their effectiveness as they now stand. It is a concern of the faculty that generous gifts, such as that of the Brown family last semester, are not necessarily being understood as “investments in supporting the work of a talented faculty and students,” and are instead being used to justify “unnecessarily aggressive undergraduate enrollment growth, administrative expansion, and DI athletics.”


What this means is that when large donations come in, they are used to spearhead support for growth in enrollment as well as for auxiliary programs that do not directly contribute to the academic excellence of Stetson University. What is also happening in the view of the faculty is that increasingly aggressive enrollment strategies are relying on “unprepared and/or financially-strapped students and contingent faculty, who can’t take full advantage of the opportunities such grants provide.”


Because the ‘Friday Group’ Report was distributed last year to two members of the Board of Trustees without larger administrative permission, the current chair of the Faculty Senate, Dr. Kimberly Reiter, was censured on September 28, 2018 by the Board of Trustees under the leadership of Joe Cooper, “for the entirety of the 2018-2019 academic year.”


The report was initially kept confidential, as faculty, staff, and administration were embroiled in a debate over shared governance, but very recently, the Stetson website’s “Governance” page, which can be accessed through the page for the Office of the Provost, updated with a large number of documents. Initially I believed they had been made entirely public, but as mentioned earlier they are no longer accessible to students. At this time they are available only to faculty.    


“Stetson University values a collaborative, inclusive, institutional commitment to shared governance,” the page stated, “proudly” making available the more recent documents having to do with shared governance policies as discussed and debated by Faculty Senate, administrators, and task forces alike.


What is important to consider, and what I believe is necessary to address is the focus of the Friday report on Division I athletics. Although it can be interpreted as an overall critique of any athletics program at all, the report puts it well by saying that athletics are not the problem. Instead, it is that faculty believe the cost of a DI athletics program is unsustainable here at Stetson—“our athletics program is so expensive that it is detracting from that experience and putting Stetson on shaky financial ground.”


Bob Huth and I spoke extensively about the importance of audited financial statements and figures. Essentially, what audited statements are intended to show is “who are the best risks, and thereby who gets less of an interest rate charge when they borrow.” These numbers are important because they are supposed to be the best representation of university finances as they actually stand.


In a separate conversation with Melissa Peters on April 18, she clarified the definition further, explaining that, essentially, a CPA, or certified public accountant, audits the numbers given by Stetson, or any other business, in order to say that these numbers present “fairly, in line with general accounting principles” that stakeholders can have confidence in the institution and in the information presented. Essentially, auditors allow the creation of a level playing field on which vastly different businesses, institutions, and corporations can be compared. However, she stressed, it is important to remember that numbers are all reported according to specific rules laid out by auditors or by outside corporations. For example, in the case of the NCAA, Indirect Institutional Support comes in to subsidize the negative value created by an athletics program that does not generate revenue. Thus, in NCAA statements, no school nets a loss. Instead, schools that do lose actually appear to net zero.


Athletics, specifically football, at Stetson have been a primary concern of the faculty in part for the perception that they lose Stetson millions each year. According to the Faculty Finance Committee’s report, our athletics budget looks something like this for fiscal year 2017:

Expenses (not including scholarships) Revenues
Total reported internal revenue $10,361,873 $1,196,783
Restricted fund activity $799,435 $526,819
Indirect Institutional Support $841,543
Athletic camps $153,545
Total $12,156,386 $1,877,137


If these totals are to be taken at face value, the Athletics program at Stetson University netted -$10,279,249 in 2017. This does not include athletic scholarships, which amount to around $6 million. Because these scholarships are essentially discounts rather than actual money, they will not be included in this net loss, but keep in mind that higher discounts for certain students drives up the cost of attendance for others. By contrast, according to Stetson’s form 990 for the year 2015, Athletics generated $844,851, and cost $1,336,101, still totalling a net loss of $491,250 considering exclusively these values.


Melissa and Bob both remarked, looking over these presentations with me, that they had not read them very closely, but planned to in the near future. However, Melissa immediately noted, of the PowerPoint and of the Friday report, “this is meant to inflame, rather than inform.”


I asked her to explain further what she meant. “As a non-profit, we are not intended to make a lot of money,” she told me, “Stetson is intended to be able to pay its bills, balance its checkbook.” In her opinion, Stetson does not have an unreasonable amount of debt, and she does not see any “gross distortion in how we are allocating out resources.” In a cursory look at the numbers, she also said that they were most likely sourced from EADA or NCAA information, which, she reinforced, have prescribed algorithms and may not be entirely reflective of the original numbers.


As a direct response, Dr. Kimberly Reiter, chair of the Faculty Senate, stated that the Friday report is “is a carefully assembled analysis from a faculty perspective of the attention given to athletics spending, and its impact on the retention, number and quality of Stetson students.  It arose from faculty concern that the 2015 Budget Reallocation Document and the 2015 Shared Governance Reform, both passed by the University Faculty, vanished for years after being sent to the Office of the Provost. This concern was bolstered by data-generated evidence of student dissatisfaction, which makes itself known in declining retention patterns over several years, even as national retention averages are rising. There was also concern that current policies might be stressing the university budget in unsustainable ways.”


Essentially, the administration and faculty are at odds concerning university goals and financial plans. It was described to me by a faculty member as well as by both Bob and Melissa as trying to reconcile two entirely different professional frameworks. It is nearly impossible. However, given the fact that no statement has been publicly issued to directly counter anything the Faculty Finance Committee’s presentation or the Friday report contain despite the fact that the latter has now existed for over a year, let us dig further into what it says.


In the last ten years, Stetson’s enrollment has ballooned from 2,162 to 3,213 as of spring 2019. This increase in enrollment serves several purposes. Being that Stetson is an enrollment driven school, the intake of tuition dollars is necessary to keep it afloat, and when enrollment fell from 2,273 to 2,162 between 2006 and 2009, it became clear that there was a problem. In 2009, with the beginning of Wendy Libby’s presidency, a plan was made to expand athletics.


In 2011, College Football Poll estimated that Stetson had the potential to bump its operating budget by up to seven million dollars at some point along the road by implementing a non-scholarship football program, and Jeff Altier, Stetson’s Director of Athletics, stated at the time that the “annual football operating budget will be covered by 100 students who play football and create enough of a revenue stream from all of the revenue sources that they will not only pay for the operation of football and women’s lacrosse, but will also have a net gain for the institution of roughly a million dollars. The non-scholarship portion of the plan gives us a revenue stream from which to operate the program.”


The intention of the plan was not only to attract more students, but to attract good ones. The ideal football or lacrosse-playing student would not only play well, but perform well academically and retain. What we have seen instead according to figures compiled within the report, in conjunction with publicly available Stetson records, is that retention in general has dropped, and that athletes do not become more likely to retain as their scholarship amounts increase. Instead, it seems that the higher an athlete’s discount rate, the less likely they are to retain. Men’s and women’s basketball players, for example, receive discounts with a mean value of around 125 percent, yet their retention sits at 60 percent, 16 percent lower than our average. By contrast, imagine a J. Ollie Edmunds Scholar, whose scholarship is roughly equivalent in value and who retains at far higher rates.


In addition, according to several sources, conversations have begun about making football a scholarship sport, which will effectively negate the benefits it was intended to have as a non-scholarship ordeal. Bob Huth and Melissa Peters let me know that they are unaware of these conversations. The football program, according to the Friday report, makes around $1.6 million each year, but if scholarships are provided to football players this will drop to around $200,000, tacking an additional $1.4 million to the current cost of athletics at Stetson if we include scholarships in the calculation.


Melissa Peters explained in my interview with her that the $10 million each year is not a loss, it is a cost, and made it clear that dropping to Division II or III would signal to other institutions that Stetson is in a time of crisis. Faculty argue that dropping to a lower division is necessary for our financial future. Joel Davis, Associate Professor of English stated in my conversation with him, “To my knowledge, the Faculty Senate is not saying the only thing to do is leave Division I. I understand the ‘Friday Group’ Report recommendations to mean that we need to scrutinize athletic spending and the return on investment on that spending with the same vigor that we scrutinize other budgets.”


I would like to argue that Stetson has already signaled to us that it is uncertain of its future, albeit in other ways. Let us consider for a moment the Stetson Promise. A program designed with the intention of increasing retention, its implementation tells us that we still have not solved the problem the expansion of the Athletics Department was intended to remedy.


Faculty, though they received merit pay, did not receive cost of living adjustments this past year, administrators took reduced raises according to a conversation I had with Melissa last March. According to Bob, “in the current fiscal year… Faculty and Staff received raises based on a 2% raise pool. In fiscal Year 2017/18, each employee received a $360 salary increase except for Senior Administration who did not take an increase.”


The discount rate continues to rise, students are being accepted in larger numbers to make up for this in tuition. Campus Life and Student Success (ClaSS) and other similar departments and programs continue to expand, yet retention continues to fall. Athletics never achieved its intended, stated goal, and now seems to want to drive expenses higher by instituting scholarships for football players.


I began almost every interview I conducted for this series with, “I don’t understand money,” but I believe that I now understand money just enough to see that there is a major problem here at Stetson University. Based on available information it seems that a Division I athletics program, profitable at only 24  schools, is not only unprofitable here, but is unsustainable based on our endowment and budget. It seems that the spending on athletics is in many ways taking away from the experience of the average student, and is also detracting from academic programs and departments. Stetson may not be in a financial crisis yet, but if spending and budgeting are not more closely monitored and scrutinized it is very much possible that we will very soon become another Tulsa.


So–what is the problem with money? It has taken me over a year to understand exactly what it is I’ve been talking about, and longer to sufficiently compile this information in a way that is digestible to our audience. The problem with money is that it isn’t designed to be transparent, and is not intended to be interpreted by non-specialists, at least as far as I, a non-money person, can tell. Transparency is essential if we are to establish lines of communication between staff, faculty, administrators, and students, and at this time, that is something Stetson University may be working on but that it simply does not yet have.


Portions of the information considered within this article were provided to The Reporter by a retired faculty member, and by a student who prefers to remain anonymous.


Further reading on the college closure crisis:

Don’t Expect a Wave of Private Nonprofit College Closures


What the heck is Sweet Briar?

For more on Tulsa:


The ‘Friday Group’ Report

Letter from the Board of Trustees to Dr. Kimberly Reiter

Letter of response to the ‘Friday Group’ Report, Dr. Libby


For more on Stetson’s enrollment:

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