Dive Brief:
- Tennessee State University would have run out of money to operate in the coming days if not for $43 million in emergency state funding, according to Tennessee’s comptroller.
- In recent years, the historically Black institution has faced growing expenses, increased tuition discounting, and the end of federal emergency funds tied to the pandemic, according to a Thursday presentation to Tennessee’s State Building Commission.
- On top of those issues, Interim President Ronald Johnson told the commission that poor decision-making by past leadership and a lack of checks and balances “put the institution in a crippled position.”
Dive Insight:
One of Tennessee State's painful missteps came when it allocated one-time funds for student aid, according to Jim Grady, a managing director with consultancy Alvarez and Marsal.
In fiscal 2022, the university provided some students with a full scholarship using $37 million in federal pandemic emergency funds. However, it had no long-term plan to fund the scholarship through the students’ entire journey through college.
In the absence of federal funds, the university discounted tuition, Grady said in his presentation. In fiscal 2023, the university logged $45.9 million in institutional aid, which includes tuition discounts, a massive increase from $8.6 million the year before. Other students found themselves without a scholarship once federal funds ran out.
Enrollment faltered because of the broken promises. First-year student enrollment, at around 3,500 in fiscal 2022, roughly halved the next year and hit 880 students by 2024, Johnson said.
Grady also pointed to poor enrollment management practices in the past that have fed into Tennessee State's financial troubles. Administrators failed to properly communicate with students about their outstanding balances and used “gray” policies and procedures when waving out-of-state student fees, he said.
Amid the university’s management failures, Tennessee’s Senate in March moved to replace all of the university's trustees and restructure the university’s board. Johnson, previously the head of Clark Atlanta University, became interim president in July — the day after the outgoing board members departed.
Commission members noted that the state has already injected millions of dollars in cash into the university.
State Comptroller Jason Mumpower, who sits on the building commission, said that of the funds the state provided, $11 million was an advance on Tennessee State’s budget. The remaining $32 million was “just to allow you to continue operating,” Mumpower told university officials. He added that, without that funding, the institution would not have been able to make its payroll.
Management hasn’t been the university’s only fiscal ailment.
It has also been underfunded by Tennessee, according to federal officials. In a letter to Gov. Bill Lee last year, U.S. Secretary of Education Miguel Cardona and U.S. Secretary of Agriculture Tom Vilsack said that Tennessee State has been hurt by “longstanding and ongoing underinvestment” from the state as a public land grant HBCU. Inequitable funding had led to the university missing out on over $2.1 billion over the preceding 30 years, they said.
“Tennessee State University has been able to make remarkable strides and would be much stronger and better positioned to serve its students, your state, and the nation if made whole with respect to this funding gap,” the secretaries wrote.
As it tries to close structural deficits, the university in October laid off 114 staff members, the university’s interim CFO, Daarel Burnette, told the building commission.
It has also cut back on travel spending, reduced duplicate contracts and made other cuts amounting to $13 million in savings. It has sought cash elsewhere, including $7 million from the Saudi Arabia consulate that the university was owed, which Burnette said should be processed soon.
Going forward, Johnson noted, the university is working to build a new financial model designed for sustainable growth. That includes comprehensive processes for enrollment management and student success.
Mumpower told university leaders at the commission meeting that, given the level of fiscal crisis that it faces, they would need to continue reducing the institution’s workforce.
He also pressured them to consider selling its Avon Williams campus in downtown Nashville, arguing that the university didn’t have the resources to maintain the property. He added that he knew of developers that would be interested in it, and estimated a sale could net Tennessee State between $40 million and $50 million.
“You’re here basically to take it down to the studs, and then rebuild it,” Mumpower said. “The challenge is great, but the opportunity is greater.”
