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19 Apr 2013

Cheyney administration facing $14 million deficit

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April 19, 2013 Category: Local Posted by:

ABOVE PHOTO: Cheyney President Michelle Howard-Vital, PhD.


By Mike Bruton


Due to discrimination in funding and several lesser factors, debt has been a constant companion of Cheyney University for more than three decades but with a lean state treasury and a bad economy the institution is awash in red ink.


Is the historic “teacher’s college” in imminent crisis? 


No, but as one state official said, Cheyney “is behind the eight ball” and the task the school’s senior officers face is “like pushing a boulder up a hill.”


Where Cheyney is not on the verge of economic collapse, it is on the precipice.


The nation’s oldest historically black university, founded in 1837 as the Institute for Colored Youth, is sitting on $14 million of debt with a structural deficit of $5 million more in the coming (2013-14) fiscal year.


“The national and international economy, while recovering, is still challenging,” Cheyney President Michelle Howard-Vital, PhD, said in a prepared statement. “Cheyney University, along with many of its sister institutions across the Commonwealth and the nation, continues to face significant headwinds in staying true to its mission of access, affordability, and excellence in higher education.


“As we have since the institution’s founding 176 years ago, Cheyney University has allocated resources to ensure that we focus our attention on our core mission of teaching and learning,” Howard-Vital’s statement continued. “In order to strengthen Cheyney University for its future, the University is carefully reviewing many of its processes and services, including enrollment management, financial aid and other student services.”


In order to stop the burgeoning shortfall, Cheyney will have to make deep cuts in the 2013-14 operating budget that could result in layoffs in some sectors.


“The accumulated debt will be larger if we don’t close the budget gap,” said Al Skudzinskas, Cheyney’s Vice President of Finance and Administration. “That ($14 million) is what we’re projecting as accumulated debt at the end of the fiscal year, which will be the end of June. We’re adding to it this year. So to close that budget gap we need $5 million. We need to close a $5 million gap in the yearly budget so we don’t add any more to this accumulated deficit.”


Skudzinskas said the administration goal is to balance the annual budget in one year, the 2013-14 fiscal year. That’s going to require a large measure of austerity and even if it’s done, the $14 million debt is still sitting there.


“We’re looking at restructuring the organization, getting back to basics, protecting the core of the university … which is the instruction, the course offerings, the service to the students.


“What we’re looking at in discretionary spending is a restructuring of support services,” Skudzinskas continued. “Support services are anything outside of the structural (education) realm. It’s clerical staff. It’s management staff … all the people that support the university. That’s (layoffs) on the tab le right now.”


Cheyney’s fiscal woes are not happening in a vacuum. Across the nation HBCUs are suffering the brunt of budget cuts, a product of a slowly recovering economy.


With students nationwide holding a trillion dollars in loan debt, all institutions of higher learning are financially stressed but HBCUs are being crushed with debt.


The wake-up call happened in late August of 2012 when Morris Brown College, an Atlanta-based HBCU, filed for bankruptcy  with $30 million of debt and only 50 students enrolled.


For many reasons, Cheyney is not yet in such dire straits but what happened to Morris Brown, a school founded by the African Methodist Episcopal Church in 1881, cannot be denied.


“We definitely need more,” said Cheyney’s Deputy to the President Sheilah Vance, referring to Pennsylvania’s funding system, “but when you are in a position where there are reductions over many years you get down to the bone. And that’s what you have left to cut.”


Pennsylvania has four “state-related universities – Penn State, Pittsburgh, Temple and Lincoln – which receives funds directly from appropriations. The other 14 institutions, Cheyney being the smallest, are funded through the Pennsylvania State System of Higher Education (PASSHE), which uses a complex formula that includes, student performance, enrollment and other criteria, to determine how much money each university gets.


In Gov. Tom Corbett’s proposed budget for the coming fiscal year the state-related universities will receive over $500 million, of which Lincoln, the state’s other HBCU, will get just $11 million.


PASSHE will get $412 million, which will be divided among its 14 universities; according to the state office of the director of appropriations.


Corbett, who originally asked for another cut to higher education, agreed with lawmakers to keep funding level with last fiscal year. But that falls way short of fixing financial problems caused by his initial cuts upon taking office.


“In the first budget year – Gov. Corbett’s first budget – all of the higher education community, the 14 universities of which Cheyney is a part of all wound up taking not only 20 percent cuts in their appropriation,” said state  Sen. Vincent Hughes, minority chair of the Appropriations Committee, “but they also had to give back a portion of their appropriation. I think it was a one percent give back.


“This basically took the state appropriation down to (funding levels of) 17 years (ago) in terms of money the university got from the state. In addition to that some of the key line items that are real important in respect to Cheyney University, the Keystone Honors line item and the Bond-Hill line item … were cut back almost a quarter (25 percent) from $2 million to $1.5 million.”


Both scholarship programs have been successful in helping Cheyney recruit honor students.


“The honors program attracts honor students and in terms of value to the University, that’s one of the great selling points,” said Hughes, who also sits of Cheyney’s Board of Trustees. “Cheyney’s Keystone Honors program operates at a higher level than any HBCU in the country.”


Even with Corbett’s level funding scheme, there’s no guarantee Cheyney will get as much funding as it did last fiscal year because it is at the mercy of PASSHE’s funding formula, which actually won’t come into play until the state budget is finalized in late June.


“There are a whole lot of components to that formula, but that formula is used to determine how much of the state appropriation a university receives,” said PASSHE spokesman Kenn Marshall. “If history is any indication, that (a state budget before the June 30 deadline) is not likely. This will affect Cheyney’s budget as well as other universities as far as the tuition rate.”


Therein is another fiscal trap for Cheyney. Tuition hikes are deadly to the school, driving down enrollment because the average household income for Cheyney students is $40,000 a year.


Recent tuition hikes, which are voted on by the PASSHE Board of Governors, drove down Cheyney’s enrollment by hundreds in recent years.


The enrollment currently is “about 1,200,” said Vance. “We had 1,500 about two years before. There was an increase in our public and state system and we lost about 400 students.


When enrollment drops Cheyney loses funding due to enrollment requirements in the PASSHE funding formula.  

Cheyney’s enrollment peaked in 1977 at 2,900 and dropped throughout the 1980s. The campus was 1,450 strong in 1995, the last time the university operated debt free.


With competition from West Chester, Bloomsberg and other similar-sized schools and increasing financial challenges, Cheyney’s enrollment continues to wane.


Financial aid is another challenging facet to Cheyney’s financial standing.


“We offer certain qualities here that are attractive to students (like) small classes, caring faculty, refined academic programs,” said Vance. “We know many of our students need scholarships and they just can’t make it without financial aid. I think it’s like 81 percent of our students are on financial aid.”


Because of the high percentage of students on financial aid, Cheyney has a high loan default percentage. Over the years the university has lost significant revenue because students were unable to repay their loans.


A study conducted by from 2009 to 2012 revealed that of 473 students who signed on for loans at Cheyney, 110 defaulted, a rate of 23.2 percent.


The national average for loan defaults for the same time period was 8 percent.


“The economic difficulties that families are facing really hit our students more than other Pennsylvania State System of Higher Education schools disproportionately,” Vance added. “We find many of our students in a situation where they will go to school but they have to stop to take time out to work and then come back and finish their education.”


Some critics say Cheyney doesn’t go after their debtors aggressively enough.


“People are under severe financial pressure,” said Skudzinskas. “We try to collect on that debt. What we can’t collect we forward to Harrisburg and it goes to the state attorney general’s office. The collection rate … I don’t think it’s that good. If people don’t have the money, they don’t have the money.”


There are some cases, said Skudzinskas, where a debtor student returns and re-enrolls without paying the initial debt.


“We’re not VISA nor Mastercard, we’re educating people,” Skudzinskas explained. “We’re trying to bring as many people to the party as possible. We want to attract more, especially the first generation college people. It not only changes their lives but it changes their kids’ lives and their kids’ kids lives.”


When Howard-Vital became the school’s president in 2007 it was $2.16 million in debt in a $27 million budget.


A Debt Advisory Board, chaired by former Howard University President H. Patrick Swygert, was formed in 2009.


In 2010, the debt had grown to nearly $8 million.


Cheyney received an accreditation warning from Middle States Commission on Higher Education for non-compliance with sections 2, 3 and 6 of the accreditation requirements.


The warning was lifted in 2011 after Cheyney was found to be in total compliance.


Cheyney does receive Title III funding as a result of a lawsuit that dealt with chronic underfunding of HBCU schools. The institution also gets funding from the $228 million in grants to 97 HBCUs from the U.S. Department of Education a few months ago.


“We are also reviewing our academic programs and customer service to students so that we will improve our competitive place in the Commonwealth and the national marketplace,” Howard-Vital’s statement concluded. “Futhermore, in order to bring our revenue in line with our expenditures, we are reviewing all aspects of the University through our annual budget review process. These efforts over the next few months should ensure Cheyney University’s competitiveness and maintain its commitment to access and affordability.”


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