By Chelsie Derman
At the moment, the College is $358.6 million in debt, but should students, faculty and staff be alarmed by the terribly high number?
According to Treasurer and Vice President Lloyd Ricketts, the College has the debt under control — and they’ve had it well under control since before Covid-19.
Yet, that does not mean the College can overlook its financial challenges, which extends into a whole new conversation. The College’s Strategy Working Group (SWG) has met several times throughout the past year, their first recorded Zoom meeting being on Sept. 29. In total, there have been six hour-long meetings to discuss some of the potential strategic plans. SWG teamed up with Tyton Partners, a strategy consulting service, to help brainstorm plans that will help raise the school’s income and reduce expenses.
“When we’re talking about the strategic plan, the College is looking ahead for the next five years,” said David Muha, the College’s associate vice president for communications, marketing and brand management. “What are the needs of the College? What do we want to do programmatically? What are we seeing on the horizon that maybe we need to plan for? Everything needs to balance from an income and expense standpoint.”
According to David Blake, chair of the SWG and an English professor, Tyton brought a level of expertise that the College otherwise wouldn’t have had. The consulting service also provided the College with a lot of data. Some of the data Tyton brought was kinds of programs students and employers might be interested in, the percentage of high school students who know about the College and the percentage of high school students outside of New Jersey who know about the College.
“They really know higher education, and combined with their financial modeling, their survey and data work was extraordinarily helpful,” Blake said.
The current 2021 SWG started coming up with a strategic plan just two years ago.
“Midway through, the Board of Trustees decided that they wanted to hire outside consultants to guide the college through the process,” Blake said. “We had hired outside facilitators before, but we had generally worked within the governance structure and never hired a group as comprehensive as Tyton Partners.”
Blake said another difference from past years was that the Board of Trustees wanted to get more involved in the strategic planning.
“The combination of these things caused a lot of confusion across campus — and some bitterness — because we had a very clear, established process,” Blake said. “As a committee, the members of the SWG had to get over the fact that this was an exception, and that we were doing something out of the norm. We couldn’t let those feelings distract us from the work.”
A major topic discussed at SWG meetings was: how are we going to attract more students and raise the school’s income?
Muha pointed out that the College is a “student-revenued” institution, which means that most of the budget’s income comes from student revenue. An obvious plan to raise the school’s income would be to raise tuition, but Muha said that the College is not considering that route.
“If we raised tuition 10% then that’s a significant amount of money that’s available to offset any increases in expenses,” Muha said. “The reality is that students and families right now would not be able to afford that and that would have a negative impact on enrollment.”
Ricketts said that the College has been barely raising tuition in the past two years. In 2020, before Covid, the College increased tuition 2%. When Covid hit, not only did the College not increase tuition, but it also reduced fees by 12.5%. This semester, the College increased tuition 2.75%.
“The College is not trying to balance the budget on the backs of students when it comes to running the operation,” Ricketts said.
When it comes to understanding the work of the SWG and the school's financial challenges, an easy way to understand the topic is through President Kathryn Foster’s analogies. One of the analogies was “scaling a mountain,” which she described in the last Strategy Working Group meeting on March 25.
Foster’s “scaling a mountain,” analogy sheds light on why this much effort has gone into thinking about various strategies to help better our institution.
“Now, it’s hard to get up a mountain, why would we bother?” Foster said. “The answer is because we have some sharks in the water down here and they’re laughing at our feet as we’re down here, and what are those sharks? They’re sharks you’ve heard about for the last 18 months to two years and beyond — demographic change certainly; the high debt loads we have at the college; cost pressures, which are getting ever greater, including with inflation now.”
Foster added that some of the sharks are the investment situation with classrooms and administration buildings and resident halls. Also, she said that another shark is the “stiff competition in the marketplace, which sometimes plays out with financial aid.”
To deal with these “sharks,” there are multiple pathways to go up the mountain. The question: which path do you pick? Three pillars to climb up a mountain are undergraduate experience, expanded reach and impact in new markets and strengthened capabilities and operations, such as increasing marketing.
Using the mountain analogy, Foster said that one must consider a bunch of factors to determine what pathway to choose — such as time, weather, risk, physical condition and financial resources.
“If you were, in fact, scaling a mountain, you would be going through this kind of thinking about what is the pathway we choose,” Foster said.
In the second SWG meeting on Oct. 29, mathematics professor Jana Gervertz, who also is a member of the Strategy Working Group, said that the College does not want to be a “hidden gem.” To combat some of the external threats — such as shift in state funding, potential change in what students are looking for (which may include mode of delivery, costs, majors), and demographic decline — some ideas Gervertz brought up were having two-plus-two pathways from community colleges and four-plus-one programs.
Two-plus-two pathways are programs where students graduate from a community college after two years and then attend a four-year college or university for two additional years. Adding two-plus-two pathways would allow students to have an easier time transferring to the College from a community college if they are a desirable student. Moreover, four-plus-one programs are graduate programs, which allows students to graduate with both an undergraduate and graduate degree in just five years. Schools like Rutgers and Princeton offer a graduate program, and if the College were to add their own graduate program, they could become more competitive.
The SWG is considering admitting more students, which may shift the faculty-to-student ratio in classrooms, compromising the teacher scholar model — unless the College hires more professors.
“The personal instruction, the personal experience of the college is all about having enough faculty here, having enough support staff here to provide that service,” Muha said. “So one of the conversations is the question, well, if we increase the number of undergraduate students, then won’t we also have to hire more faculty and so that would be a new expense? And so how are we balancing those two? What’s the magic number? Could we potentially increase the faculty-student ratio by just a little bit and still provide the same level of service?”
Adding more graduate programs and two-plus-two programs may stir anxiety in some faculty members due to the sudden change.
“I think that the biggest fear is that we’ve been so successful as an institution that focuses primarily on undergraduates, and as a faculty, we have been enormously dedicated to our undergraduate population,” Blake said. “The idea that we’re going to add graduate and continuing-education programs to what we already do has people concerned that we’re going to lose our focus. I understand these concerns. I’m a member of the faculty, and I share them. At the same time, I am confident that we can carry the same commitment to excellence and student engagement to these new endeavors.”
Aside from adding a two-plus-two pathway with community colleges and a four-plus-one with graduate programs — which the College is thinking about making virtual to avoid needing more classroom space — marketing is also a huge initiative to make the College more competitive.
As Muha pointed out, Kean University advertises all over the place, such as on billboards and buses.
“As colleges are getting more aggressive in terms of marketing themselves — and this is not something that TCNJ has historically done — but we’re realizing that if we want to grow enrollment or create graduate programs and reach a graduate market, we’re going to need to invest in some marketing to reach those audiences, so that will be another expense,” Muha said.
If the College were to attract new students, that would help relieve the school’s budget. Ricketts broke down what some of the College’s major expenses are, which are broken into several categories: anything to do with the classroom (such as instructional cost, faculty salary, academic instruction, research expenses, academic support, library books, computers for the classrooms), operation maintenance (such as utility bills), and the administration cost, which according to Ricketts, is “anything to do with the administration.”
Expenses related directly to the “anything in classroom” category account for over half of the College’s expenses.
“More than half of whatever it is that comes in, it’s earmarked to directly support student’s academic achievements,” Ricketts said.
As mentioned earlier, faculty salary is included in classroom expenses. However, because many faculty are union employees, salary contracts are determined by the state, not the College.
The American Federation of Teachers (AFT) — which also goes by the College of New Jersey Federation of Teachers (TCNJFT) — works with eight other state colleges to draft a faculty contract. The colleges who are a part of this process are Ramapo, Montclair, Stockton, Rowan, Kean and William Patterson (state schools Rutgers and the New Jersey Institute of Technology are separate).
“Every four years, we sit down with the state and we negotiate,” said Nancy Lasher, president of the AFT and a professor of interdisciplinary business at the College. “It works this way for all of the state unions.”
For particular areas, each of the colleges can bargain individually, such as for intellectual property copyright and patent rights. But for the most part, the schools bargain together.
Lasher explained that they negotiate in the governor’s office with lawyers present. They discuss things everyone cares about: salary, health benefits and other manners dealing with working conditions.
“The way the law reads, you bargain over wages, hours, and other terms and conditions in employment,” Lasher said. “For a professor, the kind of terms and conditions in employment would be things like how many different classes you can be required to teach in a semester, meaning how many preparations. Defining a professor’s duty, things of that nature.”
Faculty contracts are set to expire on June 30, 2023, but salaries won’t be part of any future changes.
“(Salaries) can’t go down because if they start cutting our salaries, that would be a problem,” Lasher said.
Muha said there could possibly be salary increases and other faculty benefits added, but since the state makes the decision, this isn’t set in stone.
“Those labor contracts are going to provide additional salary increases that the colleges will then have to budget for,” Muha said.
He also said that they have to keep room in the budget for a debt repayment jump as “all expenses go up.”
“In fiscal ‘23 we’re paying 15 million,” Muha said. “That drops a little in ‘24 and ‘25, but then in ‘26 it’s going to jump to over 26 million. So, the payment in the fiscal ‘26 budget, we’re going to have to have 26 point something million to pay that back. Again, that’s on a budget of 250 million.”
Ricketts said that the budget will probably be up to 300 million by 2026.
“Knowing that this is going to jump, knowing that the cost of labor is going to jump, and that other expenses, maintenance and whatnot, are going to be needed to be accounted for as well, and knowing that our sources of income are constrained, this then gets us to where are with the strategic plan that we’re seeing the expenses outpacing the revenue,” Muha said.
He added that the expense “jump” ultimately launched these conversations about strategic planning.
“There’s going to be this budget gap between income and expenses and how are we going to fill that gap?” Muha said. “How are we going to generate more revenue? Or, conceivably, how are we going to cut expenses? To bring those two numbers back into balance.”
Ultimately, debt is just a small part of the College’s financial situation, and to Muha, it is not seen as a “big issue.”
“The debt goes back to the early ‘90s,” Ricketts said. “Normally when you issue debt, it’s a 30 year debt… so you have a 30 year repayment period.”
The College already has a plan in motion, knowing when they will pay off the debt.
“Even though it’s $358 million in change, it’s fixed rate debt, and what do I mean by that? We restructure the debt to get it at a very low — a historically low — interest rate, a few years back, about less than 4 percent,” Ricketts said. “So even when rates go up in the future, it does not affect how much we are paying back because our rate is locked in for the duration of the debt, the thirty years, so that’s something that is important.”
Now, what exactly caused the debt? The question sums up to just one word: buildings.
The appealing buildings may be an eye-catcher, attracting prospective students, but they are a killer to the College’s budget, according to Lasher.
From the education building to the STEM complex, those buildings were the ones that raised the debt in the more recent years (as they are among the newer academic buildings on campus).
According to Ricketts, New Jersey does not provide public colleges any capital money to build buildings.
“So in order for us to be competitive with certain other institutions, be the villanovas of the world, we have to make sure we have the top-notch facilities in terms of lab space,” Ricketts said.
Ricketts said that the last facility built was the STEM complex. The cost was around seven million dollars.
“That was the latest new building that we had to go out and borrow money, in addition to some state funds, to build,” Ricketts said.
However, debt is not a new thing, and many colleges have debt.
“We’re all carrying it,” Muha said. “You could say, TCNJ has more debt than Rowan, and is that good or bad? No. I think the opinion of Moody’s and Standard & Poor’s, the Rating Agencies, is what really counts here because they’re trained to look closely at the financial health of the institution and make a determination for the investors on how risky that debt would be and what interest rate should be charged as compensation for taking on that risk, on that part of the investors.”
To borrow money, the College must have a rating assigned by a Rating Agency, which will then go to Wall Street. Assigned rating determines interest rates. Because the College has a high rating, the strategic planning consultant believed they could borrow more money to rebuild Travers and Wolfe. However, Ricketts said the College did not want to borrow anymore money, wanting instead to get out of debt.
“It just goes to show you that the strategic planning consultants were supposedly the experts when it comes to strategic planning and seeing what’s happening around the nation and they’re like, ‘yeah guys you could go do it,’ and we’re like, ‘no we don’t want to borrow any more money,” Ricketts said.
Therefore, the financial situation goes much more beyond the debt and not the College’s main concern.
Rather, the College has other goals. As Muha said, “We’re trying to anticipate budget gap, increase cost of labor, some increase in debt service, and the need to provide additional financial aid to students and the realization that we’re going to have to start marketing, so those are all factoring into the cost. The question becomes: how do we bring in more revenue? Because I don’t see cutting as a big piece.”
Ricketts clarified that reducing expenses is a part of strategy. However, cutting is not a major part of it.
As Ricketts said, “You can’t cut your way to success.”
While the Strategy Working Group has come up with their own strategic plan, Foster will ultimately present her own plan to the Board of Trustees on Tuesday, May 3. Blake said that, when President Foster forms the official strategic plan, she will take the advice from the Strategy Working Group, her leadership team and several governance groups around campus.
One thing to keep in mind is that the Strategy Working Group thrived off of feedback.
“The SWG gave the president its advice about how to implement the plan, but of course, committees don’t speak in a single voice,” Blake said. “I am excited to hear how President Foster takes all of this input and frames the plan for the board.”
A main topic that SWG discussed was growing diversity.
“Students, staff, faculty, trustees, everybody is committed to making TCNJ a more diverse institution that serves more diverse populations,” Blake said. “It was great to know that the community completely backs that goal.”
Blake himself does not yet know what President’s Foster’s recommended plan will be. Reusing Foster’s analogy, the College may have named its sharks, but until Tuesday, we are still in the dark about what pathway the College will hike.
“The SWG has been working hard since September to evaluate various ideas and options,” Blake said. “It’s the president’s job to bring all of these voices together and create a plan that she and her team feel that they can implement. So I’m excited to see what she comes up with.”