Excerpt from the Chronicle of Higher Education
Wright State University has seen more than its share of controversy in the last 10 years. There was the work-visa scandal that led to a federal investigation and a reprimand. The botched attempt to hold a presidential debate between Hillary Clinton and Donald J. Trump. The faculty strike, resolved just days ago, that paralyzed the Ohio campus for nearly three weeks.
The strike is over. But now the university faces its biggest challenge yet: a fight for its long-term solvency.
At the start of the decade, Wright State was a healthy, financially stable public regional university. Just a small number of years later, it has hit rock bottom — or so its leaders hope. The university has posted daunting deficits for several years running, and at the close of the 2016 fiscal year, Moody’s Investors Service concluded that if Wright State were to liquidate all available assets within a month, the funds would allow it to operate for only 42 days. (By comparison, Shawnee State University, also in Ohio and with the same credit rating as Wright State, reported to Moody’s last year that it would have enough cash on hand to cover 114 days.)
What is needed for Wright State to recover? Among other things, plenty of time. “It will take WSU more than 20 years to get back to the financial position it was in just six years ago,” stated a report drafted in the lead-up to negotiations with the faculty union.
Scandals alone can’t explain the deterioration in Wright State’s finances. Several challenges prevalent in public higher education played a role: declining or stagnant state support, dwindling enrollment of international students, greater competition for a smaller pool of domestic students, and a work force larger than the university’s actual needs.
But the simplest explanation of what went wrong at Wright State is this: Revenues declined, but spending did not. From 2012 to 2017, the university repeatedly ended its fiscal years in the red. Over that time, total revenues fell by $43.5 million. Despite the declines, administrators failed again and again to bring spending in line with reduced revenues. For instance, though the university cut funding for academic support by $36 million over six years, it increased spending on instruction, institutional support, and research.
“They had some revenue stress over the years, and they hadn’t done a very good job of effectively managing to that revenue stress,” said Christopher Collins, an assistant vice president and an analyst at Moody's. “They hadn’t adjusted their cost structure to align with lower revenue amounts, and I think that’s really the big thing.”
What started out as a pair of $9-million deficits in the 2012 and 2013 fiscal years quickly escalated. At the conclusion of 2016-17, Wright State had posted year-end deficits of $22 million, $37 million, and $47 million in the three preceding fiscal years.
The deficits depleted Wright State’s once-muscular reserves — a $130-million drop in just five years — and contributed to multiple credit-rating downgrades. Moody’s issued two rating downgrades on debt issued by Wright State from 2015 to 2017, determining that the risk associated with the debt had increased from low to moderate. The agency affirmed its findings in July 2018. Despite the ratings decline, according to Moody’s, Wright State’s debt remains investment grade.
