Seeing Red in a Land of Green
Other nearby college leaders watched with a mixture of amazement and skepticism. Greensboro College had spent years buying up property, and laying a fair amount of brick and mortar. Then in January, when others were bracing for what would become the worst economic downturn since the Great Depression, Greensboro started handing out raises. For onlookers, this sunny outlook was either evidence of unparalleled fund-raising prowess or massive over-extension. As Greensboro now attempts to shovel its way out of debt, it appears both views have some truth.
Craven E. Williams, who resigned abruptly from the college presidency this month, was regarded by many as an able leader with something of a Midas touch. Over 17 years, he helped raise more than $71 million for Greensboro -- a relatively modest sum compared to larger or better known institutions, but much more than was the norm at Greensboro, according to Robert Stout, chair of the college’s board of trustees. Williams also oversaw a growth spurt that proved unsustainable, and the college has now been forced to slash salary levels, increase teaching loads and – very late in the admissions cycle – offer free tuition to select students in hopes of boosting enrollment.
The past month at Greensboro has been a period of triage. News stories have carried unsavory headlines like “College fends off bill collectors,” and by most reports Greensboro is “$19 million in debt.” While that statement isn’t entirely fair, according to Greensboro officials, it’s hard to blame media outlets for any inaccuracies that may exist. The college has hardly engaged in a public awareness campaign, and any overt attempts to clarify the fiscal picture have consisted of platitudes and jargon – neither of which tell students, parents or faculty much about the state of the institution. Stout’s May 24 opinion piece in the News & Record, for instance, talked of a “perfect fiduciary storm,” but said nothing about the college’s actual debt position, much less the factors that led to this crisis.
Over the course of three days last week, Greensboro officials were unable to respond to basic questions like “What is your full-time enrollment?” and “How much debt do you hold?" Faculty have also said they have been kept in the dark about the problems the college faces. It wasn’t until late Friday, a day after announcing draconian budget reductions, that the college began to tell its story. While still a troubling story, it’s different from the one that’s been circulating.
As Greensboro bought up downtown properties and expanded program offerings, the college was relying on a bank-issued credit line for a significant portion of its operations, according to Ed Sanz, a consultant whom the college hired as its “chief restructuring officer.” That strategy seemed to be working fine up until a few months ago, when Bank of America started raising questions about the college’s ongoing budget shortfalls -- and its inability to pay bills.
“They have consistently overestimated revenues. Period,” Sanz said. “The budgets they always prepared were overly optimistic, and then they matched their expenses to the optimistic budget… I blame it on just lack of good budgeting. It’s pretty sad.”
The cycle of bad budgeting prompted Bank of America to pull the rug out from under Greensboro, reducing the college’s credit line from $7 million to $3 million, Sanz said.
“The bank was saying ‘Hey, we want to see a realistic budget that doesn’t show losses,' ” he said.
That “realistic budget” was announced Friday. The college will eliminate 10 positions, including one faculty position. Greensboro will also increase teaching loads by one course a year, requiring faculty to teach seven courses. Additionally, the college will eliminate nearly all of its part-time faculty, and cease offering teaching load reductions to faculty who also carry administrative duties. In this newly-defined budgetary world, the silver lining is that salary reductions will be only 10 percent – instead of 20 percent, as was announced in April.
Throughout the process, faculty, who were considering a no confidence vote in Williams prior to his stepping down, say they have been left out of the loop. Cheryl Brown, a criminal justice professor who is chapter president of the American Association of University Professors, told the News & Record she was surprised the college hadn't tapped into the faculty knowledge base to help solve its problems.
“When you’ve got a campus full of Ph.D.s in economics, business, sociology, all the fields that can help, and you’re not even invited to the table?" she said.
The budgetary steps announced Friday helped reduce Greensboro’s operational credit needs by $1 million, and Bank of America is now willing to extend $6 million of credit to the college, Sanz said. But the credit line comes with some serious strings attached. Given the college’s precarious financial position, Bank of America required Greensboro to put up all of its property as collateral. By the most conservative of estimates, the college has put up $50 million of collateral to secure a $6 million credit line, Sanz said.
“It is a lot more than is typically needed,” he said.
While it is true that the college, with all of its property, has $19 million of debt, it’s hardly fair to say the college is $19 million in debt, Sanz said. That would be like saying a person who takes out a loan on a $200,000 house is $200,000 in debt. By failing to clarify the record, however, Greensboro has let the story continue to be that the debt it has issued is the same as the debt it has run up. While that’s an important distinction, it’s also inaccurate to say Greensboro hasn’t gotten into some trouble. The college’s tendency to live in the red has triggered not only the attention of its creditors, but also its accreditors.
The Southern Association of Colleges and Schools, which provides accreditation to Greensboro, has sent a letter to college officials asking them to explain their fiscal situation. Belle Wheelan, president of SACS Commission on Colleges, said the association “didn’t know about it until it hit the Greensboro paper.” Describing the SACS letter, Wheelan said it asks basic questions like “What happened? Why do they think it happened? And what are they doing to ensure it doesn’t happen again?”
So what did happen? Add that fundamental question to the litany of heretofore unanswered ones. According to Sanz, the college consistently overestimated its enrollment numbers, while also underestimating its attrition rate and operational expenses. Like most colleges, Greensboro has also seen its endowment value decline, dropping from $23 million to $17 million in the last year. But the college is largely tuition driven, so the endowment decline is not a primary factor in the current fiscal crisis.
What Lies Beneath
While structural problems were festering beneath the surface, Greensboro College had the outward appearance of a wealthy neighbor next door, according to Kent John Chabotar, president of nearby Guilford College.
“There were a lot of acquisitions,” Chabotar recalls. “It’s a small college in downtown. Any small college which suddenly starts to get all that extra property [raises questions]: Could they afford it? Could they absorb the maintenance of that property, and do everything else they wanted to do?”
The answer is clearly no, but Chabotar thought otherwise up until the current crisis. While financial mismanagement may have been Williams’ undoing, Chabotar said he’d always admired the former president’s ability to woo donors. It was his talent in this arena that lent credence to the possibility that Greensboro was in fact on the move.
As he watches Greensboro adapt to its new reality, Chabotar says he’s still scratching his head. The college has offered to waive tuition for any student admitted into its honors program who agrees to live on campus, a strategy Chabotar can’t fully comprehend.
“If you’re guaranteeing free tuition to students that come to your college and you’re only charging room and board, I don’t see how those numbers work,” he said.
The numbers actually don’t work, but they may beat the alternative. With an expected class of a little more than 200 freshmen, as many as 50 may have tuition waived, according to Sanz. But the college will be filling dormitory beds that might otherwise be empty, and they will be the beneficiary of state aid that accompanies these students.
“We’re paying for dormitories, for everything regardless of whether there are people there or not,” Sanz said.
Greensboro officials frequently say their enrollment is around 1,300 students, but that figure represents full-time equivalent students. When counting only traditional full-time students, there are actually closer to 600, Sanz said. As such, a target freshman class of 220 makes sense. And it looks like the sales pitch is working. Greensboro has received 235 deposits, suggesting it may have its largest freshman class in years, officials say.
Greensboro’s struggles, however, look to be far from over. The college has yet to even name an interim president more than two weeks after Williams’ resignation, and one wonders what a presidential search would look like in these conditions. Even so, college leaders are – as usual – optimistic.
“The Board of Trustees, with the help of an internal leadership team, has prepared a budget that is sustainable,” Stout said in a news release. “This should end all of the talk about Greensboro College’s future – it is well on its way to another 171 years of educating some of the brightest young minds there are.”