Arkansas State University trustees OK restructuring plan for Henderson State
May 16-22, 2022
By Wesley Brown
After acknowledging a lengthy list of past budgetary failures and “a university that’s literally on the brink of closing its doors,” the Arkansas State University (ASU) System Board of Trustees on May 5 moved forward with a reorganization plan for Henderson State University in Arkadelphia that will provide over $5.3 million in savings over the next two years.
In doing so, the ASU board approved the recommendations of Henderson State University Chancellor Chuck Ambrose for an academic reorganization designed to enhance student success, address community-based workforce needs and produce critical financial savings for the institution’s future.
Welch outlined the dire financial situation at Henderson that was identified in 2019 and steps the ASU System has taken to improve operations. The pandemic both delayed action and made the situation worse, he said.
“It’s important that we all realize just how critical the situation is and that major steps have to be taken to help this university survive, recover and prosper,” Welch said. “We must realize that if the overall model of higher education is flawed, then Henderson’s situation is far worse than that of the vast majority of institutions. But I am heartbroken at the depths of these recommendations and the impact it will have on so many lives. Not one person involved wanted this day to come, or even for these discussions to have to occur.
“Our only two options were to make the hard recommendations necessary to keep the university open, or to do nothing and see the university cease to be a stand-alone institution,” Welch said. “The latter was not an option.”
According to ASU officials, the Henderson leadership team established an initial financial savings target of $5 million from academic salaries. Elimination or reduction in non-instruction unit salaries and restructuring of administration positions have already resulted in $1.8 million of savings.
The chancellor’s academic restructuring recommendation will reduce total instructional positions by 88 — including 21 currently unfilled positions — or 37% of the 237 total positions in spring 2022. Of the remaining 67 positions being cut, 44 are tenured faculty members who may remain employed through the 2022-2023 academic year. The changes will result in annual salary savings of $2.55 million in Fiscal Year 2023 and an additional $2.79 million in Fiscal Year 2024.
Ambrose said the reimagining of academic degree programs is organized into four meta-majors that align with the competencies, skills and talents that community-based workforce needs: Health, Education and Social Sustainability; Applied Professional Science and Technology; Business Innovation and Entrepreneurship; and Arts and Humanities.
Academic degrees are designated as either Future Degree Programs, which will continue to be offered, or as Teach-Out Degree Programs. Currently enrolled Henderson students and freshmen in Fall 2022 will be supported to complete Teach-Out Degrees. Academic disciplines included in Teach-Out Degrees will continue to be incorporated through the general education and interdisciplinary studies curriculum to enhance outcomes for all students.
“We did not take these decisions lightly, and it is impossible to minimize the impact this has on members of our community,” Ambrose said. “Henderson is a tight-knit family and community, so we understand this is difficult. We will do everything possible to help these individuals during their transition.
“We simply cannot grow our way out of Henderson’s financial challenges without implementing significant restructuring,” he added. “Our low degree completion and retention rates have negatively impacted our tuition revenue while our instructional costs have escalated. Student success through degree completion and meeting workforce needs will be our top priority.”
After the board’s decision, ASU officials provided thorough revenue data showing Henderson State’s revenue, expenses, enrollment and graduates by degree program, along with information about the chancellor’s recommendations, communication from the chancellor and questions and answers about the restructuring plan, which can be found at hsu.edu/futureofhenderson.
The restructuring plans come well after ASU added Henderson State University in Arkadelphia to its growing portfolio of seven higher education institutions that serves almost 40,000 students annual on campuses in Arkansas and Queretaro, Mexico.
On Feb. 1, 2021, Gov. Asa Hutchinson signed Act 18 of the 93rd General Assembly of Arkansas, which officially made Henderson State the seventh institution of the A-State system. Act 18 also expanded the ASU System Board of Trustees from five members to seven.
The transition was previously approved by the Henderson Board of Trustees on Nov. 21, 2019, the ASU System Board of Trustees on Dec. 6, 2019, and the Higher Learning Commission on Nov. 5. Henderson, founded in 1890, has since remained a separately accredited institution and is the second four-year institution in the ASU System, which is led by President Dr. Chuck Welch.
In early March, the board of trustees had to approve the refunding and issuance of bonds for Henderson State University and ASU as cost-saving measures. ASU said it will refinance three series of bonds with collective current value of $24.4 million, while Henderson will refinance six series of bonds with current collective value of $42.2 million. The ASU System will not incur any new long-term debt.
Julie Bates, executive vice president of the ASU System, reviewed the system’s audited consolidated financial reports for the fiscal year, which now include Henderson since its addition in 2021. Total operating expenses for the system declined by $1.2 million, she said, and no new debt was issued.
On March 16, Moody’s assigned an A1 rating to the A-State system’s bonds for Henderson State University and ASU that will be refinanced to generate cost savings for the institutions. The Wall Street credit rating service also issued a “stable outlook” for the ASU System that reflects “gradual recovery at Henderson, including improvement in financial performance and liquidity.”
Prior to becoming a member of the ASU System in 2021, Henderson’s current long-term bond financing was downgraded from A3 to Baa2 and given a “negative outlook” after the disclosure that capital reserves had been depleted in June 2019. The A1 rating is not only substantially stronger than the current Baa2, but also two levels higher than Henderson’s prior A3 rating as a result of being part of the ASU System and financial restructuring efforts. Following the sale of the Series 2022 bonds, the previous rating for Henderson will be withdrawn.
At the time of Moody’s rating upgrade, Welch said the ASU and Henderson State executive and financial team were working to get Clark County university’s finances back in order.
“This is a strong, third-party validation by a very reputable global research firm that we are taking steps in the right direction financially with Henderson State,” said Welch. “I’m proud of the work of our entire financial and leadership team at Henderson, our system office and A-State. They are working hard to get Henderson on sound financial footing.
“Our employees at Henderson are enduring painful furloughs and salary cuts right now,” Welch added. “Chancellor Chuck Ambrose and I are grateful for their sacrifices as they continue to provide the best possible education and services for our students. The recovery will continue to take time, but I’m confident we’re on the right path.”
ASU’s bonds were affirmed as A1 based on its “diversified student market role and overall strong operating performance,” Moody’s said. The New York credit rating service said, “ASU showed marked improvements in wealth and liquidity over the past decade while making on-campus investments and incorporating financially weaker colleges into the ASU system.”
Moody’s noted that ASU’s total cash and investments have increased nearly 90% over the past five years, to $370 million in fiscal 2021. Liquidity is growing, with 207 “monthly days” cash on hand for fiscal 2021. ASU benefits from a good relationship with the State of Arkansas (Aa1 stable), providing 36% of operating revenue.
