ASU System Board of Trustees meet to discuss “next steps” after A-State chancellor steps down

April 18-24, 2022

By The Daily Record Staff

The Arkansas State University (ASU) System Board of Trustees held a special virtual meeting on April 11 to discuss the recent resignation of ASU Chancellor Kelly Damphousse. ASU spokesman Jeff Hankins said Dr. Chuck Welch, president of the ASU System, briefed the board on next steps in the chancellor search process, including a discussion of individuals for interim appointments to campus leadership positions during the transition period.

“Today he will announce a search committee to advise him. Next week the position will be advertised nationally. He hopes to have a new chancellor chosen to begin July 1,” said Hankins, noting that the board itself took no action.

On March 31, Damphousse announced his resignation as chancellor of A-State, effective June 30, 2022, after completing five years of service at the system’s flagship university in Jonesboro. Texas State University in San Marcos, Texas, earlier announced Damphousse has been named as the sole finalist to replace Dr. Denise Trauth as president on July 1, 2022. Trauth has been president of Texas State since 2002, and will retire June 30, 2022.

“When I came to A-State five years ago, I pledged to do everything that I could to help the members of our faculty and staff reach their full potential, to ensure barriers to success were removed for our current and future students, and make our former students and friends proud of their university. That was the essence of the idea behind Every Red Wolf Counts,” Damphousse said. “As Beth and I take this opportunity to be closer to her mother, our family and friends, we pray that our A-State family understands our decision to return home, and knows that we gave our university and adopted hometown everything we had during our time here.”

A native of Canada, Damphousse completed his bachelor’s degree at Sam Houston State University in Huntsville, then earned his master’s and Ph.D. at Texas A&M University. The Damphousses met and married in Bryan, Texas, where Beth grew up and her immediate family lives today. The Damphousses’ oldest daughter, Kayleigh, lives in Austin.

“We have been blessed by a welcoming A-State and Jonesboro community, and we will never forget our time here,” Damphousse continued. “We will also forever be grateful for the leadership of the A-State Cabinet, our wonderful trustees, and especially President Chuck Welch, whose guidance, compassion, mentorship, faith and good humor has sustained us both during our time at A-State.”

Damphousse became the third permanently appointed chancellor of ASU on July 1, 2017, and the sixth to hold the title since it was instituted in 2006. He is the 13th chief executive of the institution since it was founded in 1909. In December, Damphousse was appointed to the NCAA Board of Governors, which is the primary governing body of the organization. He also serves as president of the Sun Belt Conference.

“This is certainly a bittersweet moment as we hate to lose the Damphousse family at A-State,” said Dr. Chuck Welch, president of the ASU System. “But we are also proud of them for this new opportunity and the ability to live closer to family. Kelly has been a trusted colleague and friend, and I always knew that his top priority was our students and their success.

“Kelly leaves the university in a very strong position and well-poised for the future,” Welch added. “His leadership during the past two years of the pandemic was exemplary. Financial positioning, fund-raising efforts, exciting new facilities and academic program growth have made A-State a better place because of Kelly’s leadership.” 

Welch said he would meet with university constituency groups to determine next steps. No decisions have been made regarding a possible interim appointment or a search process.

Damphousse’s resignation comes as the state’s second-largest university system behind the University of Arkansas is still facing financial challenges nearly two years after the COVID-19 pandemic began and over one year after A-State added Henderson State University in Arkadelphia to its portfolio.

On Feb. 1, 2021, Gov. Asa Hutchinson signed Act 18 of the 93rd General Assembly of Arkansas, which officially makes Henderson State the seventh institution of the A-State system. Act 18 also expands the ASU System Board of Trustees from five members to seven. The additional members will be appointed by the governor.

Henderson, founded in 1890, today remains a separately accredited institution and becomes the second four-year institution in the ASU System. However, the board of trustees on March 1 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.

Moody’s A1 bond rating

Moody’s Investor Services’ outlook for higher education in 2021 was negative due to the pandemic threatening revenue streams, Bates said, but the system was able to cut costs quickly enough to minimize impact and institutions collectively received $48.6 million in federal COVID-19 relief funds.

The ASU System’s Financial Reserves Policy requires days of cash on hand reporting, and both institutions finished with 197 days compared with 172 days in 2019, respectively. Henderson has improved from seven days in 2019 to 43 days in 2021 but still is not within the policy minimum. “The trend is good, and its personal services expenses level has been returned to lowest level in more than six years with more work to do,” Bates said.

Bates said challenges ahead for the system are increasing net tuition while maintaining affordability, state funding stability, cost containment efforts, and strategic use of long-term debt and reserves.

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.

“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.”

Arkansas State’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.

“The sound financial practices of A-State and our two-year institutions were critical to this rating and outlook,” Welch said. “They have successfully built cash reserves required for an A1 rating and budgeted carefully through the years. We will continue to make quality higher education as affordable as possible for our students while controlling costs.”  

Photo Caption:

1. ASU Chancellor Kelly Damphousse