Financial and management issues at Erie Community College

Over the years Erie Community College (ECC) has had its share of ups and downs as the institution navigates the waters of higher education. The school plays a vital role in training both young and not-so-young men and women for careers or to prepare them for continuing their education at a higher level.

There are 16 institutions of higher education in Western New York. Except for SUNY at Buffalo, the local colleges all pretty much depend on local high school graduates to fill their classrooms. Unfortunately the number of high school graduates has been diminishing and the trend is expected to continue.

The shrinking student pool has led many local colleges to adjust their programs to operate within budget limitations. The size of the faculty has been reduced and senior members have been encouraged to retire, often to be replaced by part-time adjunct instructors. Benefits have been reduced. Academic programs with few student majors have been cut back or eliminate. Underutilized buildings have become a financial burden.

The normal reflex of increasing tuition and fees to fill budget gaps has been tempered by the realization that the paying customers are finding it more difficult to pay, with the haunting reality of student debt that scares many students and parents. The State of New York’s efforts to expand student aid, which Governor Andrew Cuomo describes as “free tuition,” has had a negative impact on private school enrollments.

As tuition rates go, ECC’s is relatively low, at $4,900 for two semesters, plus fees. The state Tuition Assistance Program (TAP) and federal Pell grants, even before the Cuomo tuition assistance expansion, allow many full-time ECC students to attend tuition-free.

Theoretically community colleges in New York are supposed to operate with their revenues coming in equal shares from the students, the state and the local sponsoring county. In practice the numbers are radically different. In 2018-19 ECC students will pay 51 percent of total costs, with the state providing 28 percent and Erie County just 17 percent.

It has long been recognized that enrollment at community colleges runs in the opposite direction of the economy. The better the economy is, the lower the enrollment.

As the economy has improved in the past several years in Western New York ECC has struggled with declining enrollment. They are not alone. Niagara County Community College, which has generally done better with enrollment than ECC, recently announced that they anticipate a decline of five to six percent in enrollment in the 2018-19 year compared with 2017-18.

Erie Community College is heavily dependent on its tuition and fee income to maintain its budget. In the face of declining numbers the college has reduced some programs and used up financial reserves. You can only do that for so long.

Compounding issues like enrollment trends that are somewhat outside of the school’s ability to control, ECC was hit hard by an audit by State Comptroller Thomas DiNapoli in January 2016. The audit focused on loose management of the college’s finances. Highlighted areas of concern included control weaknesses over payroll processing; questionable compensation payments; the failure to solicit proposals for certain professional services; and lax monitoring and control of the school’s two affiliated not-for-profit corporations, the Auxiliary Services Corporation (ASC) and the Erie Community College Foundation.

When the audit was released the college indicated that it did not agree with some aspects of the Comptroller’s audit, but that they generally agreed with the audit’s recommendations and they planned to take corrective action.

No formal report on those corrective actions was publicly released by the school. There has been no additional follow-up by the Comptroller’s office or by Erie County officials who are responsible for oversight of the college.

In light of these various developments it came as somewhat of a surprise to see that ECC, for 2018-19, anticipates a steady enrollment compared with 2017-18. The new budget announced that tuition and fees would be held constant, which implies that enrollment will remain about the same. Those are welcome developments for students. But the question remains, how realistic are those projects?

Here’s is what ECC’s 2018-19 budget presentation says about its projections:

Another tool SUNY ERIE administration will use to ensure the College properly manages is the use of periodic budget reforecasting… This provides the best opportunity for the college to stay ahead of unanticipated economic or enrollment events that could negatively impact the college’s ability to keep its budget balanced. If there is a significant downward shift in estimated revenues that would affect the viability of the approved budget, communication will be provided to the BOT and County ensuring they are aware of the concerns as well as the College’s mitigation plans identified and executed.

But consider this: an internal report prepared at the College indicates that projected enrollment, as of mid-August, shows a potential student count drop of nearly 700, or more than nine percent compared with the same baseline projections in mid-August 2017. The projected reduction in enrollment may reverse before fall classes begin. Or it might not.

Given the correlation between student enrollment and tuition revenue, if it turns out that enrollment in September 2018 is even five percent lower than in September 2017, the drop in revenue would be about 1.7 million dollars. Fund balance that could fill the revenue gap has greatly diminished. The school would need to find ways to cut back spending on the fly during the already started academic year, which always harder than being able to plan for reduced enrollment prior to the start of the academic year. If enrollment parallels the mid-August projections the financial loss would approximate 3.4 million dollars.

A substantial drop in enrollment may also affect students in terms of course availability, since the school looks for certain registration numbers for all courses. It could also impact the availability of particular courses at each of the three campuses.

ECC’s former CFO, Bill Reuter, left for another college last year. Reuter’s long term experience and intimate knowledge of the school’s finances and activities is missed.

The College’s proposed budget was approved by the Board of Trustees, then passed on to County Executive Mark Poloncarz, who made no revisions to the plan. Likewise the County Legislature approved the budget without changes. The County Comptroller, Stefan Mychajliw, has no official role in the preparation or approval of the budget, but he certainly is in a position to comment on the financial plan if he chose to do so.

Finally there is the Erie County Fiscal Stability Authority, a body charged with reviewing county finances. (I served as a member of the Authority from 2006 through 2010.)

The Authority previously reviewed the College’s budgets every year after the budget was approved by the County Legislature, but the last review about the ECC budget that is listed on the Authority’s website is from two years ago, July 2016. In that now dated report the Authority warned about the potential problems that might occur in the future. Nothing has gotten better in the past two years. Prior review and preparation is a whole lot better than trying to deal with problems after they have developed.

One organization that has expressed concern about ECC’s finances is the Middle States Commission on Higher Education, which has the responsibility of accrediting the school’s activities. Accreditation is critical to the receipt of government funding at the school. Middle States, according to a report by senior reporter Eileen Buckley on WBFO Radio, issued a warning to ECC in a November 17, 2017 letter. The station reported that

ECC is lacking on two new accreditation Standards V and VI, educational effectiveness and finances.

“They cited us for insufficient faculty participation in assessment, course learning outcomes not integrating with program learning outcomes and standard six is in regard to our finances, so they are concerned with our financial sustainability. For the past three years we’ve dipped into our reserves and we’ve raised tuition and student fees,” [College President Dan] Hocoy noted.

The information was based on material issued by the college in June before Hocoy was appointed and began his new post in July. ECC will work to improve student retention and generate new revenues with online programs for adults…

ECC must submit a “monitoring report” next September [2018] and Middle States will review progress next October. 

“In October of 2018, the date yet to be determined, Middle States will come to campus and review our progress in light of that monitoring report and seeing where we are currently with regard to those standards V and VI. At a later point, they will make a determination as to whether we are, subsequent to that visit, still on warning, off warning or on probation. We are currently fully accredited and will be through this process of being on warning, so there is not an issue there,” Hocoy stated.

Coming next

On Thursday this report on financial and management issues at Erie Community College will continue with a review of the recent contract between ECC and Canisius College for the use of Canisius dormitory rooms by ECC students beginning in the 2018-19 academic year.

Follow me on Twitter @kenkruly