91�ֿ�

Let’s not let our budget challenges rob us of a reminder of big and small achievements at 91�ֿ�. Crawford Hall, our beautiful home for the Ambassador Crawford College of Business and Entrepreneurship, is open and receiving rave student reviews. Two publications recently ranked our Fashion Design and Merchandising program third in the nation and among the top university-based programs. Our student pilots won the Air Race Classic for the third consecutive year. Enrollment in the College of Aeronautics and Engineering continues to grow, as does the enrollment of international students. Our Regional Campuses transformed to ensure that each campus remains open and an anchor institution in its community despite enrollment reductions. And again, this year we graduated nearly 9,000 students, 63% of whom remain in Ohio to work and live, and 36% of whom, on the Kent Campus, graduated with no student debt. Zero. We are big, we are successful and collectively 91�ֿ� works for Ohio because of our employees. Thank you.

And Now, On to Budget Matters at Hand

Our nation’s Federal Reserve Board is in the news lately for trying to engineer what it calls "a soft landing" to reduce inflation while avoiding a national recession. At 91�ֿ�, we are also aiming for a soft landing, one that a) delivers balanced budgets annually and b) reduces the number of our employees primarily through attrition. In plain language, I am saying this: Failure to deliver balanced budgets endangers our ability to deliver a soft landing. We must engage in ongoing expense reductions in the $10 million-$12 million range each year through 2028. In addition, for the rest of this fiscal year, through June 30, 2025, we will have to reduce expenditures even further given actual results in the first 60 days of the current fiscal year. These additional actions will include a hiring freeze, a travel freeze and delaying large projects such as the repaving of parking lots.

Allow me to say a few more words about the landing. We want it to be soft, meaning we avoid hastily announced job eliminations. But there will be a landing … meaning that over the next 36 months, we will see a reduction in the number of employees at 91�ֿ�. Most vacated positions will not be filled, and for those vacated positions that are filled, we aspire to do so with current employees as much as possible.

All of the above is being done to preserve the strength and greatness of 91�ֿ�. Our campuses sparkle, and we continue to hold our own in a competitive higher education market.

You often hear the phrase “we’ve got this.” Well, we do … we do have a clear plan to keep 91�ֿ� strong, financially healthy and at the forefront of graduating students and generating knowledge. I recognize that this requires change and uncertainty, but it will produce a sustainable and bright future … one that we will enjoy together as Golden Flashes.

Fiscal Year 2024 Performance Results

Executive Summary. In September 2023, the Board of Trustees approved a balanced budget for Fiscal Year 2024 with proposed revenues of $687.5 million and expenses of $687.5 million, a $26.2 million (or 4.6%) increase from the prior year. Unfortunately, we ended Fiscal Year 2024 (July 1, 2023, through June 30, 2024) with a $9.9 million university-wide operating budget deficit, which is equal to 1.4% of our budget. In total, our expenses were over budget by $18.6 million, while our revenues exceeded budget by $8.7 million.

Our expenses exceeded budget for three primary reasons (which will be discussed in detail):

1. Maintenance and repairs expenses were over budget by $7.1 million.
2. Healthcare benefits expenses (medical claims, pharmacy) were over budget by $6.6 million.
3. The state-mandated tuition discount for the College Credit Plus program totaling $4.0 million has not been historically budgeted (which was corrected for the Fiscal Year 2025 budget).

The budget deficit was driven by negative balances of $10.9 million at the Kent Campus and $0.7 million in the Kent Campus Auxiliaries, with minor offsets from surpluses of $0.6 million at the College of Podiatric Medicine and $1.1 million at the Regional Campuses.

Unfortunately, we had to dip into reserves to cover the deficit, which in turn reduces the amount of reserve funds earning interest, understanding that interest earnings in part make up a portion of our base budget. As per standard accounting practice, any year-end budget surplus or deficit is applied to the respective college’s or unit’s fund balance and carried forward as one-time funds to the next budget year.

Revenue Summary. Total revenues were $696.1 million, $8.7 million higher than the $687.5 million for which we budgeted. Actual tuition and fees, which account for 57.5% of the university’s operating revenue, were $400.4 million, $10.9 million (or 2.8%) higher than the budget of $389.5 million, due to higher than budgeted enrollment at both the Kent Campus and Regional Campuses. Enrollment on our Regional Campuses stayed flat although we projected a decline. These were offset by lower than budgeted enrollment at the College of Podiatric Medicine. Over the past 10 years, total enrollment declined from a headcount of 41,213 in fall 2014 to 33,530 in fall 2023 (down 18.6% for that period).

For academic year 2023-2024, the Board of Trustees approved the following tuition increases: 3% for the Tuition Guarantee Model for incoming freshmen, which will remain constant during their four years at 91�ֿ�; 0% for continuing undergraduate students not on a Tuition Guarantee (those who started prior to fall 2018); and a 4% increase in graduate student tuition and the surcharge for non-Ohio residents.

The state’s subsidy of public higher education, known as the State Share of Instruction (SSI), constitutes 22.8% of our university operating budget and is awarded entirely based on student outcomes (courses passed and degrees awarded) rather than strictly on enrollment, as is the case in most states. Our commitment to student success generates additional state funding when we outpace our peer universities in Ohio.

The SSI allocation for Fiscal Year 2024 was $158.3 million, a $0.5 million decrease from the prior year. Upon further analysis, we continue to experience reductions in SSI due to the pandemic’s impact on our course/degree completions combined with the ongoing decline in degree-seeking enrollment at the Regional Campuses. Concurrently, other Ohio public universities (for example, Ohio State University and the University of Cincinnati) had degree completion growth during that same three-year time period driven by their significant enrollment growth over the past several years. This represents a shift of funding from access-focused institutions to more selective institutions, an inherent risk due to the pandemic and its impact on enrollment and persistence of at-risk populations in higher education. The performance-based decline in SSI we have experienced is offset by $3.4 million in new SSI we began receiving in Fiscal Year 2024 for College of Podiatric Medicine students, the result of a six-year lobbying effort that finally paid off. Note that Ohio State and the University of Cincinnati combined receive over 42.6% of the total SSI allocation annually, so as they grow and increase course and degree completions, the pool available to the other institutions shrinks because SSI is a “fixed pie” amount, meaning increases at one school reduce amounts at other schools with lower results. Considering SSI is allocated based upon performance, by continuing our commitment to student success, we have an opportunity to realize more revenue if we outperform our peer Ohio institutions in terms of course and degree completions.

Income on our investments (not on funds managed by the 91�ֿ� Foundation) performed well in a highly volatile market. The diversification of the investment portfolio and focused oversight we apply in partnership with our investment advisors delivered positive results as we ended the year with investment income (both realized gains plus market appreciation) of $29.2 million, allowing us to achieve our budgeted $15.1 million of investment income to support operations.

Revenue generated by the university’s auxiliary units (think housing and dining, the bookstore and the like) was $106.9 million, $1.0 million higher than the budget of $105.9 million. However, revenues generated by University Housing were $1.2 million (or 2.4%) lower than budget due to a slightly lower room occupancy than planned (actual 5,642 beds compared to budget of 5,930). University Culinary Services exceeded budgeted revenue by $1.8 million, with 6,058 dining plans sold compared to their budget of 5,795, and the Department of Intercollegiate Athletics generated nearly $0.5 million more than originally budgeted thanks to a new multimedia rights partnership with Van Wagner College, which focuses on generating increased sponsorship revenue to 91�ֿ� Athletics.

Expense Summary. Delivering a balanced budget continues to be our bedrock principle so that we can preserve the university’s sound financial position. As mentioned earlier, that did not happen this past year, and actual expenses were over budget by $18.6 million.

Salaries and wages totaled $319.6 million, $2.4 million (or 0.8%) higher than the budget of $317.2 million. Delivering on our philosophy of maintaining lower staff counts while treating our staff the best we can with competitive wages, benefits and work-life balance/enhancements will continue to be a strategic priority. This is evidenced by three consecutive years of competitive wage increases for non-represented staff (3% in 2022 and 2023 and 2% in 2024) placing us near the top of our Ohio public university peers. We continue to hold the line on our faculty and staff headcounts (285 fewer faculty and 296 fewer staff compared to Fiscal Year 2017) while continuing to increase wages and benefits for our most valued asset – our people.

Our benefits expenses, which represent 17.2% of the annual budget and consist of expenses such as healthcare, pharmacy, disability, retirement, leave time, tuition waiver, workers’ compensation and Medicare, were $124.8 million, $6.8 million (or 5.8%) higher than the budget of $118.0 million. In building the budget, we assumed an inflation of 5% over the previous year. However, the amount we paid out in medical claims was $8 million more than that (an additional 7% over budget). This was partly due to 21 extraordinary claims (over $400,000 each … we are self-insured) compared to 13 over the previous two fiscal years. Furthermore, pharmacy expenses during Fiscal Year 2024 increased 17.5%, driven by significant price inflation and a major increase in the number of prescriptions filled for new drugs such as Ozempic.

Before the pandemic, expenses for medical prescription claims represented approximately 17% of the total healthcare plan expenses. This past year, it exceeded 29%. We are analyzing these costly trends and are developing strategies to combat this unsustainable rise in healthcare expenses.

Student aid awarded in the form of merit scholarships and need-based aid was $91.9 million, $2.6 million higher than the budget of $89.3 million. During our midyear reforecast, and as we began planning the budget for Fiscal Year 2025, we saw that the statutory discount associated with the College Credit Plus program has not been historically budgeted and amounts to approximately $4.0 million per year. In plain English, by state law, we can only charge College Credit Plus students a fraction of the tuition paid by degree-seeking students. On the one hand, this important state program affords students in grades 7-12 the opportunity to earn college and high school credits at the same time by taking college courses at Ohio colleges and universities at no cost to the student. On the other hand, the Ohio Department of Higher Education reimburses the institution at a highly discounted rate (a per credit hour discount of over $300) depending on where the course is taken (on campus or at the high school) and who teaches the course (either the college professor or a certified high school teacher).

Competition for students has always been fierce in Ohio, and with the declining number of high school graduates in the state, that competition has become even more pronounced and expensive. Our budget for student aid has increased 207% over the past decade as we continue to balance merit- and need-based scholarships in alignment with our strategic enrollment goals and our fierce commitment to access and affordability. We just completed year three of our Flashes Go Further Scholarship Program, our $14-million-a-year commitment to Kent Campus students with the highest levels of financial need, so that these students will not have to borrow money to pay for tuition and general fees. Nearly 28% of our incoming freshman class are eligible for this program.

The university’s auxiliary operations, primarily University Housing, University Culinary Services and the Department of Intercollegiate Athletics, continue to sustain normal modes of operation, offering modern, comfortable residence hall accommodations; healthy dining options in clean, energetic spaces; and active NCAA and Mid-American Conference competition. Overall auxiliary expenses totaled $102.4 million, $3.6 million (or 3.6%) higher than budget as a result of sustained inflation on the costs of food, supplies, materials and travel for athletics teams.

All other non-auxiliary, non-personnel expenses (supplies, utilities, travel, repairs, maintenance, print, postage and the like) totaled $59.3 million, approximately $11.7 million (or 24.6%) higher than the budget of $47.6 million, the direct result of stubbornly high inflation throughout the year, plus repairs and maintenance expenses exceeding budget by $7.1 million. The cost of repairs, coupled with the aging physical infrastructure on our campuses, requires extensive resources for upkeep. Nearly 77% of our campus buildings were built before 1990, and our current estimated deferred maintenance cost exceeds $375 million. Our priority this year is to evaluate our space needs for the future and develop an actionable plan to reduce physical space (mothballing and demolition), which will reduce deferred maintenance. We received good news in June 2024 that the Ohio General Assembly approved a state capital appropriations bill with $29.1 million in funding for 91�ֿ� dedicated to priority projects on the Kent Campus (White Hall HVAC and classroom improvements, library elevators, campus elevators, critical deferred maintenance and IT network access in academic buildings) as well as our Regional Campuses, including Trumbull Campus library roof, Stark Campus central chiller, Geauga Campus Main Classroom egress, East Liverpool Campus Purinton Hall classrooms, Salem Campus Main Classroom HVAC, Ashtabula Campus Main Hall entrance, and Tuscarawas Campus Founders Hall HVAC and emergency generator. These funds are much needed and much appreciated.

We also completed crucial new building construction projects. In August 2023, we opened the Aeronautics and Engineering Building expansion, and we completed Crawford Hall, the new home for our Ambassador Crawford College of Business and Entrepreneurship, in time for the 2024 Fall Semester. In Fiscal Year 2024, the university spent $114.5 million on construction and renovation projects funded by several sources, such as university facility funds, previously appropriated funding from the state, bond proceeds and donations.

Our annual expenses also include paying down our long-term debt. Over the past eight years, we refinanced our bonds four times, saving us an average of $2.6 million a year, and executed a debt restructuring to reduce our debt service payments for 2023 through 2027 by $8 million per year at a very low cost. Nevertheless, our debt service payments continue to be a considerable expense to the university, totaling $29.2 million ($14.5 million in principal and $14.7 million in interest payments).

Other Observations. Since 2017, we have been reducing costs and expenditures to help us manage the decline in revenues in the wake of decreasing enrollment. Strategies such as employee and faculty separation plans in 2017, 2018, 2020, 2021 and 2022, continued strategic hiring and position control, lowered investment management fees, healthcare plan redesign, the comprehensive office print initiative, the reduction of energy costs through performance contracting and sustainability measures (solar, geothermal and recycling), shared services in facilities operations and information technology, and innovative sourcing strategies such as group purchasing and reverse auctions for electricity have led the way.

Our careful stewardship yielded a state of Ohio financial health score of 3.1 on a 0-5 scale, and we continue to perform at the mean of Ohio’s public universities. This financial score is a statutory measure of financial health comprising three key ratios: primary reserve, viability and net income. The score decreased from the Fiscal Year 2023 score of 3.6 as we intentionally used one-time funds to finance Crawford Hall, the Aeronautics and Engineering Building expansion, and the Band Practice and Music Facility instead of issuing debt during a time of rising interest rates. Our score for Fiscal Year 2024 shows that our reserves are sound and outstanding debt is reasonable. However, we must continue to align expenses to projected revenues and carefully and strategically steward the spending of one-time funds.

Other independent, external measures of our university’s financial health are provided by the Moody’s and Standard & Poor’s ratings agencies. While many institutions have experienced ratings downgrades and negative outlooks as of late, our most recent bond ratings were affirmed in February 2024 at Aa3/Stable Outlook (Moody’s) and AA-/Stable Outlook Standard & Poor’s, which are deemed to be investment grade (very strong capacity to meet financial commitments). The reported strengths of our rating include enrollment growth (first increase since 2015), maintenance of R1 research status, the university’s governance and management team, a very strong financial risk profile with a solid cash and investment base, size of the university, geographic diversity and debt profile (no new debt and paying down principal). Offsetting factors were noted as well: operating performance, selectivity rate (below median) and unfavorable student demographic pressures. We anticipate a review of our ratings will occur again this year with similar results.

Fiscal Year 2025 Approved Budget

Executive Summary. Our balanced budget of $703.6 million is an increase of $16.1 million (or 2.3%) from the prior year’s approved budget. We continue to confront inflation and a less than 1% increase in funding from the state of Ohio for this year. As such, we had to cut $12.3 million in projected expenses to balance the budget and will cut even more to address the Fiscal Year 2024 deficit. This reflects our post-pandemic reality and one that we continue to tackle head-on collectively and collaboratively.

An important tool we rely on for budget planning purposes is our five-year financial forecasting model. Based on conservative yet realistic assumptions (such as flat enrollment, slight increases in tuition for non-Tuition Guarantee students, 8% healthcare inflation, maintaining current staffing levels, competitive wage increases, fully funding the Flashes Go Further Scholarship Program and no new debt issued), an annual deficit of nearly $26 million can be expected by the end of Fiscal Year 2028 if we do not act to increase revenues and concurrently reduce expenses. Based upon this information, we can develop annual budget balancing actions proactively and afford ourselves the time to meaningfully and deliberately engage stakeholders in solutions rather than reactively and abruptly cut budgets in an uninformed and non-strategic manner. We all recognize that without careful judgment and management of our financial resources, our university can quickly fall victim to an accelerated structural budget deficit.

In February 2024, we initiated the Fiscal Year 2025 budget development process with the following guiding principles:

• Focus on core activities: access, completion, research and creative activities, and employee and student well-being.
• Limit new hires.
• Reduce spending by $12.3 million through reorganization, shared services and cost containment.
• Preserve our sound financial position, meaning budgeting expenses to projected operating revenues. 

In May 2024, the Board of Trustees approved a balanced budget of $703.6 million in revenues and $703.6 million in expenses, which is $16.1 million (or 2.3%) higher than the Fiscal Year 2024 approved budget.

Revenue Summary. Tuition and fee revenue is budgeted at $406.4 million, $16.9 million higher than last fiscal year, based on a conservatively projected 0.3% increase in enrollment at the Kent Campus (+80 FTE) and flat enrollment across the Regional Campuses. This represents the second year in a row, and the second time in 10 years, that our year-over-year system-wide enrollment has not been projected to decline from the prior year. Fall 2024 tuition and fee rate increases authorized by the Board are as follows: 3.0% for new freshman Tuition Guarantee students (which is then frozen for four years) and 4.0% for graduate student tuition and the non-resident surcharge. These tuition increases, as well as the incremental revenue they provide, are modest in comparison to the ongoing high inflationary pressures impacting our operating expenses.

Our focus on strategic enrollment management continues, and the great work done by all continues to mitigate the ongoing demographic and regional shifts that are negatively affecting our enrollment trends. Our retention rate (the percentage of freshmen who return for the sophomore year) declined noticeably during the pandemic but continues to improve as we work with our students to provide them with the support services they need to persist and graduate. The retention rate improved at the Kent Campus from 79.7% in fall 2023 to 82.0% in fall 2024 (the highest ever was 82.2% in fall 2015) and decreased at the Regional Campuses from 56.6% in fall 2023 to 53.5% in fall 2024. We welcomed 4,304 new freshmen at the Kent Campus in fall 2024, which represents the eighth-largest incoming freshman class in our university’s history. The fall 2024 entering class also boasts some additional distinction: 21% from traditionally underrepresented groups, an average high school GPA of 3.61 and average ACT score of 22.

We also remain committed to access to 91�ֿ� through need-based student aid by fully funding the Flashes Go Further Scholarship Program, which covers unmet financial need for tuition and fees for students and families with incomes of $100,000 or less. Over 28% of the entering freshmen qualify for this highly valuable program that resonates with our university’s mission of access and affordability.

The funding we receive from the state of Ohio, or SSI, is budgeted at $158.2 million. In June 2024, we learned that our SSI allocation for Fiscal Year 2025 declined for a third straight year, this time by $1.9 million due to the ongoing shift of funding we discussed earlier (namely growing enrollments at Ohio State and at the University of Cincinnati).

For the fourth year in a row, auxiliary revenues continue to grow, budgeted at $2.0 million (or 1.9%) higher than last year’s budget due to near-full occupancy expected in the residence halls, growing dining plan participation and enhanced intercollegiate athletic revenues from multimedia rights revenues and sponsorships. For fall 2024, we welcomed 5,898 students into our residence halls, nearly 256 more than last year, with dining plan sales increasing by 287 this year compared to last, thanks to more sales to commuter students and faculty/staff.

We expect our intercollegiate athletics revenue to grow slightly from ticket sales, sponsorships and football guarantee games (schools that pay us to play them). However, our revenue from our athletics conference will likely decline by $400,000 for each of the next 10 years due to an expected settlement of the House v. NCAA class-action lawsuit.

We budgeted $15.1 million of investment income to support operating activities, the same as last year. This assumption is reasonable considering that money market accounts continue to yield 5.3% interest and the projected Federal Reserve Bank’s reduction on the federal funds rate is expected to be very gradual over the next two years. The $15.1 million is 2.1% of our total operating budget, with $13.6 million supporting the Kent Educational and General activities and $1.5 million in the Kent Campus Auxiliaries. Hopefully, a solid market performance year is on the horizon, although we realize that the economy and investment markets continue to be highly volatile and uncertain during the period leading up to and following the presidential election. The reassuring point is that our investment portfolio is structured and managed well, highly diversified and positioned to deliver a competitive return.

Expense Summary. Budgeting expenses to projected revenues has become increasingly difficult over the past several years given minimal incremental revenue projected for tuition increases, minor year-over-year increases in overall enrollment and declining SSI coupled with inflationary pressures that continue to impact our university’s operating expenses. As a result, we initially projected that a $12.3 million reduction in expenses would be required to balance our budget for Fiscal Year 2025.

We have budgeted for wage increases for non-represented staff, maintaining employee benefits at previous year levels, base funding for student recruitment, the discount associated with the College Credit Plus program, as well as new investments in lifelong learning. We then balanced these expenditure increases by applying a 3.25% reduction in projected expenses for all colleges against projected expenses for all colleges and divisions, totaling $12.3 million less in projected expenses. Examples of expenditure reductions include:

• Eliminating vacant positions.
• Reducing and/or freezing travel and a freeze in hiring.
• Eliminating subscriptions and licenses.
• Reorganizing units to capitalize on normal attrition (resignations, retirements).
• Merging divisions (as we did to create the Division of People, Culture and Belonging).
• Adjusting operating hours for service areas.
• Eliminating overtime due to changing shift coverage hours/working days.
• Renegotiating contracts for services or goods.
• Reducing print materials and mailings.
• Canceling planned events.

These actions are not easy, but they are necessary to avoid a deficit budget, which could grow into a structural budget deficit in future years. And they will only become more difficult as we look ahead and plan forward.

Even though we cut budgets across the university, we prioritized a 2% wage increase for all non-represented staff in recognition of their hard work and dedicated service. For 91�ֿ�’s bargaining units (AAUP and AFSCME), wage increases will follow the respective contracts as negotiated.

The budgeted expense for employee benefits (retirement, medical, leave time, workers’ compensation and the like) is $124.4 million, $6.3 million (or 5.3%) higher than last year’s budget. Healthcare costs drive our expenses, and although there are no expected medical plan design changes for benefits year 2024, our duty from a fiscal stewardship perspective will be to emphasize quality and affordable healthcare benefits while, at the same time, developing strategies for combatting inflationary factors that could render this vital benefit financially unsustainable.

Student aid, which is comprised of both merit-based scholarships and need-based aid, is budgeted at $93.2 million, an increase of $4.0 million to fund the discount associated with offering the College Credit Plus program to more than 3,100 high school students per semester. Access and affordability continue to define who we are, evidenced by our fully funding the Flashes Go Further Scholarship Program at a base budget of $14.0 million, with 28% of our incoming Kent Campus freshmen eligible for this benefit, meaning that these students will not have any student debt from tuition and fees upon graduation. Additional external funding sources have helped us manage funding and prioritize need-based aid: the increased award amount and eligibility requirements for the Ohio College Opportunity Grant and the ongoing increases in the Federal Pell Grant award.

Inflation on non-personnel expenses continues to weigh heavily on our budget forecasts, and it is another reason why we must continue reducing expense growth annually to deliver balanced budgets. In addition to the extraordinary increase in the cost of pharmacy and medical claims, other expense categories continue to experience stubborn inflation. Electricity rates increased 76% from 3.4 cents to 6.0 cents per kilowatt/hour. The continuing saga of extraordinary increases in insurance costs (property, casualty, liability, travel and cybersecurity) appears to have no end in sight. An additional $500,000 is budgeted this year to pay for these critical coverages – a 16% increase. The cost of property and casualty insurance for the university grew 456% over the past seven years – from $900,000 per year in Fiscal Year 2018 to $4.1 million in Fiscal Year 2025. The list continues across all expense areas of our university budget, including food and consumables for food service locations, fuel for our vehicles, hotel/airfare/transportation for university travel, repairs and maintenance supplies, and construction costs. The more we must pay for these items, the fewer of these items we can afford to buy and stay on budget. This has been our experience since the pandemic and represents our new reality. We must contain and reduce non-personnel expenses moving forward.

Now that the Fiscal Year 2025 budget was approved by the Board and is underway, our priority No. 1 is to manage revenues and expenses effectively to end the year in a balanced position and shift away from the year-end deficit we experienced in Fiscal Year 2024.

Fiscal Year 2026: Looking Ahead

Executive Summary. Our financial reality is this: Although revenues continue to slightly exceed our conservative budget projections, our current expenses exceed these small revenue increases. We are overbuilt for our current revenue realities. Uncertainty continues regarding possible reduced state funding (operating and capital), further tuition restrictions, enrollment and demographic challenges, prolonged inflation and volatile investment markets.

As we look forward, we must begin by looking back on some key trends and data points. In its most recent annual report, the State Higher Education Executive Officers Association reported that Ohio’s state support of higher education per student decreased 31.2% since 2001 (nearly $3,474 per student), with Ohio ranking 37th among the 50 states. During this same period, Ohio’s General Assembly shifted from allowing tuition increases to be applied to all undergraduate students annually to a Tuition Guarantee Model, which allows tuition increases to only incoming freshmen and freezes it for their four years with us. The difference in annual revenue is staggering: Under the former model, a 3% increase for Fiscal Year 2025 for all undergraduate students would have generated an estimated $5.2 million in revenue compared to the current $1.6 million we will generate under the current Tuition Guarantee Model.

The one-two punch of declining state support and the cohort model of in-state tuition and room and board, combined with flat enrollment at best, means we are overbuilt, particularly in terms of the amount of building space we occupy, the number of employees we hire and the generosity of our benefits. In terms of our overall cost structure in relation to the revenue we generate, which are at risk of declining even further as the state of Ohio begins the biannual operating budget development process in February 2025 for the Fiscal Years 2026 and 2027, we must reduce costs to align with projected revenues if we are to thrive in the future. Fewer administrators, fewer employees, less occupied space on our campuses and a reworking of our benefits are in our future.

Our fall 2024 enrollment is the same it was in fall 2009. Over these same years, we reduced the number of faculty and staff by 6.6%, but our instructional and administrative space increased by nearly 25% (800,000 square feet)! We must right-size space and utilize it in the best possible way. The average cost to operate and maintain space is approximately $7 per square foot, so by taking space offline, we reduce our budget. For example, closing the now vacant Business Administration Building (100,000 square feet in size) will save $700,000 in operating costs. Demolishing the building would cost approximately $3 million, resulting in an even larger overall savings.

Beyond space, we are exploring several other opportunities to reduce expenses: 

• Employee benefits: benchmarking all categories (medical, pharmacy, leave time and tuition waiver) to not only our Ohio university peers but also comparably sized Northeast Ohio employers.
• Implementing Transformation 2028: The initiative with the deans, faculty and staff will reduce the overall cost of the academic enterprise at 91�ֿ�.
• Administrative efficiency: expanding shared services, centralizing or outsourcing administrative business functions.
• Rethinking the intercollegiate athletics model: as the environment changes dynamically and constantly in the NCAA as a result of the House settlement, conference realignment, NIL (name, image and likeness) and the employment status of student-athletes.
• Regional Campus System reorganization: continuing the outstanding yet difficult transformation led by Vice President Peggy Shadduck and the Regional Campus deans.

In Conclusion

A budget serves three purposes: planning, monitoring and assessment. We develop a budget based on assumptions, and the Board of Trustees approves it as the fiscal year begins. Throughout the year, we analyze actual revenues and expenses, making mid-course corrections/further reductions to expenditures if needed, to ensure we end the fiscal year in balance. Finally, after the fiscal year ends on June 30, we compare the budget to actual, see how we ended the year and then incorporate what we’ve learned into future budgets.

Based on our lived experience over the past few years, we have learned that enrollment is stable, incremental revenues from tuition/fees as capped by state law are minimal, annual increases in state support track well below inflation and, as a result, we continue our ongoing annual expense reductions. And now we face something unseen in my 12 years at 91�ֿ�: ending the year with an operating deficit. As we partner together on transforming the university, Fiscal Year 2024 must be the only year that happens.

Sincerely,

Todd Diacon
President