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story.lead_photo.caption FILE — Henderson State University is shown in this 2019 file photo. - Photo by Emily Walkenhorst

Henderson State University salaried employees, including faculty, will be paid less this year than originally promised while the university faces a budget shortfall of several million dollars.

University leaders also have taken a formal step toward "affiliation" with the Arkansas State University System as a potential long-term solution to its financial troubles.

Cutting salaries by 3% and reducing the university's match to employees' retirement from 10% to 6% will save the school nearly $1.1 million this fiscal year, officials said. The university, per state law, is required to match at least 6% of employee retirement contributions.

Overall, Henderson State University trustees have cut the school's budget for this year by more than $3 million. Last year, the university ran a deficit of more than $4 million. Trustees approved a $69 million budget in May that anticipated a 3.5% growth in enrollment. Preliminary enrollment figures released in September show only a 2.4% enrollment bump, largely from high school and graduate students.

The university is covering losses using a $6 million interest-free loan from the state that it must begin paying back in the spring. That means the university must cover both its more than $4 million deficit and the $6 million loan to break even financially.

The university has lost money in recent years. At first it was because of dropping enrollment, but an increase in enrollment last fall did not offset losses in other areas, including $3.7 million in student accounts receivable incurred during the past fiscal year alone.

The state and the Arkansas State University System are conducting separate audits into the university's finances, at which point the university's budget issues may become more clear.

"This is at least a start," Trustee Brown Hardman said when reached by phone Monday. Hardman favored the budget cuts, which he said all seven trustees approved. He expects layoffs to be a part of future budget reductions.

Hardman also joined a unanimous vote to begin exploring a merger with the Arkansas State University System. The $6 million loan in July came with the condition that the university explore merging with another school, Hardman said, and such a merger may be in the best interest of Henderson State.

The approved motion, according to university spokeswoman Tina Hall, is "to move as quickly as possible to begin discussions toward arriving at an affiliation with Arkansas State University expeditiously."

The ASU System, for just more than $50,000, is assisting Henderson State through December in resolving its financial issues and making recommendations for better operations, among other things.

ASU System President Chuck Welch was president of Henderson State before taking on his current position.

The system and Henderson State released a statement Monday from Welch to the Arkansas Democrat-Gazette.

"We appreciate the interest of the Henderson State University Board of Trustees in potentially becoming a member of the Arkansas State University System," the statement read. "We have tremendous respect for the rich history of Henderson and all of its constituencies, and the addition of a four-year university in southwest Arkansas would be a significant step for us and complement the pending addition of ASU Three Rivers. We will continue to assist Henderson in every way we can under our existing services agreement and proceed with discussions regarding system membership."

College of the Ouachitas in nearby Malvern plans to merge with the ASU System, effective Jan. 1, at which time it will change its name to Arkansas State University-Three Rivers. That plan is pending the approval of the Higher Learning Commission, the schools' accrediting agency.

Maria Markham, director of Arkansas' Division of Higher Education, urged the university's trustees to "open a discussion to consider HSU joining a university system" in a letter recommending the $6 million in state assistance in July.

"This will allow HSU to maintain its history and distinct identity but would provide improved financial controls and other advantages," Markham wrote.

She asked the university to submit a plan by today to the Higher Education Coordination Board outlining controls and strategies to prevent future financial issues that require emergency funding.

Gov. Asa Hutchinson supports the partnership between Henderson and the ASU System and has seen positive results from it, said Chelsea O'Kelley, a spokeswoman for the governor, but Hutchinson will support whatever future trustees ultimately choose.

Talk of merging the state's second-oldest university with another school or system does not come without tension. Some people raised concerns to trustees during their vote Friday, Hardman said.

Hardman characterized people who oppose the exploration as saying, "We need to continue to kick the can down the road like we have for the last seven years and maybe it will hit something."

He added, "It's time for us to be leaders."

Trustee Creed Spann, who proposed the measure to explore affiliating with the ASU System, declined to comment when reached by phone Monday. When asked why he cast his votes the way he did, he said he would not speak without permission from Board Chairman Johnny Hudson or the university's acting president, Elaine Kneebone.

Phone messages left for other university trustees were not returned Monday afternoon. Messages left for student government and faculty senate representatives also were not returned Monday afternoon.

Henderson State University trustees approved cuts Friday for the first time this fall. The anticipated savings are $3.3 million to $3.5 million; all figures so far are estimates based on what the university expected to spend throughout the fiscal year, which ends June 30.

Kneebone presented the proposed cuts to trustees.

"I believe in the value of this university and what it does for our students and our state," Kneebone said in a prepared statement released Monday to the newspaper. "People who work here do so selflessly, and I want to acknowledge the sacrifices that are being made. I believe that we will emerge from this situation stronger in our mission to educate the next generation of Reddies."

The largest budget reduction is to salaries and retirement compensation. The second-largest cutback was an estimated $900,000 in supplies and travel. Personnel savings, which include the ongoing hiring freeze and leaving extra help unfunded, total a projected $650,000. Downsizing course offerings could result in savings between $250,000 and $500,000. Eliminating an unfilled administrative assistant position in the president's office, along with reducing extra help, could save another $112,000. Miscellaneous operational cuts could save $275,000.

The reduced salaries are for only "non-classified," salaried positions, Hall said.

The $69 million budget approved by trustees this spring included spending 2.7% more on salaries, and the 3% salary reduction approved Friday takes those employees' earnings down below last year's.

Hardman said he recalls faculty only getting a raise once -- about 2.2% -- since he joined the board of trustees about seven years ago.

A Section on 10/01/2019

Print Headline: Henderson State University shrinks budget by $3M; pay for salaried workers cut

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