Even before the COVID-19 pandemic upended higher education with its added challenges, costs and expenses, private colleges and universities in New Jersey had already been struggling.
Now, as some of the state’s public higher education institutions experience the same struggles, the state Comptroller’s office has begun an investigation into a fiscal crisis at New Jersey City University in Jersey City.
“We’ll follow the facts where they lead us,” state acting comptroller Kevin Walsh said in a statement.
Last November, William Paterson University in Wayne announced layoffs to address a $30 million deficit.
Mismanagement by senior leadership has played a major role in the financial woes at both universities, despite the impact of the pandemic, dropping enrollments and other long-term trends. At the Jersey City university, ex-president Sue Henderson was primarily blamed for the university’s financial decline, according to news first reported in The Jersey Journal.
On June 28, the New Jersey City University board of trustees announced a $20 million deficit according to the student-run university newspaper, The Gothic Times. But in his letter ordering the investigation last week, Gov. Phil Murphy cited a higher deficit — $67 million and an additional $156 million in debt.
Murphy requested acting state comptroller Kevin Walsh conduct an investigation into the finances and operations of New Jersey City University, a school with deep roots in low-income and minority communities in Jersey City, to see “if it can remain open at all.” The university opened its doors in 1929 and was known as Jersey City State College until 1998.
The financial emergency was brought to light at a June meeting of the school’s Board of Trustees. The university said it only had enough cash on hand to operate for 25 days, according to reports. The meeting ended with embattled university President Sue Henderson resigning without prior notice to the school and the trustees approving a 3% tuition hike. Officials also requested Rep. Brian Stack, D-Union, to secure $10 million in appropriations from the state to tide over the crisis.
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Although news reports about the university’s financial crisis spurred Murphy’s investigation, the university’s faculty had already passed a vote of no-confidence in Henderson months earlier in 2021. Some among them said Henderson’s mismanagement occurred with the “blessing” of the board of trustees.
The university disputes the previously reported facts and issued a statement Tuesday to The Record and NorthJersery.com, saying that Henderson’s leadership was not responsible for the university’s financial downturn. The prior newspaper reports conflated the university’s net position with its net surplus, said CFO Ben Durant. According to First Tryon Advisors, an external, full-service financial advisory practice currently on retainer at NJCU, the university’s $61 million deficit was caused by a 2015 pension accountability standard introduced in 2015 called GASB 68.
“NJCU’s Net Position would be positive ($84 million) without the 2015 change in accounting standards. It is completely inaccurate to attribute the entire $175M decline in Net Position to leadership, which is what a recent article suggests,” the statement said.
Meanwhile, the school adopted a 90-day temporary “rightsizing” budget in June, resulting in layoffs. The layoffs so far have been limited to managerial staff, said university spokesperson Ira Thor, who did not say how many staff positions were cut.
“We are less than 40 days into the university’s announced 90-day emergency budget period. The steps conducted during this period are singularly focusing on allowing the university to seek rightsizing solutions to address an existing, and recently intensified, structural deficit,” he said in a statement.
Faculty members have not yet been laid off, he said, and are in negotiations with the university through the local AFT union. A faculty member who did not want to be named said the administration is requesting the union to consider furloughs and other cutbacks, and that the mood among teaching staff is anxious.
Concerns about the university’s financial standing were raised by university faculty in September 2021, when the Faculty Senate passed a vote of no-confidence in Henderson.
Joel Katz, a professor of media studies, introduced the motion of no-confidence to the Faculty Senate. The vote held Henderson responsible for much of the university’s financial crisis and used publicly available documents from the auditing firm KPMG to show how its financial standing plummeted after Henderson took over in 2013.
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According to language in the no-confidence vote, the university was facing enrollment declines and pension adjustments that affected its financial standing, but Henderson’s modus operandi of real estate investments, building expansions and hiring of senior administrators at high salaries could also have contributed to the decline. The vote’s authors said Henderson did not operate with transparency or in a “spirit of shared governance”. The university’s bond rating had also been downgraded twice and had shown other signs of financial decline, the vote said.
Henderson has been criticized for overseeing an ambitious and flagship project she initiated that expanded the university campus and buildings on the West side of Jersey City in a 22-acre “University Place” project. It was estimated to cost $400 million, most of which would be undertaken by the main developer, Strategic Development Group. Students and faculty questioned the need for such luxurious expansion in a community already struggling with tuition hikes and the pandemic.
Those investments also did not reflect the needs of the marginalized communities the university historically served, said the faculty member, who did not want to be named. “Most of us can remember a time when the relationship between administration and staff was much healthier,” said the faculty member, referring to Henderson’s tenure.
The university’s Board of Trustees, who some faculty members said “blessed” Henderson’s actions, responded publicly to the no-confidence vote, saying it had several inaccuracies.
The university’s new acting president, Jason Kroll is promising openness and proceeding to conduct town-halls and deliver statements tackling rumors, including news that Henderson received a cozy pay-off. Kroll provided actual numbers for parts of Henderson’s severance package. Kroll also reportedly said at a recent town hall that his approach towards addressing the crisis would be to retract operations, not expand them, but faculty members say they are not sure what to expect.
The emergency at New Jersey City University might have been avoided if the state had more access to its financial operations, and unions affected by the layoffs and cutbacks have been asking for this. Public universities receive annual appropriations in the state budget which are also a major source of their revenues, apart from tuition and fees. New Jersey City University appropriations from the state budget for 2022-23 are $33.9 million. It received $24 million in 2020-21, and $26.6 million in 2019-20.
Union leaders at AFT have been calling on the Murphy administration to extend more oversight into the financial operations of public universities in recent years, ever since William Paterson University began experiencing financial difficulties in 2020.
“At that point in time I was being told that Jersey City [NJCU] was going to be the next university to fall,” said Donna Chiera, president of AFT-New Jersey. “And at that point, we were calling on the state of New Jersey basically, the Office of the Secretary of Higher Education. We were making them aware that we had concerns that the state university system had no financial transparency, accountability or oversight. What we have been saying has happened. People who work in NJCU knew that there was going to be a shoe to drop. And the shoe dropped.”