Creating the Future of College: Reimagining Henderson

Fiscal Responsibility and Financial Exigency Process Next Steps FAQs

Updated February 11, 2022

The following Frequently Asked Questions (FAQs) have been prepared to provide further information regarding next steps for fiscal responsibility and intent to declare financial exigency.

GENERAL OPERATIONS 

Q:  I know several high school students interested in Henderson. What do these changes mean for them?

A:  Henderson is restructuring to serve students more effectively. We owe it to our current and future students to align all resources for student success. All of our efforts will be realigned to support student access and affordability and to empower students to complete degrees that align to 21st century workforce needs. Please see the Student FAQ for additional information.

Q:  Does Henderson plan to close or become a community college?

A:  Absolutely not. We are making changes to ensure that Henderson is a thriving and successful 4-year institution for years to come.

Q:  If academic programs are eliminated in the future, will students be able to complete degrees in progress?

A: Yes. In the event it is necessary to eliminate academic programs in the future, actively enrolled students and freshmen entering in Fall 2022 will be supported to complete your degrees.  

FISCAL RESPONSIBILITY

Q:  As shared at the Campus Conversation on January 13, 2022, Henderson’s annualized modified cash revenue of $55.8 million, compared to the FY2022 operating budgeted revenues of $68.3 million, represents a projected shortfall of roughly $12.5 million in cash moving into FY2023. This projected shortfall accounts for Higher Education Emergency Relief Fund dollars (approximately $6 million annually) that have been awarded for the past two academic years but will not be available in FY2023. What steps have been taken to address this deficit and improve Henderson’s cash position?

A:  Henderson instituted a position management process and implemented a modified cash budget. The Rapid Response Team has worked with departments across campus to reduce spending and also issued a campus-wide survey for cost-saving suggestions.

Additional steps—including the introduction of a new Strategic Resource Allocation Model, furloughs, position eliminations, flattening of academic administrative structure, renegotiation of major contracts, and restructuring of campus debt—were announced at the Campus Conversation on February 3, 2022.

Resources—including the position management process, modified cash budget, cost savings survey results, and Henderson’s Strategic Resource Allocation Model—are available at https://hsu.edu/futureofhenderson.

FINANCIAL EXIGENCY PROCESS

Q:  What is financial exigency?

A:  At the Campus Conversation on February 3, 2022, Chancellor Chuck Ambrose communicated that Henderson State University will immediately begin the process of declaring financial exigency.

The Faculty Handbook provides that “[a] financial exigency will be certified when a unit (college or school) of the University or the University itself is threatened by a financial crisis that cannot be ameliorated by means less drastic than the reduction or elimination of programs which results in the termination of personnel.” (2016 Faculty Handbook, pages 35-36)

The financial exigency process can include the elimination or reduction of programs. It is distinct from and implemented on a much faster timeline than program reduction or elimination undertaken as part of a formal academic planning exercise. However, even under the financial exigency process, tenured faculty members whose positions are designated for elimination will be given at least twelve months’ notice prior to the end of their employment.

Q:  Why is financial exigency necessary at this time? 

A:  As shared at Campus Conversations on January 13, 2022, and February 3, 2022, multiple factors have contributed to the need for a declaration of financial exigency. Annualized modified cash revenue of $55.8 million, compared to the FY22 operating budgeted revenues of $68.3 million, represents a projected shortfall of roughly $12.5 million in cash moving into FY2023. This projected shortfall accounts for Higher Education Emergency Relief Fund dollars (approximately $6 million annually) that have been awarded for the past two academic years but will not be available in FY2023.

Henderson does not have sufficient financial reserves due to years of deficit spending and has been unable to recover financially despite a $6 million advance from the State of Arkansas in July 2019. During the past two decades, long-term debt grew from $14 million to $78 million, which requires debt service payments of approximately $6.9 million annually.

According to the Arkansas Higher Education Coordinating Board’s January 2022 “Annual Financial Condition Report,” Henderson is the only university in Arkansas with negative operating margins in both the 2016-2017 and 2020-2021 evaluation periods. Henderson also has recorded a negative fund balance as a percentage of revenue in the 2018-19, 2019-20, and 2020-21 fiscal years. 

Cost-cutting steps outlined for the remainder of FY22 only address our current cash crisis. Permanent changes to academic and administrative structures must align to a new Strategic Resource Allocation Model to improve overall net institutional performance (enrollment, completion, and outcomes).

Additional reference documents are available at https://hsu.edu/futureofhenderson.

Q:  What led to the increase in long-term debt and how will this be addressed?

A:  Campus investments—including construction of residential facilities such as Reddie Villas and University Place and the student recreation center—contributed to an increase in debt from $14 million to $78 million during the last two decades. The ASU System is looking at options to restructure this debt, which requires payments of approximately $6.9 million annually.

Q:  What is the status of the $6 million advance from the State of Arkansas?

A:  Henderson received a $6 million advance from the State of Arkansas in July 2019 to sustain operations. In April 2020, the General Assembly approved special language in the state appropriation bill to reconstitute the advance as a no-interest loan that can be paid back through June 30, 2028. Henderson repaid $250,000 on June 30, 2021.

Q:  What is the process to formalize a declaration of financial exigency?

A:  Consistent with the process set forth in the 2016 Faculty Handbook (pgs. 35-36), Chancellor Ambrose will formally propose a situation of financial exigency to the Faculty Senate and Staff Senate on February 3, 2022.

Next,  “[t]he Faculty Senate and academic administrative personnel (including all deans, associate deans, and department heads) shall separately evaluate the documentation and within 14 calendar days recommend in writing to the head of the academic unit whether they concur with the determination of financial exigency.

“The academic unit head shall evaluate the recommendations made by the Faculty Senate and the academic administrative personnel and shall forward them, along with his or her written recommendation, to the [Chancellor]. No less than 30 days after receiving these recommendations, the [Chancellor] will forward the aforesaid recommendations, along with his or her written recommendation, to the Board of Trustees for action.” (2016 Faculty Handbook, page 36)

Q:  If a recommendation to declare financial exigency proceeds, when would this be considered by the Arkansas State University System Board of Trustees?

A:  Unless a special meeting is called, the earliest the Arkansas State University System Board of Trustees could consider the recommendation is at its regularly scheduled meeting on March 11, 2022.

Q:  How could a declaration of financial exigency impact instructional and non-instructional units?

A.  “If the Board of Trustees certifies a financial exigency, the Vice-President for Academic Affairs shall initiate actions to ameliorate the financial crisis. The final determination may include reduction or elimination of programs, as well as the termination of employment of members of the faculty (tenured and non-tenured), staff, or administration. The Vice-President for Academic Affairs, in conjunction with the Faculty Senate, or a Senate-approved Committee consisting of full-time faculty members, shall work with the appropriate administrators (deans and chairs of affected programs) to determine the program(s) and number of personnel to be affected. 

“In making this determination, non-academic areas and programs shall be examined for possible elimination or reduction as well as academic programs … Serious effort shall be made to appropriately relocate affected faculty and staff in other parts of the program area or in a different program area of the same academic unit. Alternatives to termination of personnel shall be considered; these include early retirement, transfer, voluntary salary reduction, leave of absence without pay, and reductions or postponements in benefits.” (2016 Faculty Handbook, page 36)