President Todd Diacon announces financial summary for upcoming fiscal year as enrollment trends downward

Kent State President Todd Diacon

Zaria Johnson Editor-in-Chief

Kent State’s enrollment continues to be a key factor in determining the university’s financial stability, according to an email sent by President Todd Diacon Friday to members of the Kent State community. 

Diacon began sharing university financial updates in October 2019. “It is my hope that through enhanced transparency, we can create open dialogue and a better understanding of the financial state of the university,” he stated in the first email explaining its purpose. The email noted that due to an employee buy-out initiative, expenses were down, but that the savings were “offset by lower-than-expected revenues from tuition and fees due to continued enrollment declines.”

Diacon emphasized the importance of maintaining enrollment to ensure the financial stability of Kent State and Ohio’s other public universities across all fiscal years while the state’s population and number of high school graduates continue to decline.

“Dollars and cents matter because while we are not a “business” per se, we do carry enormous financial obligations,” Diacon said, “including the obligation to protect and promote the health and success of everyone in our community.”

Although prospects for upcoming years seem positive, Diacon highlighted the importance of enrollment in avoiding financial challenges in the future.

“We still face obstacles, including a noticeable and continued decline in enrollment on all our campuses, which translates to lost revenue,” Diacon said. “Ongoing enrollment and revenue declines will continue to challenge us and are addressed further in this report under the topic of planning for future fiscal years.”

Enrollment went down across Kent’s campuses, with a decrease of 1.2% at the main campus and 11.5% at the regional campuses for fiscal year 2022. The Kent campus also saw a decline in retention rate from 81.6% to 80.5%, meaning fewer freshmen are returning to Kent State for their sophomore year, the email stated.

For fiscal years 2022 through 2024, the university will implement a Strategic Enrollment Management plan headed by the Division of Enrollment Management with the goal of attracting students to Kent State regardless of the demographic decline in the area. 

“The new Strategic Enrollment Management plan presented to the Board of Trustees in June emphasizes these optimization strategies while also focusing on realigning and expanding current and future funding sources — Kent State, the Kent State University Foundation and external benefactors,” Diacon said.

New freshman enrollment on the Kent Campus increased from 3,819 in fiscal year 2021 to 3,982 for fiscal year 2022. Diacon said this is due to the Strategic Enrollment Management team and recruitment events meant to counteract declining demographics in the area. 

Kent State University generated a surplus of $21.9 million for fiscal year 2021 due to a conservative budgeting approach along with unexpected increases in revenues during the pandemic, according to the email. The typical expected surplus of the university’s $595 budget is 1%, or about $6 million.

“Because of the pandemic, Fiscal Years 2020 and 2021 were like none we had experienced before, and the uncertainties of the moment made it difficult to build a budget as we usually would,” Diacon said. “As a result, we adopted the guiding budget philosophy of ‘planning for the worst and working for the best.’”

“The surplus funds are now available for colleges, divisions, regional campuses and auxiliaries to use for “one-time expenses aligned with their respective strategic priorities as well as navigating through the uncertain horizon of the pandemic,” the email stated.

“This surplus may be attributed to unexpected increases in revenues during the year compared to our conservative budget planning assumptions, specifically, restoration of $13 million of [State Share of Instruction] dollars, a better than expected investment income of $9 million and an enrollment decline of 3.5% compared to the initial projected decline of 6.5%,” the press release stated.

When building the budget for fiscal year 2021, the university planned for a continuation of the reduced State Share of Instruction (SSI). These funds represent “the state’s subsidy of public higher education and is awarded entirely based on student outcomes (courses passed and degrees awarded),” according to the email. 

For fiscal year 2021, the university received an initial cut in SSI funding of 4.38% with additional cuts expected to come in the future. 

“In alignment with our ‘planning for the worst and working for the best’ philosophy, we budgeted for an 8.6% reduction in SSI revenue for the year, for a total of $145.3 million,” Diacon said.

The university also planned for declining investment value and reduced investment income during that time, on top of a $65 million decrease in the budget compared to FY2020. Wage cuts or freezes for all university employees were put into place.

However, fiscal year 2021 proved the opposite, Diacon said, with revenues not declining as much as the university predicted and investments increasing, all while the university was spending less with fewer students and employees on campus. 

In January 2021, the university’s SSI was fully restored for fiscal year 2021 at $158.3 million, $13 million more than budgeted, according to the email. 

Salaries and wages during the year totaled $267.3 million, which surpassed the budget of $275.7 by 0.2%, the press release stated. The SSI restoration added an additional $5.1 million of salary expenses, and in February of 2021, the university restored all non-represented salaries to reflect those of June 30, 2020.

Benefit costs for employees include retirement, health care, compensated absences and other benefits, and totaled $111.1 million for fiscal year 2021. This is about 1.9% or 2.1 million over the estimated budget for the year due to “additional retirement and other benefits associated with the salary restoration.”

The Kent State Board of Trustees approved a balanced budget of $646.9 million, an increase of $51.7 million from fiscal year 2021.

SSI funding for fiscal year 2022 is expected to increase by $1.5 million compared to fiscal year 2021, and the university has increased its share of state subsidy from 9.8% in fiscal year 2015 to a projected 10.1% in fiscal year 2022, which provides an additional $4.8 million. 

The SSI is expected to increase another 1% for fiscal year 2023 for another $1.5 million in revenue, the email stated.

Over the last decade, university merit-based and need-based financial aid has grown 267% and now totals $78.8 million, or 13%, of the university’s total expenses. 

The university received $90 million overall in pandemic management and relief funds for institutional expenses alone, and received additional $57 million for student support. Through June 30, 2021, the university has spent nearly 56.3 million that was budgeted separately from the operating budget for fiscal year 2021 which includes: 

  • $11.7 million for instructional delivery and network upgrades

  • $8.7 million for COVID-19 testing, contact tracing and mental health services

  • $7.8 million for personal protective equipment, cleaning, signage and protective barriers

  • Nearly $28.1 million in refunds and lost revenues for student housing and dining.

There are $33 million remaining for use through March 2023, Diacon said.

Due to a reduction in on-campus activity, student life and athletic competition, Kent Campus auxiliaries, which provides necessary resources for students such as University Culinary Services and the Department of Intercollegiate Athletics , saw a significant decrease in revenue for fiscal year 2021, Diacon said. While the approved budget planned for $47.3 million for Kent campus auxiliaries, there was a decrease of nearly $7.6 million with actual revenues totaling at $39.7 million, according to the press release.

“The primary drivers of this revenue shortfall were University Housing (formerly the Department of Residence Services) and University Culinary Services (formerly University Dining Services) with budgeted occupancy of 72% for the year, while actual occupancy was 62% in the fall and 48% in the spring,” the press release stated. 

The decline was due in part to students living on-campus opting out of their housing contracts, and the shortened contract term for those who remained in university housing for the Fall 2020 and Spring 2021 semesters, Diacon said.

However, university auxiliaries saw expenses increase during this time through the need to provide resources for the remaining on-campus students and the commencement of football, basketball and other sports in the fall, the email stated. This resulted in a total of $63.5 million in overall auxiliary expenses, which is $5.2 million, or 8%, above budget and $6.5 million less than the expense total from the year prior.

Non-academic university departments are expected to be the university’s biggest recovery for fiscal year 2022, according to the press release, with a projected $30 million in additional revenue compared to the year before. After welcoming 5,300 students back to campus for fall 2021 and about the same purchasing dining plans, this is due in part to a return to normal amounts of students living and dining on-campus. 

The continuation of intercollegiate athletic competition is also a contributing factor, with revenues in the Department of Intercollegiate Athletics budgeted to increase $6.1 million after playing three football guarantee games where opposing teams pay the university to play in their stadiums, according to the email. 

“As we grow out of the pandemic in our auxiliaries, our emphasis has been on budgeting expenses to reasonably projected revenues, and all the auxiliary budgets are either balanced or projecting small surpluses, keeping in mind that last year these same activities generated a deficit of $7 million,” Diacon said.

The university’s investment income, which are funds not managed by the Kent State University Foundation and represent “actual dividends and interest income received,” according to the press release, was $9 million for fiscal year 2021, which exceeded the $7 million budgeted amount for the year.

“At the time the budget was being finalized in August 2020, the investment markets were experiencing significant turmoil and volatility, and the stability of the economy was highly uncertain given the course of the pandemic,” Diacon said. “As a result, we exercised extreme caution and budgeted only $2 million in investment income to fund operating activities.” 

In September 2020, the Kent State Board of Trustees decided to postpone several Kent Campus Gateway Master Plan Phase 1 construction projects. 

The university reallocated $28 million worth of funds intended for a parking deck project on East Main Street parking deck to what Diacon referred to in the email as “strategic enrollment growth priority projects” such as the College of Aeronautics and Engineering building expansion, the College of Business Administration building renovation and the Ice Arena marching band facility renovation. 

The university proceeded with construction and renovation projects that cost $19.5 million, including the Design Innovation Hub, research labs in the Integrated Sciences Building, a rebuild of the Power Plant turbine, improvements at the College of Podiatric Medicine, the Purinton Hall roof replacement on the East Liverpool Campus and improvements to the heating, ventilation and air conditioning on the Trumbull Campus. 

The email described other budget details for the university, including:

  • An increase in Investment income for fiscal year 2022 to $12 million compared to $2 million for fiscal year 2021 and $9.3 million in the year prior to the pandemic.

  • A total of $86.2 million in expenses related to supplies, utilities, maintenance and repairs, travel, print and postage, which was about $1 million over budget, but $13.7 million less than the year prior due to less on-campus activity.

  • The university’s total of $35.9 million in debt service payments with $21.5 million in principal debt and $14.4 million in interest payments and no new debt issued during fiscal year 2021.

  • Kent State’s Ohio financial health score of 4.4 out of five, which Diacon said “shows that our reserves are sound, outstanding debt is reasonable and that we must continue to align expenses with declining tuition and fee revenues.”

  • The university refinanced its existing bond debt four times over the past five years, which translates into an average $2.6 million in reduced annual cost.

Zaria Johnson is editor-in-chief. Contact her at [email protected]