HAMPTON, Va. — The financial situation at Thomas Nelson Community College is considered severe.
President John Dever sent the college an email Monday which said the school is going through what he called a difficult period.
He said the school has dealt with significantly reduced income for the past several years because of declining enrollment, and it became serious this past year.
Dever said the school's spending outpaced income, and last fiscal year ended with a shortfall. Dever said unfortunately because of the school's financial crisis, they have to let some employees go.
Another factor that contributed to Thomas Nelson's financial shortfall is that the school needs to repay an unauthorized internal loan of $250,000.
Dever said the Virginia Community College System provided TNCC with a $1.7 million loan to cover the FY 2019 deficit.
Dever is set to retire as president at the end of the upcoming fall semester 2019. Dever also wrote that he and cabinet members will hold faculty staff-forums at both campuses within the first two weeks of the school year to discuss the issues, get feedback and answer questions.
You can read the full email below.
Colleagues:
I write to provide you with information about the status of the College budget, starting with how we finished Fiscal Year (FY) 2019 (July 1, 2018-June 30, 2019) and the implications for FY 2020 (July 1, 2019-June 30, 2020).
As we are all well aware, for the past several years Thomas Nelson and other VCCS colleges have been dealing with the challenge of significantly reduced revenue because of declining student enrollment. The situation became particularly acute for Thomas Nelson this past year. Not only does this decline in enrollment affect our tuition revenue, but also the portion that is received from state general funds.
As I indicated in my general message this past February, analysis showed that expenditures were outpacing revenue at the mid-year point both in terms of Personnel and Other than Personnel Service (OTPS). Although efforts were made to accomplish mid-course corrections, it became clear as we neared the end of FY 2019 that the budget adopted in June 2018 was unrealistic and out of alignment to carry out the critical operations of the College. The bottom line is that FY 2019 ended with a shortfall. OTPS expenditures were significantly underestimated by some $1,400,000. In addition, the problem was compounded by the fact that a reporting system did not exist to provide Cabinet members and account managers with timely, accurate, and readily accessible information regarding the budget and expenditures that fall under their responsibility.
Other factors contributing to the FY 2019 shortfall include an underestimation of $185,000 for tuition waivers (those instances where tuition is not collected for such items as dual enrollment, continuous learning classes taken by Thomas Nelson employees, and senior citizen enrollments) and the need to repay an unauthorized internal loan of $250,000 from local funds to college funds that occurred in FY 2018 but did not come to light until FY 2019.
Going forward, it will not be enough to rely only on the steps that we have taken in the past several years to sustain the budget in FY 2020 based on the available projected revenue. Previously, these steps have included holding a number of unfilled positions vacant, formal reductions in force (one in Fall 2017 involving five positions, and another in Spring 2019 involving twenty housekeeping positions at the Hampton Campus), reducing discretionary expenses, seeking and securing funding from the Educational Foundation to support critical instructional equipment purchases previously funded through the college budget, pursuing efficiencies in operations, and implementing strategies to better align functions across units.
We have been working closely with VCCS Financial Services, which provided Thomas Nelson with a loan of $1,700,000 to cover the FY 2019 deficit, which must be repaid. We will need to begin repaying $600,000 on the loan in FY 2020, with the remainder anticipated to be repaid in FY 2021. Of course, these repayments cause an already constrained budget situation to be even more so.
Based on the lessons learned from FY 2019, we have been working diligently to formulate a budget for FY 2020 in which projected revenue and expenditures truly balance. Since enrollment is projected to continue to decline, although at a lesser rate than in previous years, overall revenue will correspondingly fall.
FY 2020 revenue is projected to be $41,846,000, some $758,000 less than that for FY 2019. From a broader perspective, FY 2020 revenue is projected to be some $6,600,000 less than the high water mark of $48,439,000 in FY 2017. With declines this steep, we are faced with some very difficult choices to reduce expenditures for FY 2020. In addition, declining student enrollment has resulted in Thomas Nelson being reclassified within the VCCS as a Level III institution instead of its previous classification as Level IV. The Level III status further reinforces the need for organizational restructuring.
Given the severity of the reduction in revenue and the absolute need for a FY 2020 budget in which expenditures do not exceed available revenue, I regret to inform you that a further reduction in force affecting all categories of employees will need to be implemented in Fall 2019.
The deliberations around this topic will be guided by the overarching goal of Thomas Nelson’s maintaining its capacity to carry out its comprehensive mission in service to needs and aspirations of the Peninsula and the Commonwealth. At the same time, it is clearly disruptive and painful when valued colleagues have to be let go. As we proceed with the decision-making process, we will do our best to balance the need for confidentiality and discretion with due attention to appropriate consultation and transparency.
In order to ensure that the missteps of FY 2019 are not repeated, I have issued a set of Budgetary and Financial Strategies, Principles, and Processes for Thomas Nelson Community College (June 11, 2019). A copy is attached. In an effort to get at the root of the problem, we will continue to pursue a number of strategies that promote enrollment and stress the value proposition of attending Thomas Nelson because of its distinctive combination of affordability and high quality.
I very much wish that I had more favorable information to share with you about the financial condition of the College. The reality, however, is that we and our sister institutions are all currently experiencing unprecedented challenges.
I will speak further about this important matter in my remarks on All College Day. Within the first two weeks of the academic year, I along with Cabinet members will hold faculty-staff forums at both campuses to further discuss the issues, receive feedback, and answer questions.
Our task now at Thomas Nelson is to draw upon our organizational strengths and capacity for resilience to see us through this difficult period and emerge on the other side with greater stability and strength.
John T. Dever, President, Thomas Nelson Community College