Hemorrhaging money and students, Central State University in Ohio is turning to the state for guidance.
The historically Black land-grant institution has run a deficit for three years in a row, suffered declining enrollments and struggled to pay its vendors on time. To help the college climb out of the hole, university leaders who were new to the institution decided this summer to bring their financial concerns to the state and ask for help. Central State has already cut staff and frozen hiring to address the financial situation.
The public university is now on “fiscal watch,” a designation by the Ohio Department of Higher Education that signals “immediate and decisive action is necessary to improve the institution’s financial condition,” according to a news release from the department. This is the second time the university has been on fiscal watch in the last decade.
The chancellor of the Ohio Department of Higher Education is tasked with making that call based on eight criteria. Central State University met five of them, including a significant gap between its adopted budget and actual revenue.
“Considering the totality of their finances, including delayed payments to vendors, downward budget revisions and cash flow concerns, it became clear to us this month that fiscal watch would be helpful and would help formalize a series of steps that we would have likely wanted to take with Central State University’s leadership anyways,” said Mike Duffey, chancellor of the department, in an interview with Inside Higher Ed.
The university will have to develop a financial recovery plan within three months. That must include an analysis of how the university got into its poor financial position and what efforts the university is undertaking to get out of it, plus contingency plans and financial forecasts for the future. The university also has to produce quarterly financial reports and work with the state auditor to improve its budgeting, accounting and financial reporting procedures.
But that hard work essentially comes with free consulting and advising. The state auditor has to write up a report for the university’s Board of Trustees analyzing its financial issues and offering recommendations. State funds will also pay a firm to provide additional accounting support. The department’s goal is for Central State to end its fiscal watch within three years, once it is in better financial health.
Ohio governor Mike DeWine said in the release that both university and state officials agreed there was “sufficient cause” for the fiscal watch and that state lawmakers “will continue to work closely” with the university. He emphasized the university is an “important piece of the higher education landscape in Ohio” as its only public HBCU.
Morakinyo A. O. Kuti, who became president of Central State University in July, said he wishes the university was in a better financial position, but fiscal watch status comes with tools and guidance from the state that will help the university in the long run.
“We’re fortunate that the state responded to our request to come and help us review our books … It’s always better to operate based in light and [to] know what’s going on,” Kuti said. “We don’t want to be here, but it’s going to be a useful exercise for us.”
What Happened
When Kuti arrived at Central State this summer, he found its finances in bad shape.
The university had a deficit of $3 million in fiscal 2024. It also ran up deficits in 2022 and 2023—$4 million and $14 million, respectively.
Those budget troubles partly stem from enrollment declines. The university enrolled roughly 1,600 on-campus students in 2022, while its online student population rose as high as 4,000 students, Kuti said.
But online student enrollment plummeted after the university shuttered Career Plus, a controversial free college program for labor union members, in 2023. The program allowed union members to earn an associate degree at Eastern Gateway Community College and a bachelor’s degree at Central State, until the U.S. Department of Education sent a cease-and-desist letter to Eastern Gateway, claiming the program violated federal financial aid regulations. Central State ended its relationship with the Student Resource Center, a company that helped facilitate the program, in fall 2022 and then discontinued the program altogether, The Dayton Daily News reported.
The program’s loss, however, came at a cost. Preliminary student head count numbers for fall 2024 show a total of 2,719 students, with only 842 undergraduates enrolled online, a far cry from the several thousand the university enrolled two years ago, according to data from the Ohio Department of Higher Education.
“When the online population dissipated, we had too many infrastructure [expenses] supporting the online environment,” Kuti said. “And so, when the students were no longer there, we lost a lot of money.”
Duffey emphasized that Central State is also facing the same challenges as other higher ed institutions, including a demographic cliff—a drop in the number of traditional-age college students—and dwindling federal COVID-19 relief funds, which helped some institutions shore up their finances.
While fiscal watch isn’t “incredibly common,” the “issues Central State University is facing are not unique,” Duffey said. “They’re pretty similar to other institutions nationally.”
What Happens Next
This isn’t the first time Central State has been on fiscal watch. The university was also given that designation in 2015, in part because of financial struggles, and managed to shed it by 2017.
Kuti said his goal is to end the university’s fiscal watch between 18 and 24 months from now, ahead of the department’s goal. The university has suspended most of its hiring and limited travel to cut down its expenses. It also laid off 12 employees, saving about $700,000 for this fiscal year.
“We have to reduce costs, so we’re looking at all of our contracts to make sure they’re beneficial,” Kuti said. “We’re looking at alignment of academic programs across the campus to make sure we’re supporting the most productive programs. We’re looking at efficiencies and ways to increase revenue across the board.”
Meanwhile, administrators have been hosting meetings with staff and faculty members to explain what’s happening and what fiscal watch means.
“This designation does not affect our classes,” Kuti said. “It doesn’t affect our accreditation.”
If the university’s financial situation continues to worsen after several years, the next step for the Ohio Department of Higher Education would be a conservatorship, in which an appointed conservator manages the university. But Duffey doesn’t believe it’ll come to that for Central State.
“We think the outlook is good,” he said. The new president has “obviously got some work in front of him, but students are not going to be directly affected in their day-to-day lives … We look forward to working with [administrators] to help build their future and exactly how they position themselves.”
Kuti feels hopeful, as well.
“It wasn’t the way we wanted to start the academic year,” he said. But “people on campus know that we’re a resilient university, that we have a brighter future.”