Facing a nationwide trend, SEMO takes proactive steps against looming budget shortfalls

Amid universities around the country facing financial problems, largely impacted by lower enrollment numbers, Southeast Missouri State University is working to avoid potential budget issues that could arise in the near future.

According to statistics compiled by the Education Data Initiative, enrollment numbers nationwide have declined 9.8% since their peak in 2010 and are expected to continue following that trend.

"Most institutions right now are having difficulties," SEMO president Dr. Carlos Vargas said. "If you listen to the news at the national level, and even in Missouri only, there are institutions that are really having very significant financial difficulties, and I think that this is something that has been coming for a few years."

Before leaving SEMO, former vice president for Finance and Administration Brad Sheriff presented scenarios projecting an $11 million loss over the next three years. Vargas explained that SEMO is not in a position where significant cuts to programs and staff need to be made right away, although there is potential for some cuts down the road.

"When Dr. Sheriff presented a few scenarios about those three years and $11 million or so, I think people were already talking about, ‘Oh, my God, are we going into financial exigency?’ Which is a term that essentially is the prelude of the university taking action and eliminating a large number of programs and a large number of positions; faculty, staff and all that,” Vargas said. “He said, ‘No, we're not there, but we need to take action.’ There needs to be a sense of urgency.”

Vargas said projecting over three years is a “good exercise", but is not necessarily what will happen in reality due to difficulties predicting appropriations for enrollment and retention.

“There are a number of assumptions that go into that, and it's really hard to predict, but that gives you a general sense of whether you have to pay attention to it or not. We are in a position right now where we need to take action," he said.

Fontbonne University in St. Louis announced it will be closing at the end of the summer in 2025 due to a lack of available funding, providing a recent example of the difficulty of maintaining a higher education institution. With that in mind, Vargas said SEMO is looking at “anything and everything” it can do to avoid falling into a deficit.

“We're looking at what we should continue to do, (whether that’s) strengthen, eliminate or restructure. Everything,” Vargas said. “We are focusing more and more on our mission, and what it is that we need to do that is consistent with our mission because we need to pay attention to that first and foremost. We want to make sure that the students are at the forefront of our actions. They need to be the most important factor that we consider when we make decisions.”

Vargas added that the university hasn’t had any mass layoffs or large furloughs because the university has been thoughtful with its spending.

“We haven't eliminated positions randomly and in large numbers, and that's because we have been very thoughtful about how we use our money to make sure that we're not using it in ways that are ineffective,” Vargas said.

While no programs are being cut for now, Vargas said some with fewer students may need to be in the future. Additionally, university officials are working to partner with local organizations on community services both SEMO and the organizations provide.

"If you have a program that has only three students, is that a program you need to maintain?" Vargas asked. "The question there is, 'Should we be marketing that program better?' Does it have fewer students because we are not marketing it well or enough? Or is it because it's a program that has, in some ways, outgrown its usefulness?"

SEMO projected a surplus of $7,141,264 for fiscal year 2023, as presented at the June 20, 2023, Board of Governors meeting, allowing the university to budget more for FY 2024. The university budgeted for a small surplus at the end of FY 2024 that included an estimated income of $152,865,633 and estimated expenditures of $152,862,227. The final report will be available later this year, and the budget for FY 2025 will be presented to the Board of Governors in June.

Decreased student populations resulting in fewer high school graduates is one of the major contributors to Southeast's potential looming financial issues, as $56,685,386 of the university’s projected income comes from tuition and student fees. Vice president of Enrollment Management and Student Success Debbie Below said 37 of the 50 states are expecting a decline in college enrollment between now and 2037, which has required SEMO to “shift” the way it recruits students.

“We're definitely seeing more competition from out-of-state institutions here in Missouri, which is a concern I have,” Below said. “Not just for SEMO, but, really, for the entire state, because if our students leave the state to go elsewhere we may not get them back in our workforce.”

Below said fewer students are attending college, and cited a study that found universities are at a 30-year low for first-year students seeking higher education after graduating high school. Below denied the “public perception” that costs to attend college have increased to a point where “there's not a return on investment.”

“That is not true,” Below said. “There is still a major gap between having a high school diploma and having a bachelor's degree, or higher, in terms of lifetime earnings. Sometimes those earnings don't show up right away, but they do as your career trajectory takes off.”

Below emphasized incentives for potential students to study in Missouri, including the Access Missouri Grant which is currently worth $2,850 and can only be used in the state.

“I always start with that because if we're going to talk to the public about education,” Below said. “I want them to understand that there's a major benefit of studying in the state of Missouri financially.

Despite the uncertainty surrounding SEMO’s fiscal future, university officials remain confident in their ability to keep the budget balanced and avoid a financial crisis.

"The university is a business, and basically, we're going to do what it takes to secure the future," interim vice president of Finance and Administration Gerald Shields said.