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April 14, 2023

Report: UHart to adopt budgeting reforms, cut millions in expenses after financial challenges  

PHOTO | CONTRIBUTED In 2019, UHart tapped $132 million in bond funds to refinance existing debt and fund construction of the 60,000-square-foot Francis X. and Nancy Hursey Center for Advanced Engineering and Health Professions (shown above).
By Michael Puffer

Following a year of dramatic financial challenges, the University of Hartford is working to implement budget reforms, including development of an $11 million package of budget cuts and new revenue.

Pay and benefit cuts for staff are on the table, along with adoption of new budgeting protocols to head-off future problems for the 66-year-old university.

UHart saw its operating deficit balloon to $17.1 million last year, about the same time it breached the debt service coverage ratio requirement for $132 million in bond debt. The ratio is an important measure of a bond issuer’s ability to cover bond repayment obligations.

University officials stress the school is up to date on all financial obligations and has a deep reservoir of endowment and credit.

In a report dated March 30, Longhouse Capital Advisors detailed how UHart ran afoul of the debt service coverage requirement for a $132 million bond issuance in 2019, along with steps the university should take to return to compliance.

UHart was obligated by its bond conditions to hire a financial consultant after finding it had failed to meet the required 1.1 debt service coverage ratio.

Beginning this year, University President Gregory Woodward, who is retiring at the end of the school year, and top staff have worked to free up $11 million and eliminate reliance on “one-time budget solutions,” reads a portion of the Longhouse report. This is meant to put the university “on a sustainable operating trajectory.”

That university expects to accomplish that goal primarily through “expense right sizing,” Longhouse reports.

According to the consultant, tactics under consideration include:

  • Increasing student-to-faculty ratios, resulting in fewer classes and lowering adjunct salaries.
  • An across-the-board cut to healthcare benefits, fringe benefits, other expenses and salaries.
  • Rebidding various contracts.
  • Insourcing and collecting funds for summer housing and summer conferences.
  • Increased centralization of restricted donor funds and their use for operating expenses.
  • Anticipated additional savings from a move from NCAA Division I to Division III sports, which fully takes effect in fiscal 2024.

The university issued two rounds of bonds in 2019, raising $133.65 million. This was used to refinance about $93 million in past debt, pay bond-related costs, and fund about $58 million in campus improvements, including a new 60,000-square-foot academic building.

Those bonds were tapped through the Connecticut Health and Educational Facilities Authority (CHEFA), a quasi-public state agency that provides access to tax-free financing for nonprofit colleges, hospitals and other organizations.

In July 2022, the University of Hartford tapped another $25.5 million through CHEFA, this time to refurbish the university’s on-campus Village Apartments and other housing assets.

Longhouse’s report lays much of the blame for the poor fiscal 2022 performance on the COVID-19 pandemic, while also noting the university had already begun efforts to improve its financial standing several years earlier.

Much of the proceeds of the 2019 and 2022 bonds went to upgrades for campus facilities and student living, and the university has been adding programs of study and support services to attract and retain greater numbers of students.  

The Hartford Business Journal detailed the school’s financial issues in March. The university, responding to questions for that story, expressed confidence in its current finances and future trajectory. UHart said it has a “strong” $175 million endowment and an untapped $15 million revolving credit line with JP Morgan Chase.

“The University will continue to manage our financial position and operations closely to ensure compliance with all financial ratios in the future,” UHart reported at the time.

Longhouse’s report noted UHart projects a better fiscal 2023 based on improving enrollment, retention and a return to fuller dormitories, dining halls and reengagement with campus activities.

Longhouse predicts a “good likelihood” UHart will return to compliance with its bond covenants, provided a $5.5 million contribution from one vendor is accounted for as revenue and that the university continues to draw on restricted and “quasi-endowment” funds for fiscal 2023.

But the university still needs to take “significant steps” to improve its financial picture, Longhouse reports.

UHart has identified budgeting mistakes of fiscal 2022 and is adopting a more conservative budgeting process. The university has also hired a seasoned chief financial officer – Jamie Skowyra – “who has hit the ground running and has become conversant with the budget details very quickly,” according to Longhouse’s report. Skowyra had previously served as CFO at Nichols College in Massachusetts.

The university’s former chief financial officer resigned in July 2022, Longhouse reported.

The university must also make significant investments in its enrollment and academic infrastructure, Longhouse advised

The university will consider selling a number of properties it owns that are not contiguous with its 350-acre campus in West Hartford, Hartford and Bloomfield, according to Longhouse.

Longhouse’s optimistic projection for UHart counts on increasing undergraduate enrollment in each of the coming three years, as well as 3% annual tuition hikes. 

It assumes full-time tuition discount rates of 1%, a $2 million contingency and $1.5 million vacancy adjustment for unfilled positions. 
 

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