University of Louisville faces 'ominous' future, top leaders say

LOUISVILLE, Ky. (WDRB) --  With state funding and private donations dwindling, the University of Louisville faces an “ominous” financial future, for which the only solution might be a long-term plan to grow the student body by 36 percent, its top leaders said Tuesday.

The stark and unusually candid discussion unfolded at a meeting of the board of directors of the nonprofit U of L Foundation, whose members include university board of trustees chairman David Grissom, vice chairman John Schnatter and interim President Greg Postel.

“If this were a private enterprise, it would be very concerning; you wonder about the efficacy of the business model,” Grissom told his colleagues on the board. “I hate to use the word ‘ominous,’ but it is.”

Postel added that another proposed state budget cut – which would reduce the university’s state funding to 1990s levels, not counting inflation – sets the university on a course toward “privatization.”

The discussion was prompted by figures showing that the total amount of new money pledged by donors to the university, including its athletics department, dropped to $43 million in the fiscal year that ended June 30, from $75 million in the year that ended June 30, 2016.

The drop occurred in the year that the university and foundation boards were completely overhauled and former President James Ramsey, who led the university for 14 years, was pressured to accept a buyout.

“This is like the tail of all those things that happened a few years ago,” said trustee Nitin Sahney, the former CEO of Omnicare.

Sahney said the appointment of a permanent president and a permanent replacement for former longtime athletics director Tom Jurich, who was fired in October after a recruiting scandal in the mens basketball program, will be important milestones in getting the university back on track.

But the university faces a confluence of financial pressures that include reduced support from its $735 million endowment – which was overvalued and depleted under Ramsey; the continued erosion of state funding; a ceiling on tuition increases to raise revenue; and a need to regain private donors.

“Short of a larger student population, this is going to be challenging,” Postel said. “There has got to be a lever to pull.”

He said U of L could grow to 30,000 students, from about 22,000 today, over several years.

He added that U of L needs to mimic the University of Kentucky in growing the student body and recruiting more out-of-state students, who pay much higher tuition.

After the meeting, Postel told a reporter that it would take five years for the university to add 8,000 students, and of those, 4,000 or 5,000 could be in online courses, a fast-growing area.

He also said there is no active plan to convert the state-owned university into a private institution, but privatization is effectively happening given dwindling state support.

State money will make up about 10 percent of U of L’s $1.2 billion budget in the fiscal year that starts July 1, assuming Gov. Matt Bevin’s proposed cuts to higher education are enacted by the legislature this spring.

Another problem, Grissom said, is that university faculty and staff pay has been flat for about a decade, meaning a decline with inflation factored in. That’s what trustees heard at recent campus forums on the search for a new president, Grissom said.

Schnatter added that the university’s spending more than $55 million to expand Papa John’s Cardinal Stadium – the football stadium named after his company – doesn’t help faculty and staff morale.

In fact, he said, spending money on a stadium instead of faculty pay breeds “animosity.”

“The buying power and the spending power of the faculty is going the wrong way,” he said.

The stadium expansion is funded by private donations to the university’s athletics association rather than state money or tuition, foundation interim executive director Keith Sherman told Schnatter.

Schnatter said he understood that, but, “I am just saying, from a perception perspective.”

Asked by a reporter whether he supports the stadium expansion project, Schnatter declined to comment.

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2018 WDRB News. All rights reserved.

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Chris Otts reports for WDRB.com about business and economic topics, higher education and local / state government. He joined WDRB News in 2013 after seven years with The Courier-Journal. Got a tip? Chris is at 502-585-0822 and cotts@wdrb.com.