The Ohio Board of Regents has published its financial ratings for state colleges and universities for fiscal year 2013. Despite a persistent budget deficit, reduced revenue and shrinking enrollment last year, Youngstown State University’s rating has been upgraded from a 2.6 to a 3.3 — its highest point since 2010.
As points of reference, Cleveland State University, The University of Akron and Kent State University tote financial ratings of 3.4, 2.8 and 4.4, respectively.
The Board of Regents collects financial data each quarter from all the public universities in the state of Ohio, per Senate Bill 6, and they assign a rating on a five-point scale to the universities based on several factors.
David Cannon, vice chancellor of finance and data management for the Board of Regents, works closely with that data and the rating system. He said as the economy slowly improves, universities across Ohio are also experiencing renewed financial vigor.
“We saw an increase in 2013 for a number of schools…in 2011 and 2012 with the economy the way it was, we saw some schools dip, but for the most part we saw schools come back in 2013,” Cannon said. “[The financial rating] is really an indicator of a university’s financial condition.”
Neal McNally, interim vice president for finance and administration at YSU, described the rating as a reflection of the school’s financial stability rather than profitability — which is only a small part of the rating.
YSU’s rating has now mostly recovered from the major hit it took between 2010 and 2011. McNally cites a number of factors that have contributed to the increase in YSU’s rating, including debt.
“A lot of schools around the state of Ohio continue to issue a lot of debt, so that they can expand their facilities and keep those facilities up to date. We have resisted that and have not issued any additional debt really since 2010,” he said.
Another major factor McNally focuses on is the university’s adaptation to declining enrollment.
“We’ve really tried to control our expenditures. Our enrollment has gone down, so we’ve made corresponding adjustments to control our expenses so that they are more in line with our revenue. So, it’s really just financial management,” he said.
McNally emphasizes the
role of an early retirement program, which YSU launched around the time of the rating decrease, played in this hit.
An early retirement incentive program is an alternative downsizing method that offers staff incentives to retire early. The underlying logic of these programs is that though companies will have to pay large sums of money in the beginning, they will save far more — through both a smaller workforce and an increased ability to restructure — just a few years down the line.
“[An early retirement incentive program] is a big up-front investment. You have to purchase service credit from the state of Ohio’s retirement system. It’s very expensive to do that. We did that and as a result, over the next several years, we started incurring savings from those employees no longer being here,” McNally said.
This program could also be a factor in the rating bouncing back as YSU reaps the benefits of its investment.
Though YSU is certainly still under financial duress, news of this improved rating is a possible sign pointing toward the success of the institutional changes implemented over the past few years.