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Central State University: what happened? – financial crisis in Central State University, Ohio

WILBERFORCE, OHIO — Dr. Herman B. Smith Jr. stepped onto Central State University’s campus in early 1995 with hope, ambition and a clear idea of the task he faced.

The school was an estimated $5 million in debt, but a $4 million bailout package from the state would stimulate a resurgence. Besides, Smith had wrestled with similar crises at three historically Black colleges and universities (HBCUs) in the South, and he was hand-nicked for his new job by Ohio’s governor and its top higher-education official. His brand of medicine would succeed where others failed.

But Central State was a different breed of patient and the extent of its disease had not been diagnosed. The school’s accumulated debt when Smith arrived was actually close to $11.6 million, an audit report later revealed. The undetected financial instability sabotaged Smith’s rescue effort. After fifteen months, he was fired.

In a telephone interview from his home in Atlanta, Smith said he was “grossly, sadly and unjustifiably mistreated” and called his tenure at CSU “Mission Impossible.”

For decades, CSU has lived on a cycle of financial crises and government bailouts — a cycle that exasperated its supporters and frustrated state officials either unwilling or unable to find a permanent solution. Despite repeated promises to straighten out the school’s finances, CSU’s trustees and administration continued spending more than the school took in.

The school’s current crisis contains a potentially lethal blend of financial and political minefields. The exact amount of its multimillion-dollar debt is unknown. Most of its dormitories have been declared uninhabitable and have been vandalized, apparently by students. The state auditor and inspector general are investigating potential wrongdoing. And some lawmakers have suggested closing or merging the school.

Next Six Months Are Pivotal

The next six months are pivotal as Ohio’s elected officials hammer out how much money CSU will receive over the next two years. The school’s survival as Ohio’s only public HBCU hinges on that funding. But lawmakers say before they make any decisions on the future of CSU, they want to know the answer to one seemingly simple question: What happened at Central State?

That question has no easy answer. CSU’s supporters claim the university has endured chronic underfunding because of racial discrimination, and their position is shared by the U.S. Department of Education’s Office of Civil Rights.

But state education officials, the governor and several lawmakers strongly disagree, claiming mismanagement is to blame for Central State’s crises. A review of CSU and state records, as well as interviews with current and former Central State trustees, state higher education officials and auditors, offers glimpses into the reasons for CSU’s downward fiscal spiral.

Estimates of CSU’s current debt are still climbing. The state auditor’s office has told higher-education officials that CSU’s debt has probably reached $16 million, according to an Oct. 31 memo that Ohio Board of Regents Chancellor Elaine Hairston sent to Gov. George Voinovich.

The school still appears to be spending more than it is bringing in, according to the memo. “This is a crucial matter which will have to be addressed before there is any hope of legislative support for a solution,” Hairston told the governor.

Auditor of State James Petro, whose audit showed CSU’s debt jumping by $4.3 million in a single year ending June 1995, said more than half of that increase can be blamed on overspending, particularly in the athletic account.

CSU officials now have until mid-January, after requesting and receiving a one-month extension from auditor Petro, to produce a set of auditable financial records for the year ending June 30, 1996, so that a state audit can be completed. That final report, when it comes, could be even more scathing than the 1995 audit, which was released in September.

Placing Blame

Petro said CSU’s financial oversight during 1995-96 included “some of the worst record-keeping I’ve ever seen” and said he may take CSU to court if they fail to provide records that can be audited. But Smith disputes the auditor’s contention that the university’s financial record-keeping was poor during that period. In fact, the board of regents praised Smith’s chief financial officer in writing in November 1995 on the improved quality of financial reports. “I think they’re saying things to justify the position they’ve taken,” Smith said.

Smith criticized his predecessor, Dr. Arthur E. Thomas, and the previous CSU board of trustees, which Voinovich forced out in July, for diverting room-and-board money to the athletic program. “How could the president be allowed to stay in that chair for ten years under those conditions?” he said. Thomas declined to be interviewed for this story.

Smith also questioned state oversight of the institution, saying, “When you talk of lack of management, you need to start right there in Columbus… Where were the authorities in 1990, ’91, ’92 and ’93?” When he arrived on campus, Smith said he found “great selfishness, and no commitment to the institution.” Yet his critics on campus said Smith showed little concern for CSU, and plenty for himself.

In a self-evaluation he prepared for trustees, Smith submitted a three-ring binder that included several color pictures of himself at a CSU commencement and a one-page self-assessment in which he gave himself perfect marks in every category.

He ordered $200,000 in leased furnishings for the president’s residence, a transaction being probed by the state auditor. When state officials closed the dormitories for code violations, and forced students to leave their rooms, Smith remained on vacation at his home in Atlanta, an act that infuriated officials on campus and in Columbus.

Hairston said state officials had “grave concerns” about CSU’s financial stability in the early 1990s, when CSU could not balance its budget despite receiving more than half of its operating money from state subsidies. When tight state budgets forced cuts to the state’s public colleges and universities, “the other schools adjusted” by cutting budgets and staff, Hairston said. “No such changes were made at Central State as far as we can discern,” the chancellor said.

Thomas, CSU’s president from 1985-95, had a vision for CSU that apparently exceeded the school’s budget limitations, state officials say. And he was reluctant to align the two. In 1991, a statewide task force was formed to examine the school’s spending and mission in response to a legislative proposal to slash state funding for CSU. But at the first meeting of the task force, Thomas made clear what he thought of the politicians’ second-guessing of his administration. The budget-cut threats against CSU, Thomas said, “conjure up times when it was against the law to teach Negroes to read and write.”

Funding was preserved, and the task force ultimately issued a series of recommendations including cuts in CSU’s academic programs designed to put the university on solid financial footing. But in February 1994, responding to criticism that he hadn’t followed through fully on the recommendations, Thomas wrote to his board of trustees chairman: “Central State has a specific mission as a four-year institution, one which in the opinion of the university administration cannot be achieved by the elimination or merging of our present departments.” Hairston said, “When the vision of an individual supercedes the reality of a situation, you can get into this type [of financial crisis].”

Spending Priorities Were Questioned

Lois McGuire, long-time faculty member who has been active in the faculty union at CSU, said the school’s teaching staff raised questions on campus during Thomas’s term regarding the, university’s spending priorities. Many faculty members thought the core academic program was suffering in favor of the school’s athletic program and a few administrative initiatives.

The initiatives, including new programs in water resources management and manufacturing engineering as well as several linkages to African nations and colleges, “were all very good ideas” for a school on sound financial footing, McGuire said. But they drained money from other programs during that period.

Jacqueline Souel-Downey, a member of CSU’s board of trustees from 1990-95, said Thomas “tried the best he could, given his passion for the school, to adhere to what the board of regents wanted him to do.”

But the university lacked the financial controls that an institution its size needs to succeed. The school lacked effective fund-raising, was always shifting money around to respond to crisis situations and never generated a rainy-day fund, Souel-Downey said.

Insufficient State Funding Cited

But the primary problem, Souel-Downey said, was insufficient funding from the state of Ohio. The school’s supporters have argued that CSU bears costs other state schools don’t: a greater proportion of its students received inadequate preparation in public schools and require remedial education; students are less well-off financially; and the comparatively small enrollment makes the school’s fixed costs such as water and electrical systems more expensive per student than larger schools.

The U.S. Department of Education’s Office of Civil Rights’s fifteen-year-old discrimination complaint against Ohio regarding Central State is one reason the “underfunding” argument resonates for CSU’s supporters. The civil rights office has taken the position that Ohio has, in essence, underfunded Central State and discriminated through its decision to build and enhance Wright State University, which is only eleven miles away from CSU. The state has still not resolved a 1981 finding by the civil-rights office that Ohio violated federal civil rights laws in its treatment of CSU.

Office of Civil Rights officials have told Hairston that the state must not only keep Central State alive but must revitalize it and build up its campus and academic programs in order to resolve the case. If the state I fails to do so, it faces the possibility of a federal discrimination lawsuit.

Board of Regents officials deny the discrimination and say CSU is one of two schools in the state to receive a special supplement beyond its enrollment-based subsidy and receives more funding per student than any other state university.

The case represents a wild card in any future-of-CSU discussions, because when similar cases in other states have landed in federal court, they have occasionally prompted judges to order states to pay millions to predominantly Black schools.

At least one state lawmaker, State Sen. Gene Watts (R-Columbus) formally requested that Hairston explore the possibility of merging CSU with Wright State University. Hairston said the March request was forwarded to a committee that was working on a long-range plan for Central State, and the committee rejected the idea.

Souel-Downey said some of Ohio’s students perform best at HBCUs, and studies have shown the success rate of Black students during school and after graduation is higher for those who attended HBCUs than those attended predominantly white schools. “No other institution of higher learning in our state does nearly as well as Central State in producing Black graduates, and this includes those state institutions with higher African-American student populations,” Thomas wrote to state officials in December 1994.

Hairston said she believes “there is a significant role for Central State to fill” in Ohio’s public higher-education system. “There arc many promising students in Ohio that need a nurturing atmosphere,” she said.

But CSU and state officials first have to hammer out a “supportable. realistic mission” for the school. Souel-Downey said she wants to be optimistic. “But the school historically has not been financially sound. It goes through these cycles and continues to be in debt. “It really is the state’s stepchild.” Mark Fisher is education reporter for the Dayton Daily News.

COPYRIGHT 1996 Cox, Matthews & Associates

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