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South Carolina State pursuing solvency: controversial loan from University of South Carolina part of remedy

Controversial loan from University of South Carolina part of remedy

Orangeburg, S.C.
Four years of operating in the red finally
forced South Carolina State University to borrow $2.1 million from
another state institution. But it appears the historically Black
institution may be able to avoid that problem next year.

SCSU has reorganized and laid-off twenty-six employees.
Additionally, almost twenty employees have also been reassigned to
other positions at the university. Add an 8 percent increase in student
fees to the equation, and the institution possibly could be looking at
a financial surplus by the end of next year.

The money to repay the loan is in the 1998-99 budget, which was
approved last month by the university’s Board of Trustees. The increase
in tuition and fees should cost in-state students an additional $250
per semester to attend the 102-year-old institution.

“Based on the university’s cost cutting measures, and with the
inclusion of additional revenues, the end of the 98-99 fiscal year may
show a $400,000 budget surplus,” said S.C. State President Leroy Davis
Jr. “If so, it will be the first time m four years that S.C. State will
end a fiscal year with a balanced budget.”

To meet its year-end payroll, SCSU requested the appropriation from
the state General Assembly and asked permission to enter into a loan
with a local bank. Then in June, the state’s Budget and Control Board
requested $2.1 million from the University of South Carolina (SCU), a
state agency that had a budget surplus.

“It is important to note that never at any time in this process did
S.C. State approach or ask USC to provide funds to cover the
university’s budget deficit,” Davis said.

Since the Budget and Control Board negotiated the deal, rumors have
swirled that there is a plan to make S.C. State one of USC’s satellite
campuses. However, officials from both schools deny it.

USC agreed to the loan, but both President John Palms and a number
of trustees made it clear they didn’t especially like the idea.

“I don’t think it’s good policy to do this,” Palms said the day the
trustees approved the deal. “It’s only for emergency situations.”

Indeed the situation at S.C. State is an anomolous one, according
Bracey Campbell, a spokesperson for the Southern Regional Educational

“As far as we know, there are no other schools in our region that
have that kind of financial problem. Schools have financial challenges,
but none have had to look to sister institutions for help,” he said.

How did S.C. State get into this situation?

Last year, responding to new performance-based funding standards
handed down by the state, the school made a concerted effort to raise
the average SAT score of its incoming class to 1,000 — a move which
cost the campus 200 incoming students and nearly $3 million.

The university’s lack of reserve dollars also contributed, in part, to the budget deficit, Davis said.

S.C. State implemented proactive steps to address its budget
problems before approaching the state Budget and Control Board —
including reducing travel 20 percent, reducing and delaying some
purchases, and hiring only essential personnel.

The school also had a $3.5 million overdraft in the 1996-97 fiscal year and recurring shortfalls in other funds.

All of this resulted in a depletion of the university’s cash flow
over the past several years, according to Budget and Control Board
documents. The $3.5 million overdraft occurred after the school failed
to ask the Higher Education Commission to transfer $1.5 million in
reserves to its accounts, documents show.

A recent audit showed that four auxiliary budgets that were
supposed to be self-supporting were losing money: the athletic
department ran a $5.7 million deficit; central supply’s deficit totaled
$156,181; the student center snack bar lost $95,297; and the Felton
Laboratory lunch program came up with a $151,414 deficit.

A 1994 legislative audit report complained that the school didn’t
make all its students pay tuition, allowed faculty and staff to amass
unpaid debts for university services, and failed to collect thousands
in bounced checks for tuition and fees.

To ensure there is not a repeat of operating with a shortfall,
Davis said he plans to review and revise current administrative
structures, policies, and procedures to develop an effective enrollment
management plan and forge partnerships to promote philanthropic support.

COPYRIGHT 1998 Cox, Matthews & Associates

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