I am writing this letter to clarify information related to AB, based on my personal recollections during the time I have been involved with the Board of Trustees. I was first involved with the Board in 2007 as a liaison from the Alumni Council as an observer, not a voting trustee. I became a voting trustee in late 2012.
From the time I began as liaison, through 2011, enrollment was dropping. By the time Rick Creehan became President in 2011, Fall 2011 enrollment was under 500.
Using an affinity-based recruitment model based on athletics, enrollment reached 1,000 – 1,100 by 2014/2015. However, retention dropped so although incoming classes were in the 400s, we were not retaining them as before. If we had been, enrollment would have been in the 1,400 -1,500 range.
During that period, the business office was not adequately staffed, nor did they have the tools to produce timely, accurate reports on our financial situation. In fact, when Pres. Creehan arrived, and the Board Chair had to inform him that we had $4 million more debt than had been previously known. This was not due to any financial malfeasance, just to the inadequacy in the business office.
Rick’s plan was to build enrollment quickly using the athletic recruitment model while searching for a program to implement that would have a sustainable impact on enrollment. To continue to operate while this took place, his administration researched the use of endowment funds in financial crisis and assisted the Board in developing a policy in April 2012 stating that if the school were in danger of closing
(declaring financial exigency), funds could be borrowed from the endowment. The intention of the board was that donors be notified of this action. The other option at that time was to close the school, which was verified by a forensic accounting firm.
To avoid closure at that time, the board voted to borrow the bulk of the endowment, basically $14 million. The policy requires that all eligible scholarships continue to be paid, which they have been, every year since. The loan interest due to the endowment is tracked, and the intention is to restore the endowment. The funds were used to pay a line of credit of $4 million that was being called because it was remaining
fully deployed (the balance was $4 million, and it was not being paid down) and for expenses such as payroll and other operating expenses over the next two years, so they were exhausted within the next couple of years.
In addition, to house the larger student population and provide a stadium for the multiple sports teams, a municipal bond in the amount of $37 million was issued in 2013, at over 7% interest. The rate was not quoted until near the end of the process, and the Board felt pressure to move forward to have housing and a sports stadium ready for the following fall as enrollment was already growing quickly.
Meanwhile, the budget was still unbalanced due to a 4-year tuition freeze, lower retention, an increase in the discount rate, and a lack of budget discipline. AB was still underwater financially, losing money each year. In fact, there has not been a year since I joined the Board that AB has had a positive budget.
There was an attempt to start an Optometry school during this time. We passed the first level of accreditation with the Optometry accrediting body, but to move to the second level would need to hire faculty and build out eye lanes for teaching. Attempts to raise money to do so were unsuccessful. With no way to fund the buildout and faculty required at the second stage of accreditation, AB pulled the application in 2017.
During President Creehan’s tenure, an academic program review process was developed and implemented. One set of programs that were reviewed early on was the three Music majors (Musical Arts, Music Performance, and Music Education). The review revealed that the cost of the programs was high, and enrollment was low, with the largest enrollment being in Music Education. The cost of providing excellent, specialized instruction to a small group exceeded the income by over $400,000
annually. The decision was made in October 2015 to discontinue the Musical Arts and Music Performance Majors and retain the Music Education program to remove the effect of this deficit on the overall budget.
In the years since, several academic programs have been updated or discontinued and new ones have been added, by following the academic program review process. A similar process is used with athletic teams, removing those that are not successful and adding other options as they can be identified.
Given the continued unbalanced budget, AB defaulted on the Municipal Bond in early 2015 and began working to find a buyer for it over that summer and fall. In October 2015, AB signed a standstill agreement with the Bondholders to stop further action by them to seek payments or seize the campus.
When Tim Barry became President in November 2015, AB continued to seek alternative funding to buy out the municipal bond. AB began working with USDA in 2016 to apply for a USDA rural development loan to buy out the bond and fund the Optometry school. In 2017, USDA declined full funding of this request but suggested we re-apply for funding just to buy out the bond which we did in 2018. Later that
year, the thirty-year loan was approved, and the bondholders accepted a buyout of $27 million using the proceeds of the loan in that amount approved by USDA, with an interest rate of just over 3%.
In 2015, enrollment practices were altered to avoid over-recruiting in certain sports leading to predictable retention issues, which caused some reduction in enrollment but also improved retention. In 2016, AB had a regularly scheduled visit from the regional accreditor HLC. Given the financial issues from 2015, HLC imposed a sanction of probation on AB in 2017. As is typical, this caused a drop in enrollment into the 900s. Over the following two years, HLC removed the accreditation sanction (first to a lesser sanction, “on notice,” then to the removal of any sanction).
As we stabilized from the Probation announcement and the shift in enrollment tactics, COVID hit in 2020, which further dropped enrollment, into the 800s. During 2022 there was a lack of clear messaging about AB’s future which has led to further enrollment drops, to 727 in the Fall of 2022. Despite this drop, we were able to resolve the budget for this fiscal year. However, a reduction and delay in receipt of
Employee Retention Credit funds from the IRS (expected in April or May) created a budget and cash flow gap for this summer. This is the gap we are currently working to address.
In the Spring of 2022, the Board voted to make an additional borrowing from the Endowment of $540,000 per the Endowment Use Policy developed in 2012. The Board was unaware until late Fall 2022 that donors had not been notified of this action. At both times of borrowing from the endowment, the only other option was to close the school. As stated previously, every scholarship eligible to be awarded
has been awarded every year and will continue to be awarded going forward. As previously stated, the loan and interest are tracked, and every scholarship which has been eligible to be awarded has been awarded through cash flow and will continue to be until the loan from the endowment is repaid, and the scholarships are again awarded directly from the endowment earnings.
Regarding recent staff changes, AB’s admissions office is restaffed, with one position currently open. The advancement office is now under the leadership of a 30-year veteran in this field who is already working to rebuild the staff needed in that office. AB also has a new CFO starting this week, and additional support for accounting functions has been arranged.
Over the past year, the Board and administration worked closely together to cover short-term cash flow issues and begin to address accumulated accounts payable. That work continues as we work to increase enrollment and gain efficiency in expenses through new academic programs, and through academic and administrative partnerships with other institutions of higher learning and area employers, as outlined in the Bridge Plan previously released. Dr. Bucklew, as interim President, has already begun the process of developing a full strategic plan which will include a wide range of representation from AB and the community.
My hope is that this information, based on my recollections over the past 15 years, helps to clarify some of AB’s recent history.
Becky Hooman, ’81, ‘17(H)
May 2023
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