Plight @ Institutions of Higher Learning

[AKA2D '91]

Clark Atlanta fights for survival
Budget crisis: University plans layoffs, possible cuts in academic programs.

By ANDREA JONES
The Atlanta Journal-Constitution

• Atlanta/South Metro community page



Struggling to avoid financial disaster, Clark Atlanta University plans to slash spending by 20 percent, forcing layoffs and possible cuts to academic programs, school officials say.

The school's president, Walter Broadnax, said Clark Atlanta -- one of the six schools that make up the Atlanta University Center -- has been operating beyond its means for many years.

"We are facing substantial financial challenges," he said. "The bottom-line truth is that there is a gap that has occurred between our expenditures and revenues."

Broadnax, who took over for retiring President Thomas Cole in August 2002, said the financial woes have deepened in recent years as funding sources dried up in the downturned economy. Last year, the university overspent its $100 million budget by $7.5 million.

Clark Atlanta University is the second historically black school in the AU Center to be buffeted by serious financial problems this year.

In April, the Southern Association of Colleges and Schools yanked Morris Brown College's accreditation, citing major problems with financial aid, record-keeping and institutional effectiveness. Morris Brown also is the focus of a federal fraud investigation into alleged mismanagement.

Unlike its hapless neighbor, Clark Atlanta has a growing enrollment, no short-term debt and a substantial endowment of about $30 million, which Clark officials say they will not use to pay bills. Most funds in endowments are earmarked for specific uses.

The 5,000-student school remains fully accredited and is not scheduled to undergo the Southern Association's stringent reaffirmation process until 2006, when representatives will visit Clark Atlanta and examine its financial health and academic programs. The private school must be free of operating debt at that time or face possible sanctions, according to the accrediting agency's rules.

Clark Atlanta currently has no financial reserves and a long-term debt of about $55 million, most of it payments on bonds for construction projects, according to financial statements provided by the school.

Clark Atlanta has the lowest possible rating for investment-grade bonds. If the university does not make budget cuts, it could risk missing bond payments, which could allow creditors to demand early repayment of the full debt, according to the financial statements.

Broadnax said the school is not currently in danger of that happening. He said the school will reduce its expenses by 20 percent -- $14 million -- in the coming fiscal year to get back in the black.

The cuts will translate into layoffs, which will begin in the next few weeks, he said. He would not say how many people might lose their jobs. The school also has started a campaign to strictly enforce tuition collection and prevent students who have not paid their bills from attending classes.

Figures show that over the last eight years, the school has collected only about half the money owed by students. In 2002, for example, the school collected just $5.5 million of the more than $10 million due in student accounts. Annual tuition is $12,312.

An analysis by Dun & Bradstreet gave Clark Atlanta the financial rater's worst possible credit score, saying the school pays its bills an average of 29 days late.

Broadnax said summer months are the most difficult for the cash-strapped school, and small vendors especially are often paid late.

"There is simply not enough cash flowing through," he said.

The school instituted a hiring freeze in February and has begun offering early retirement to eligible staff members to cut costs. Twenty employees have taken the buyout, which will save the school about $1.2 million in salaries and benefits, school officials said.

The cuts in programs will be phased in over the coming school year, but the specifics have not been worked out, officials said.

Broadnax said drastic changes are necessary to keep the school afloat. "These sorts of cuts cause tremendous anxiety on campuses," he said. "But we simply cannot continue on the path we were on."

Colleges and universities around the country are grappling with budget cuts and funding issues.

William Gray, president of the United Negro College Fund, said historically black colleges are especially hard hit in a bad economy because they rely heavily on corporations and foundations -- instead of alumni -- for money.

"Corporations give out of their profits, and if there are no profits, there's no giving," he said. "Foundations give out of their assets, and if there are no assets, there's no giving."

Clark Atlanta University was formed in 1988 with the consolidation of Clark College and Atlanta University, which were both struggling financially. But the new school never fully merged programs, Broadnax said, causing duplication in staff and programs that has remained to this day.

Until 2002, the school also had been budgeting one-time cash donations into the operating budget, which masked the level of financial stress in audits, Broadnax said. "This is not something that happened overnight," the school president said.

The proposed staff cuts and program changes have led to contention among some of the 330 faculty members. Students and staff packed campus meetings as Broadnax's message of cutbacks spread. Some faculty members circulated memos alleging corruption among top officials.

Clark Atlanta's former attorney, Michael Baskin, sued the school in March, claiming he was fired for speaking out about wrongdoing at the school. He had said some alumni fraudulently claimed tuition payments as tax-deductible contributions.

The school countersued and settled the case last month for about $215,000, according to the Fulton Daily Report. Under the terms of the agreement, neither side is to discuss specifics of the case.

Broadnax said the cutbacks will strengthen the school in the long run.

"This is the courageous thing to do," he said.