Addressing Budget Challenges

Bethel Colleagues:

As a community, we share both joys and difficulties as we serve God together at Bethel. We’ve had a number of things to celebrate in the past several months— the launch of new academic programs, outstanding academic achievements by our students, remarkable scholarship by our faculty, excellence by our student athletes, successful accreditation processes, and staff who are tenacious in providing outstanding service and care for our students. 

However, today I am writing to share about a difficulty we’re facing as a community. For the past few months, Cabinet members and I have been wrestling with the realities of declining enrollment and the budget challenges we face over the next few years. In this email, I hope to present some context for our situation, action steps that have been identified to ensure we have a balanced budget for 2018-2019 (FY19), and plans for long-term financial stability. 

Background

Higher education as a whole is facing continuing change and challenge. Students and families are questioning the value of a college degree and are concerned about student debt—even though the median debt level for College of Arts & Sciences (CAS) graduates is less than it was in 2006. Increased skepticism from the general public, combined with more educational options, has added tremendous downward pressure on our ability to attract students. Like many other schools across the country, Bethel has experienced declining enrollments in recent years. In CAS alone, which drives over two-thirds of our budget, we are down 341 students from our peak, and down 116 since 2013.

To tackle these challenges, within the past five years we have completed a university-wide prioritization and review process, conducted an extensive strategic planning process through the Strategic Coalition, completed a Campus Master Plan for our facilities, refinanced our long-term debt, and developed a comprehensive campaign plan. As a community, we have focused intently on providing an outstanding student experience. We have improved our processes and services for the benefit of students, launched new and innovative programs that will help us in the years ahead, and implemented new recruitment and marketing strategies. 

Bethel has always been a “tuition-driven” institution. We rely primarily on tuition dollars to fund our university operations. Enrollment drives over 90% of our income and our budget. This fall, even though Bethel Seminary enrollment increased for the first time in more than a decade, and our College of Adult & Professional Studies (CAPS) and Graduate School (GS) showed improvement over last year, total CAS enrollment was 47 students lower than it was a year ago and about 50 students short of our projections used for budgeting.

FY19 Plans

As we work on the FY19 budget, we have been wrestling with the impact of previous enrollment declines. Based on our enrollment, tuition revenue and expense projections, we have a gap between income and expenses of approximately $6 million. Cabinet has taken steps to reduce that gap. Some of the steps provide short-term relief and other steps will reduce our budget challenge over time. These plans include the following:

• We will not implement raises for the 2018-2019 school year.
• We will again this year offer the Faculty Phased Retirement Program. Materials will be distributed by January 22.
• We will voluntarily reduce employment expenses by offering a Voluntary Separation Incentive Program. Employees who are eligible for the program will include staff, administrators, and full-time faculty who were age 60 or older as of September 1, 2017, and have accumulated 15 or more years of retirement benefits-eligible service as of September 1, 2017. All eligible employees will be mailed materials by January 22. A decision regarding participation will be required by March 8, 2018. The timeline for participation in the Voluntary Separation Incentive Program allows us to have better information when making additional financial decisions this spring.
• We will not fill some open staff positions.
• We will eliminate a small number of staff positons this spring.
• We will use the bond refinancing savings to offset $1 million of the gap.
• We will make other expense reductions in non-personnel areas.

Beyond FY19

It is important to note that some of the above changes are only one-year adjustments. We still have work to do for the years ahead. Therefore, in addition to what we are doing to balance FY19, we are going to form several working groups focused on the following areas:

• Innovation: to identify new strategies, markets, or programs that could set Bethel apart and provide an enrollment boost.
• Annual Review of Academic Programs: to identify places of strength and challenge in our academic programs, particularly in terms of enrollment, revenue, and expenses. We want to learn more about areas that need more investment and areas that cannot continue at their current funding level. This process is likely to lead to individual faculty reductions and/or reductions in programs.
• Faculty Load Models and Structures: to look at how we currently structure our faculty loads and explore possibilities for change, following through on a recommendation from the 2015 Strategic Coalition.
• Staffing Models: to identify and implement strategies to increase our operational efficiencies. It is likely that additional staffing reductions or adjustments will result from this work.
• Health Plan Review: to identify ways we can reduce our year-over-year health plan costs.

While many of the above items highlight our plans to tackle expenses, our priority on growing enrollment will continue with vigor. Our enrollment success will require contributions from all of us. From the development of new programs to the many who make personal connections with our prospective students on a daily basis to those who impact the student experience in a wide range of ways, we will continue to link arms as we market the value of the Bethel experience. I count you as essential partners in our enrollment work.

I recognize this is sobering news to read. I want us to remember that God is at work at Bethel. He has been faithful in the past and has provided in surprising ways. The world desperately needs Bethel graduates. I firmly believe that God has an important future for Bethel. My prayer for us is found in Ephesians 3:20-21. “Now to Him who is able to do infinitely more than all we ask or imagine, according to His power that is at work within us, to Him be the glory in the church and in Christ Jesus throughout all generations, forever and ever. Amen.”

Serving Together,

Jay