University of St. Thomas facing a 6

After six straight years of operating losses at the University of St. Thomas in Houston – during which time the private Catholic institution overspent by more than $33 million – administrators are making a concerted effort to turn around the college's finances, Board of Directors Chairman Robert Corrigan said.

The board last year instructed top university officials to plug the gap between operating revenues and expenses within two fiscal years, Corrigan said. His finance committee began holding monthly meetings with school leadership, as word of the bleak financial situation sent the faculty into a collective panic.

"I assumed the chair role last year, and I made addressing this deficit the very highest item on my agenda, next to ensuring our Catholicity," Corrigan said. "It's the old adage – no margin, no mission. So, yeah, so I made it a priority, and we've budgeted to have a surplus for this fiscal year."

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Finance officials at the university did not immediately respond to questions, but a 2023-2024 budget analysis obtained by the Chronicle showed aggressive steps to reduce operating expenses. The university had already begun relying more on adjunct faculty, who cost less than tenure or tenure-track faculty. Reductions were made to the marketing department, vacancies went unfilled, travel budgets were reduced, third-party contracts declined and construction on a new residence hall got delayed, according to the report.

As a private nonprofit, UST is not required to post its budgets online but is required to submit its yearly audited financial statements to the federal government. According to seven years of records between 2017 and 2023, operating expenditures had grown at a 47% rate, outpacing a 28% increase in operating revenue. The statement is not yet available for 2024.

Records show the last surplus in operating income in the fiscal year ending June 2017, just before university President Richard Ludwick took office. Since then, the deficit has climbed annually, reaching $11.7 million in operating losses in 2022 and another $11.8 million in 2023.

Cash flows, which track all cash coming in and out of a business, also increased over the same period to a cumulative $33.46 million since the end of 2017, according to the audited financial statements.

The university used reserves to cover the operating budget losses, including a $40 million loan in 2020 that was refinanced from $32 million in old debt, according to the budget analysis. Other reserves came from scholarship contributions from donors, draws from endowment funds, and one-time COVID-grants.

"The operating budget is one of several key indicators we can use to measure the overall performance of the University," the report reads. "Endowment growth, philanthropy, gross and net revenue, enrollment, faith life, and campus vitality are all vital for ensuring a thriving university."

The financial picture had soured as more students have matriculated into the university, and administrators in 2022 began offering a "promise" program for full tuition to low-income students. More than 3,600 students attend UST, according to the university's website, and tuition revenues reflect growth as institutional financial aid numbers have also increased.

School officials have touted the rising student population, and audited financial statements also show growth in investment values as gifts and donations remained stable. The overall losses were still concerning to several faculty, however, who said they had been following the reports or hearing rumors for years.

Former accounting professor, Ramon Fernandez, said he found it concerning that the financial audits showed increased amounts of money borrowed from income earned on the endowment.

"You just cannot continue to operate year after year after year, losing money and having negative cash flow," he said.

Tenured theology professor Randall Smith said he has been most concerned about a lack of transparency regarding the financial troubles, which has caused faculty to question their job security. He also pointed to a decrease in instructional expenses as a percentage of total operational costs. And meanwhile, financial disclosures show Ludwick receiving a pay increase to almost $517 million without benefits in 2023, up from $380 million the year before.

"I suppose that the risk of having a budget deficit year after year is that the budget deficit has to be closed, and then the question is, how is it going to be closed?" Smith said.

Fr. Dempsey Rosales Acosta, who was last year's chair of the Faculty Senate, said the group felt calmer when then-interim VP of Finance Jose Luis del Aguila held two online meetings with the faculty in fall 2023, formally acknowledging a budget deficit. Del Aguila was permanently named to the position in April.

A former financial administrator, who declined to be named for this story, said that the fiscal issues were already coming down the pipe in 2017, with some in the financial spaces raising the alarm even then. Several graduate programs had been major drivers of revenue, but a variety of bureaucratic changes to enrollment or financial processes caused enrollment in those programs to suffer, the former UST official said.

They added that some people on the administrative side were not good budget managers. Corrigan also pointed to problems managing expenses.

"It's watching the bottom line, it's being diligent on the bottom line," he said. "If you're not paying attention to it, things tend to loosen up."