OU President James Gallogly remains steadfast that the university’s finances are out of order and says he is still uncovering inefficiencies and waste.
His predecessor, David Boren, hasn’t said much of anything since leaving office.
Where the state’s flagship university is financially is a complicated matter.
In a recent interview with the Tulsa World, Gallogly expressed concern about the university’s investments in student housing, particularly the residential colleges that were Boren’s brainchild. He said the university’s former chief financial officer was unaware OU was losing money. He added that it was time for higher education to stop complaining about its lack of state funding and be better stewards of taxpayer dollars.
At the same time, he said the university’s debt rating is “still good,” and declined to make available an itemized list of the $12.3 million in cost savings he has uncovered during his first two months. He didn’t present that list at an OU Board of Regents meeting two weeks ago.
OU has a budget of slightly more than $1 billion. It has seen its bonded debt balloon by 49 percent over the past eight fiscal years. Tuition and fee revenue — the primary expenses students pay and one of the university’s primary sources of revenue — has increased by 55 percent in that same time span.
One measurement that reflects the financial health of higher education institutions is net position. OU has seen its net position decline each of the past two fiscal years for which data are available, ending with fiscal year 2017.
OU has seen its state funding decline by $24 million since the 2010 fiscal year. Low occupancy at new student-housing investments, according to Gallogly and news reports, are causing the university to lose money and consider rent subsidies.
The increase in OU spending mirrors a nationwide trend as public universities have battled declining state aid and embarked on building sprees so they can provide amenities sought by students. Much of the borrowing nationwide, and at OU, has occurred at the low interest rates that followed the Great Recession, Gallogly noted.
The increase in debt and projected $14.5 million operating loss for the current fiscal year prompted Gallogly to say, shortly before he took office, the university needed to put its financial house in order. He noted the university’s debt load of more than $1 billion.
In the past, Boren said the university’s debt load wasn’t unusual, noting that some of it was for improvements to the Gaylord Family Oklahoma Memorial Stadium and wasn’t being financed with public dollars.
Boren, through a spokesman, declined to comment for this story.
“President Boren is focused on teaching his classes and does not intend to comment on administrative matters at OU,” said a statement provided to the World.
In recent weeks, Gallogly has focused his criticism on OU’s two residential colleges, saying the colleges have a combined 63 percent occupancy rate, which is going to cost the university $2.3 million this year. Even fully occupied, the colleges are going to cost $1 million more than they bring in, Gallogly said.
“Part of what we’ve been trying to figure out over the past couple of months, is how much money really went into these projects. Like I said, I just discovered that there was a $10 million cash infusion into those projects. I wasn’t aware of that before,” said Gallogly. “Those projects were mostly funded with bonds.”
According to The Oklahoman, the two residential colleges had $80.5 million in bonded debt and were a part of the more than $300 million in debt added between June 30, 2015, and June 30, 2016, according to OU financial reports. The colleges were modeled after those at Yale and Oxford University, where Boren was educated.
“With that much bonding, it’s like asking a student to pay rent on a first-class house; they simply can’t afford it,” said Gallogly.
New details about those projects and others arose because, Gallogly said, “the accounting system was so convoluted, the budgeting process is so convoluted. I’ve been very open about that. I’ve been in public companies my whole life and those kind of things would be very easy to determine in a public company.
“Here there’s this silo and that silo and another silo ... It’s all extremely convoluted and frankly unacceptable and that’s one of the reasons we have a new CFO,” Gallogly said. “It’s extremely confusing. I personally think I had to explain to the former CFO that we were losing money. I’m not sure he was aware of it. That’s a sad statement isn’t it?”
Chris Kuwitzky, the OU CFO who was let go when Gallogly took office, said “As reported in the University’s audited and publicly available financial statements, for the first time in over sixteen years OU realized a net loss during fiscal years 2016 and 2017. The losses were attributable primarily to state funding cuts, related instructional funding deficits, and non-cash pension/benefit accruals.”
In his June defense of OU’s debt, Boren stressed the need for more state funding, saying, in part: “Rating reports noted OU’s declining support from the state of Oklahoma as diminishing its credit strength. In the past few years, higher education has been cut more than any other major state function.”
Gallogly took a different view of state funding when speaking with the World.
“We’ve been historically complaining about the level of state funding. That has decreased. That’s put financial pressure on the university.
“I’ve been very open to say that strategy of constantly complaining is not working, that we have to be a partner for the state and bring them opportunities for investment,” said Gallogly.
“We’re going to fix the financial issues. We are highly inefficient,” said Gallogly. “The way this university runs, it’s stunning compared to private enterprise.”