Eastern Gateway Works to Address Financial Woes

YOUNGSTOWN, Ohio – The chief of staff of the Ohio Department of Higher Education said the state wants to work with Eastern Gateway Community College but added he’s never worked with a college in such a dire financial situation.

At a meeting Monday of the college trustees finance committee, Jim Bennett, chief of staff and senior policy adviser at the Ohio Department of Higher Education, said the state wants to work with the college to address its financial issues.

“This is not the state vs. Eastern Gateway,” he said.

The state understands that the college is critical to eastern Ohio in meeting the educational pursuits of students, Bennett said. Still, the problems at Eastern Gateway are significant. There are 14 four-year public universities and 23 two-year community and technical colleges in Ohio.

“Of the colleges I’ve worked with, I’ve never seen one with as dire a financial situation as Eastern Gateway is facing,” Bennett said.

He said the college needs to take decisive action.

On Dec. 18, the state Controlling Board approved a more than $6 million advance to Eastern Gateway to ensure adequate cash flow. 

The chancellor of the Ohio Department of Higher Education distributes payments and subsidies to colleges and universities for “exceptional circumstances” with controlling board approval.

The $6 million amounts to a three-month advance in state share of instruction. The college had requested a six-month advance, or $12 million.

The money approved by the Controlling Board will be released in pieces to meet the most pressing needs such as payroll, Bennett said.

Trustee Thomas D’Anniballe, who appeared before the Controlling Board, told finance committee members that the Ohio Senate Workforce and Higher Education Committee chairman expects accountability from the college.

“He said, ‘You’ve already made some cuts, but it’s not nearly enough. We need you to think outside of the box,” D’Anniballe said.

So far, the college has trimmed about $4 million in costs, with about 60% in personnel costs and the rest in operational expenses. The bulk of the personnel cuts came from EGCC’s adjunct faculty pool. The college cut about 350 adjunct faculty members, reducing its ranks to about 960.

About 50 full-time staff members were reduced, with roughly 20 laid off and the remaining leaving for other employment. A handful of programs, including drafting, have been sunset, meaning they’ll end after current students complete them.

More cuts could be coming.

The advance through the state Controlling Board was approved with a list of conditions that Eastern Gateway must meet.

Among them, by Jan. 15, the college must adopt a board-approved financial recovery plan that includes an analysis of the financial difficulty and the causes of all significant revenue or expenditure problems.

It also must conduct an immediate review and elimination of all nonessential expenses and an immediate pursuit of structural operating budget expense reductions that are aligned with ongoing revenue projections derived from conservative student enrollment estimates.

By March 1, “determination shall be made regarding opening for the summer/fall semesters, based on the anticipated financial viability of the institution in the long term.”

The U.S. Department of Education placed Eastern Gateway on Heightened Cash Monitoring 2 status in August 2022, meaning the college must use its own resources to credit student accounts and then wait for federal student aid reimbursements from USDOE.

Lauren Mounty began working with Eastern Gateway on Dec. 11 as a consultant to update internal processes and procedures to facilitate timely and consistent Pell Grant reimbursements from the U.S. Department of Education.

Mike Sherman, vice president for student affairs, institutional effectiveness and board professional at Youngstown State University, is serving as an “executive on loan” at Eastern Gateway. 

He’s overseeing assessment of the college’s internal operations and the development of an action plan to address the priorities needed to stabilize the institution.

Also at Monday’s finance committee meeting, Arthur Daly, senior vice president and development officer at the college, said a developer has expressed interest in buying the downtown parking deck. College officials haven’t met with the interested party.

“It presents an opportunity for us to get out from under the parking garage,” he said.

In August, the college closed the upper floors of the deck, saying ongoing litigation with the property’s former owner, USA Parking Systems of Cleveland, has impeded efforts to obtain funding for needed repairs at the deck.

The deck was built in 1974, and Daly said the ramps need repair.

The college and USA Parking had been in litigation since 2020. That case was resolved Dec. 20 in favor of Eastern Gateway when U.S. Circuit Court of Appeals judges affirmed a U.S. District judge’s ruling that dismissed USA Parking’s complaint against the college. 

Eastern Gateway’s financial problems started with the end of its Free College Benefit program.

In July, the college announced the program would end after the fall 2023 semester. In 2022, the U.S. Department of Education ordered the college to stop the program as part of a federal financial aid program review.

The education department alleged that the college was charging students who received Pell grants more than those who didn’t.

Eastern Gateway enrollment swelled to about 40,000 during the free college program, up from about 5,000 students just a few years before.

The college also has been on probation since November 2021 with the Higher Learning Commission. The HLC extended probation at least until this November, citing in part its financial issues.

Another lawsuit, filed by Student Resource Center in the U.S. Southern District of Ohio, is pending, with that company seeking $20 million.

That company ran the college’s free online courses and programs for labor unions and other professional organizations.

SRC sued Eastern Gateway, citing breach of contract, saying it failed to pay the company what was owed under its collaborative agreement.

The college is looking to sell one of the three buildings on its Steubenville campus too.

Daly said Eastern Gateway awaits an appraisal of its Pugliese Center. 

“A sale would bring additional income to the college,” he said.

The college would also like to move out of another building on the campus that houses administrative offices and consolidate everything into one building.

Copyright 2024 The Business Journal, Youngstown, Ohio.