Morehead State University is certainly an important institution in Eastern Kentucky. It offers a high-quality education to its students, many hailing from rural communities with limited job prospects.
This past week, Morehead State University President Dr. Jay Morgan said the university finds itself in a strong position both in enrollment and in carrying out its long-term strategic plan. This is the case despite seemingly relentless cuts in state funding.
“The year has started well,” Morgan said. “Our students moved in two weeks ago. First classes started a week ago Monday. We've moved thousands of kids in and … right now we think we are going to be right at about 10,000 (total) students this year. We are estimating our incoming freshmen is at about 1,350. That's a stable class. It's about what we've budgeted and projected.”
Morgan said another measure of success he places significant emphasis on is retention of first to second year students.
“It is the measurement,” Morgan said. “It is up about 5%, from 69% to 74% in two years. We are very pleased with our retention.”
Morgan said an ever-evolving flagship program at the university is its Space Systems and Engineering program, which has developed partnerships with NASA.
“We are now bringing in students from Europe, California, all over the world, and students from right here in our backyard,” Morgan said. “The growth of the program is phenomenal. The jobs that these graduates are getting, the starting salaries are $80,000-plus and they are lined up at the door with offers.”
Other strengths? Nursing and Education and programs that place a significant number of graduate students into Eastern Kentucky. The university recently enacted long-term strategic plan. The tenets of the plan emphasize "a small to medium-sized high-quality institution that is affordable," Morgan said.
Morgan also talked at length about the challenges the institution faces. At the top of this list is pension obligations. The state of Kentucky recently passed a pension reform bill that has changed the rules for pension contributions for what are known as quasi-government agencies such as health departments and some domestic violence shelters. The new law also impacts regional universities including Morehead State. The reform legislation stems from the state's struggles with its Kentucky Retirement System — considered the worst funded pension system in the nation.
The new law gives regional universities a one-year reprieve on its annual contributions by freezing this year's contribution rate at 49%. Next fiscal year, however, the rate will jump to 83%.
“For us that spike from 49 cents of every dollar to the 83 or 84 cents is going to cost us an extra $3.2 or $3.3 million extra in pension payments alone (a year)," Morgan said. "That's not salary. That's just pensions on top of what we were already paying,"
The university budget is $142 million.
The new law gives universities the options of buying their way out of the system or staying in and figuring out how to cover the costs of the skyrocketing contribution rates. Of buying out of the system Morgan said "I don't know how anyone would afford that.”
To do the buyout the university would have to go out and bond some "90 to 100 million to cover the unfunded liability only," Morgan said. "They are big numbers.”
The other option in the law is to do a 27 or 30-year financing with the KERS pension system where you would finance 90 or 100 million with them. All new hires would go into a 401-K style program with the university still making a 9% retirement contribution.
“Or we can stay in and pay the 83% contribution," Morgan said.
Morgan said the university is requesting an actuarial evaluation. A decision on whether to stay in or out of the system has to be made by April 1, 2020.
“What we have chosen to do, to be fiduciarily responsible, is to say we are not saying we are going to get out and we are not saying we are going to stay in," Morgan said. "We owe it to the university to get the actuarial study and then we are going to evaluate whether it is more financially advantageous to stay in and pay the high rates and get out, pay the lower rate but pay the system over 30 years. Either way you are going to be paying. Which side of the coin do you want?"
Morehead State's most recent state funding reduction was announced in the spring of 2018 and took effect in July 1 of 2018. That was roughly a 6.7% budget reduction. This resulted in the university trimming over $10 million from its budget.
"It was a painful cut for us," Morgan said. "We were able to work through it. We reduced a significant amount of middle and upper level administration just through retirements, attrition, and we were able to manage our way through it."
Morehead has faced at least 12 years of state budget cuts.
Morgan said despite the challenges the university is in a strong position and leadership at the university is very optimistic about the future.
“We are the second lowest tuition in the state of Kentucky second only to Kentucky State University. We've kept our tuition frozen last year and we raised it a little over 2% this year. We froze housing. We want to make sure we remain affordable and we want to stay a small to mid-sized campus that offers a high-quality education.”