Last month, Ohio governor Mike DeWine appointed retired bankruptcy attorney Fred Ransier to act as the conservator of Eastern Gateway Community College. Ohio law requires the conservator to turn over governance of the institution to a five-member board by the end of this wee. As part of the process, Ransier will deliver a report to the new governance authority, which will include the status of the school’s bond repayment plans.
In 2020, EGCC issued nearly $13M in new bonds, on top of a prior issue, which still has some notes outstanding. The EGCC Board of Trustees issued the general-obligation bonds to purchase two new buildings and rehabilitate certain campus facilities. The status of the bond repayment has been the subject of intense interest because Ohio state law transfers bond repayment to the county that hosts a community college in the event of a default or closure.
In EGCC’s case, that would be Jefferson County, which has a population of about 65,000 people and is about 30 miles west of Pittsburgh. County commissioners there have been working since the college failed to ascertain the size and nature of EGCC’s debts and the county’s level of responsibility for them.
Earlier this spring, the EGCC Board of Trustees – which has since been dissolved – indicated that it would not attempt to rescue the school’s accreditation. EGCC’s accreditation expires on November 1. That decision means that the Board of Trustees voluntarily vacated the income that the school had intended to use for the 2020 (and earlier) bond repayment.
Technically, the bonds have no rating, but Moody’s assigned an AA1 rating to them based on the credit rating of the State of Ohio. That rating remains, pending the conservator’s report to the governance authority.
Bond repayment plan not among state’s concerns
It is unlikely that the college (or county) will default on the EGCC bond repayment; Ohio state law seemingly has a mechanism to prevent that. In a recent interview, Ohio state representative Tom Young, a Republican from Washington Township in Montgomery County and Chairman of the Ohio House Higher Education Committee, said: “We tried everything we could…”We’ve given Eastern Gateway more than sufficient time to get their act together. You can’t be in arrears and run a public institution… The governor’s office and the House and the Senate, we’ve worked very hard to see what the best path was, and to make sure that the students were helped.”
The state government in Ohio tried everything except actual oversight of EGCC. The governor appoints all community college trustees in Ohio. When the school first started showing signs of financial distress, the governor-appointed trustees elevated EGCC’s finance VP to the president’s office, despite his lack of academic qualifications to fill the role.
Instead of demanding immediate changes, the Trustees aimed to keep ill-gotten federal financial aid dollars rolling into the school’s coffers. Instead of demanding action, the state’s Higher Education Committee said nothing when the school repeatedly failed to file required financial statements for investors holding its outstanding bonds. As it stands, the school has not filed these annual reports for three fiscal years. The Auditor of State didn’t seek any corrective action until after the school’s Board of Trustees voted to close the school.
Having a functional Board of Trustees is essential
It is disingenuous to say that the Ohio state government did everything it could, unless Representative Young is saying that the State of Ohio was literally powerless to do anything about EGCC, its rogue administration, and its arguably equally rogue, governor-appointed Board of Trustees. Minimally, the Governor’s office should have been able to vacate the EGCC Board in 2020 or 2021 and appoint a new one to correct the school’s mounting problems. The state could have investigated the “Free College Benefit Program,” if for no other reason than to document its glaring financial irregularities.
None of that happened. No one acted until it was far too late to save EGCC. The truth is that the State of Ohio could have done much, much more and far sooner to save EGCC, but there was no political will to restore EGCC to its previous state. At a time when enrollment in community colleges was in sharp decline, the prospect of getting rid of a troublesome institution was too good to pass up. Realistically, the Governor, the Ohio Legislature, the Ohio State Auditor, and the EGCC Board of Trustees stood by and watched the house burn.
EGCC offers a true lesson in the likeliest outcome of willful ignorance and lax oversight on the part of community college trustees. Take a good look at EGCC and understand that a functional Board of Trustees is the only firewall a community college has.
Photo Credit: Martin Fisch, via Flickr
