For more than a year, the New Jersey City University has struggled to correct significant financial deficits that have threatened the university’s operation. The school’s debt load precipitated NJCU’s precarious financial position. The sale of bonds to build luxury dorms on campus left the school teetering on the brink of financial collapse. A newly signed law in New Jersey aims to help other state schools avoid NJCU’s fate.
Earlier this week, New Jersey Governor Phil Murphy signed into law a bill that requires state-funded universities to submit to annual fiscal monitoring. The requirement is the state’s reaction to NJCU’s purported reversal of financial fortunes over the space of a single year. In 2021, NJCU reported a surplus of $100M to the state; by 2022, that surplus had turned into a deficit of $67M. In response, the school sought emergency financial relief from the state. Naturally, the State of New Jersey wanted a full explanation of what happened.
NJCU narrowly avoided a fiscal disaster by cutting about one-third of its academic programs, about 4 dozen staff members and receiving a $10M infusion of funds from the State of New Jersey. The school estimates that it will struggle with low enrollment and deficit spending through 2026.
The State of New Jersey is not interested in repeating the episode with any other publicly funded institution. In January, members of the state legislature introduced bills to mandate additional fiscal oversight of all of New Jersey’s higher education institutions.
New Jersey is right to hold institutions accountable
The lack of oversight is both stunning and puzzling. All state funded higher education institutions have trustees or regents that oversee spending and strategy at a high level. The fact that the state now has to impose transparency and reporting regulations, as well as insist that institutions’ Chief Financial Officers complete mandatory training testifies that the existing oversight mechanisms are – well – garbage.
When elected and/or appointed officials whose jobs specifically involve financial oversight cannot or will not perform those oversight functions, the only rational response is to remove them from office. The state should not have to get involved at the operational level of an institution to ensure that its administration remains clear about its mission and whose side it is on.
If the state has to perform the oversight on behalf of an institution – which it sounds like New Jersey does – allowing the institution’s board of trustees to continue to operate is pointless. They’re not performing the function(s) the people elected them to perform. As a result, they’re putting the institution in financial jeopardy and transferring their own fiduciary shortfalls to the state.
The transparency and reporting the new law requires is helpful. What would be even more helpful is removing from office those who either cannot understand or execute their oversight responsibilities.
It will not be long before additional higher education institutions around the country will need additional fiscal monitoring by the states. When that happens, the states should hold to account those currently tasked with providing fiscal oversight.
(And if the Business Leaders for Michigan want a model to follow, they should forget about Texas and follow New Jersey instead.)
Photo Credit: Phil Murphy , via Flickr
