I have written about the financial crisis at New Jersey City University several times. In a nutshell, NJCU found itself nearly $23M short on operating expenses. That triggered a massive, top-to-bottom re-examination of the University’s spending practices.
It also resulted in the resignation of its president amid charges she spent lavishly while the proverbial water flowed over the bulkheads. The first interim president elevated micromanagement to an art form to control the school’s runaway spending problem. At the same time, NJCU eliminated more than one-third of its academic catalog.
Earlier this week, the school published a long-awaited report on itself, its future plans, and the financial gymnastics that will be required to put NJCU back on a solid financial track. After more than a year of wrangling, the school still anticipates falling enrollment and a deficit of more than $8M through 2026.
The cause of NJCU’s crash is up for debate. Initially, the NJCU community attributed the financial meltdown to the decision to build luxury dormitories in a bid to attract students. NJCU financed $150M of the original $400M construction plan. The $150M revenue-backed bond debt was enough to destabilize the school’s finances. Realistically, other practices (like over-hiring at the executive level) created a structural deficit that NJCU will struggle to tame for years.
The 24-page report is interesting. Even though NJCU’s finances are still smoldering, the first two-thirds of the report focus on its academic plan. While improving the academic performance of a university never hurts, its academics were neither the tinder nor the match that set NJCU’s books on fire.
NJCU spending choices are to blame
NJCU is a majority-minority serving institution, with both high Hispanic and Black student populations. Students come from households whose annual household income hovers around $40,000. The likelihood that these students would go all in on luxury housing is vanishingly small. It’s equally unlikely that students from a higher socioeconomic background would start applying at NJCU in large enough numbers to improve the school’s financial forecast.
Committing the institution to nearly $8M per year in debt service didn’t help. Although NJCU was able to drop its debt service from an anticipated $8.7M in 2023 to a more manageable $7.3M annually through 2026, it’s still money that comes out of the General Fund, and it is not dischargeable. In this financial climate, it’s likely not even re-financeable. Tellingly, the institution’s debt service is the only evidence in the report of the luxury dorm project. (Apparently, they don’t want to talk about it.)
Following mass staff layoffs and executive restructuring, as well as academic program cancellations, the real demon for NJCU is still the lack of oversight that allowed the administration to make such poor decisions in the first place.
Naturally, there’s no plan to change that.
Photo Credit: Alan Levine, via Flickr