Turmoil on Hawk Hill

When St. Joe's students root for their basketball team, they chant, "The Hawk Will Never Die." That's helped get them to the first round of the NCAA tournament.

Now if there were only a fight song for their school's financial health.

The Catholic university that straddles the border of Philadelphia and Lower Merion Township faces perhaps the most tumultuous conflict in its 163-year history - at least, that's how many faculty see it.

Hit by an $8.7 million shortfall, the university is cutting positions, slashing budgets campuswide and digging deeper into endowment earnings. And in perhaps the most controversial step, the school said it would accept 1,500 freshmen for fall — 225 more than 2013 — which would bring in more revenue but also make it appear less selective, a concern for faculty and students.

Class sizes could rise, and some adjunct faculty could lose their jobs — actions that have led to faculty and student protests. The faculty senate last month took a unanimous vote of no confidence in two of the university's senior financial leaders, an unprecedented move for the senate.

While the vote carries no authority, it underscores the animosity that has been growing for several years between faculty and administration and has reached a fever pitch.

Randall Miller, a history professor and one of the university's most senior faculty members, handed out a blistering string of C's to the school during a faculty meeting last month:

"Confusion, chaos, crisis, concealment, cabal, conspiracy, contempt, cynicism, cowardice — these are troubling terms," Miller said on the floor of the faculty meeting, "for they run counter to our professed values and bespeak a loss of the trust necessary to respect our mission as a Jesuit Catholic university and to realize our obligation for academic excellence. ... They are the vocabulary on the campus. And that alone speaks volumes about our troubles."

In an interview last week, three top university officials — the president, the board chairman and the senior vice president — acknowledged missteps in communication with faculty and students and said they are working to repair the rift.

But they asserted that St. Joseph's is sound fiscally — they pointed to reports by financial rating companies —- and that the administration is making difficult but appropriate decisions to keep the school healthy and the education program solid for the long-term.

"These are challenging times related to enrollment and affordability for the whole industry," said board chairman Robert D. Falese Jr., a 1969 St. Joseph's graduate and retired bank executive. "The question here isn't our financial position and our financial management. The question is how we go forward."

Colleges nationally have been struggling to meet enrollment targets and cut expenses as they adjust to a drop in high school population, increasing competition and mounting pressure to control tuition costs.

"What's happening at St. Joseph's is not surprising," said Terry W. Hartle, of the American Council on Education. "It's necessary, given the circumstances that many institutions face."

*A financial crunch*

With 8,860 undergraduate and graduate students, St. Joseph's runs on a $230 million budget and an endowment of $205 million.

Though financial pressure this year is most acute, the problem has been building. The primary reason, said John W. Smithson, senior vice president, is that the university has increased the aid it doles out to needy students from $60 million in 2011 to $85 million in 2013. Tuition, fees and room and board top $52,000 this year.

The university's annual operating surpluses have eroded, going from a high of nearly 14 percent in 2006 before the recession to just 2.6 percent last year.

For the second consecutive year, administrators realized mid-year that they were running considerably short of their budget goal — this fall by $8.7 million — needed to end the fiscal year with a three percent surplus. The problem, Smithson said, was three-fold: Thirty-five fewer freshmen and 26 fewer transfer students than anticipated enrolled. Financial aid costs ran $1.3 million more than budgeted. The rest of the gap was due to a change in budgeting practice that allowed some spending to run over.

To faculty, who say they've been shut out of the decision-making, it sounded like "voodoo accounting," as Miller, the history professor, called it.

"I don't believe what they say in terms of the budget," said Claire A. Simmers, professor and chair of the department of management in the university's business school. "Lots of us are very informed. That's our living."

Simmers also spoke at the meeting where the no-confidence vote was taken against Smithson and Louis J. Mayer, vice president of financial affairs. Professors, she said, want to help but are being rebuffed.

"When we ask questions, it's coming from a position of concern, interest and willingness to help," she said.

The student newspaper, The Hawk, also called for Smithson and Mayer to depart in an editorial: "We no longer trust these administrators to lead us through the terrible circumstances they are responsible for creating."

The board of trustees and the president, the Rev. C. Kevin Gillespie, remain steadfastly behind Mayer and Smithson.

"The administration is taking the steps that the board feels are appropriate and that includes people named in the resolution," Falese said.

They point to the most recent bond ratings by Standard & Poor's and Fitch — an A minus and A respectively — as evidence the university is financially stable.

Standard & Poor's in a 2013 report cited "strong historical operating surpluses and strong financial management."

"They actually look good," said Carolyn McLean, associate director of U.S. public finance at Standard & Poor's in New York.

The report noted that St. Joseph's ended 2012 with a $5 million surplus, though its tax form indicated a $4.4 million deficit. Smithson said the difference was due to investment losses.

"This year, capital markets were up quite a bit," he said, not anticipating a negative number.

*Controversial solution*

Nicholas Paolizzi, student body president, was at an institutional planning meeting in January when he first heard of St. Joseph's plan to take more freshmen, raising its acceptance rate to between 88 and 92 percent. The school currently accepts 78 percent of applicants.

"I nearly gasped and jumped out of my chair," said Paolizzi, a junior from Woodstown, N.J., worried about the school's reputation.

Also to close the money gap this year, the university reduced budgets campuswide by 4.2 percent and cut or held off on filling 20 non-academic positions and 15 academic positions, Smithson said. Only three people, he said, were laid off. The board also authorized the university to spend 5 percent of endowment interest, up from four percent, to generate another $1.2 million. And the university offered buyouts to employees with 10 years or more.

Many students, typically apathetic about administrative happenings, are concerned, Paolizzi said. Students packed a meeting where Smithson and the head of faculty senate addressed the issues.

"My inbox for the last two months has just been crazy," Paolizzi said.

Gillespie, the president, has subsequently said the acceptance rate will be lower than first projected, likely in the mid-80s - not 92 percent, and maintained that the quality of student body would be unaffected. That's largely because the school had an eight percent increase in applications. The addition of the 38-acre Maguire campus, niche programs in autism and other areas and a strong sports program are attracting more students, he said.

The average GPA of applicants is nearly identical to last year's - 3.44 compared to 3.51, Smithson maintained.

But he acknowledged that the way administrators made the decision to increase the freshman class was flawed.

"We all recognize that going to a number like 1,500 should have been vetted more with the faculty and others," he said.

Faculty and students also are concerned about larger class sizes and less individual attention with more students on campus.

"Will there still be the same personal relationships?" asked Felicia Carter, 21, a senior from Philadelphia who protested outside the board of trustees' meeting last month. Many students come to the university for the smaller class size and attention from professors, she said.

Smithson countered that St. Joseph's in 2008 accommodated 1,463 freshmen with less housing and without the Maguire campus.

"We think we're very capable of having a class like that," he said.

Students say they are frustrated by the administration's response to their concerns. Chanelle Greene, a senior from Bowie, Md., said Gillespie pounded his fist on the table and raised his voice when meeting with student protesters.

"I was taken aback," Greene said. "I did not expect him to react that way to our demands, which are basically to keep the integrity of SJU."

Her mother, Monique Greene, was so upset she called Gillespie.

"I was kind of distraught," she said, "when Chanelle told me they couldn't have a professional conversation."

Gillespie said he became upset because a few professors were taking entire class periods to discuss the controversy.

He emphasized that he has listened to student and faculty concerns in multiple meetings, including a session over pizza with several of the protesters. More meetings with administrators, board members and faculty are occurring this week.

"We take the issues and questions seriously," he said, but cautioned, "sometimes we disagree."

*Communication breakdown*

Problems have been building: More than a year ago, university-hired consultants found a campus where "suspicion and mistrust abound."

Much of the consternation goes back to when Smithson was hired as senior vice president without an external search or input from faculty. Smithson, a 1968 graduate, had led the board of trustees from 2003 to 2007 when the previous president, the Rev. Timothy R. Lannon, was hired. In February 2010, Lannon wanted administrative help so he could focus on fundraising and other high level issues. He hired Smithson on an interim basis.

Faculty questioned the propriety of hiring a former board member who had hired Lannon. Smithson previously had been senior vice president at Towers Watson Reinsurance and CEO of PMA Capital Corporation, a Philadelphia workers' compensation insurer. He resigned from PMA in 2003 after the company posted a $96.4 million loss for the third quarter.

Through a St. Joseph's spokesman, Smithson said his work at PMA is not relevant and that he took a buyout after two successful decades.

Falese said the position was posted and personnel procedures followed before Smithson's hiring became permanent.

From May 2011 through July 2012, Smithson filled in as interim president, during which communication problems with faculty persisted. Faculty also questioned the university's decision in 2012 to buy the cardinal's residence for $10 million — which the university said was key to the campus master plan and supplemented by money from a donor — when the budget was tight.

In September, the university announced cuts to employee health care contributions, causing more angst. That followed a 1 percent cut in pension contributions two years ago.

Gillespie said the administration is trying to improve relations, including establishing a task force on "shared governance" and bringing three faculty members onto his cabinet, whom also serve on the academic committee of the board of trustees - a first.

Administrators and faculty spoke in unison on one point: They're committed to St. Joseph's mission.

"Despite all of this, there's a tremendous sense of hope and resolve," said Miller, the history professor. "We're going to work through this."

But pressure will likely continue. The administration is preparing next year's budget, which will be finalized in May, and Smithson said further cuts are possible.

"It would not be surprising," he said.

Staff writer Joseph N. DiStefano contributed to this article.