Morehead State is facing major debt issues if action isn’t taken in the next 12 to 24 months, according to President Dr. Jay Morgan at the October board of regents meeting.
Though there have been no sizable debts taken out in the past two years and MSU is under-budget in the Fall semester through other cuts, a debt reduction plan should start almost immediately to begin eliminating debt, or it will rise dangerously beginning in 2021-2022.
Morgan said that the four, to four-and-a-half period, will be tough to get through without debt restructuring and the university runs the risk of not getting out of debt.
Some of the suggestions made by Morgan to begin debt refinancing included merging two large loans into an estimated $10 million–to lengthen the debt schedule, refinance up to $70 million in bonds and to use money from the possible sale of the procurement building for debt relief.
A decision was not made on the options.
If the university does not take action to lower the debt, the fiscal year 2021 to 2022 and the following years would require $900,000 minimum to keep the debt at a constant level.
Performance-based funding posed a threat to MSU, partially due to the requirement of a portion of the campus’s square footage to be dedicated to educational use.
MSU has been working to eliminate unused space to meet the requirements, which requires Kentucky colleges to have a percentage of square footage used for educational purposes.
“Over the past one to two years, we’ve slowly been trying to skinny down the number of square feet that we are carrying or supporting,” said Morgan.
Money saved by phasing out unused space is planned to go toward debt reduction later on.
Of the 670 acres owned by the university, 500 are unusable due to the surrounding woodland and 16 of the buildings owned by MSU are dedicated to housing.
Kim Oatman, assistant vice president of facilities and oerations, said MSU is very close in size to Murray State and there is room to scale things down by making better use of space and through the sale of the procurement building.
“Our goal is to get down to the main campus and see if we can move off our extraneous property that doesn’t border campus that we don’t really need, and converting those dollars to debt reduction as those move forward,” said Morgan.
Enrollment has dropped over the last year due to an enrollment crash effecting all Kentucky colleges. The total headcount of students has gone down 6%, graduate students are down 14%, under-represented minorities are down 5% and African American students are down 6%.
Morgan said they need to take action as quickly as possible to be proactive in handling the debt.