Here’s how Ohio U manages its $650 million debt

It would seem that a $650 million setback would cause Ohio U's doors to close. But the campus stays open, even in the red. This is how it works. 

Ohio University is more than $650 million in debt, which is about the same amount as the in-state tuition of over 24,000 students. When approaching that figure in a concrete sense, the 2017-18 budget outlook provides better insight into what the university will look like for students and as an academic institution in the future. In terms of financial health, Ohio U is perfectly fine at the moment, according to Distinguished Professor of Economics Emeritus Richard Vedder. He says that the school still has a comfortable “nest egg of funds they can dip into.”At most universities, a concrete budget must be obtained from revenue sources like tuition and state appropriations. This budget is in turn used for things like building maintenance and faculty salaries, and Ohio U is no different.[AdSense-A]But university changes both exterior and interior will affect the budget heavily, and the financial stability of the future.Ohio U has a growing debt that exceeds $650 million, while it continues to spend upward of $20 million on athletic programs. This discretionary spending on collegiate athletics is a “hotbed among many faculty members,” Vedder said. One of the biggest concerns the university’s budget faces is the possibility of low enrollment. This year, Ohio U’s enrollment dropped for the first time since 2009. Ohio itself has one of the lowest population growths in the nation, ranking 43rd despite being the tenth most populous state.With generally 85 percent of Ohio U’s students being in-state, Vedder said it is problematic for university revenue that college aged students are becoming more sparse. If less students enroll each year, then less money can be earned off of tuition or room and board. Vedder also said that in the past five fiscal years, there has been “hardly any change in the amount of money Ohio University is taking in,” even when accounting for the 2 to 3 percent inflation rate over that time period. The university continues to delve into its reserves, even with state funding stagnating. This [tooltip gravity="nw" txtcolor="#000000" text="Ten years ago, Ohio U received 34 percent of its total budget from the state. Now, the state provides just 24 percent of the total budget."]stagnation[/tooltip] and numerous other budgetary issues have caused schools like the University of Akron and Wright State University to fall on hard times economically, and these hard times of budget cuts have caused the faculty to unionize, Vedder said. These budgetary challenges could spell out issues for the university down the road, Vedder said, though Ohio U has not had major problems with budgeting yet.Vedder claimed that there is “about a 25 percent chance in the coming years that a union may form around the faculty” of Ohio U if issues like salary increases and funding for university services aren’t solved. Faculty salaries are projected to only take up about 49 percent of the 2017-18 expenditures, while benefits will only take up around 16 percent. Although this may seem like an unnecessarily large portion of the university’s budget it is actually relatively normal, even low, compared to universities like Youngstown State.   In spite of all this, Ohio U’s budget remains solid, Vedder explained, and there is no restlessness “among the natives.”