ASU to the Rescue

Arkansas State University’s campus in Querétaro, Mexico, which is set to graduate its first class this year.
Arkansas State University’s campus in Querétaro, Mexico, which is set to graduate its first class this year. (ASU System)
Arkansas State’s campus in Querétaro is in a mountainous region of Mexico about two-and-a-half hours by car from Mexico City.
Arkansas State’s campus in Querétaro is in a mountainous region of Mexico about two-and-a-half hours by car from Mexico City. (ASU System)

Ask the president of the Arkansas State University System how things are going, and in a heartbeat the voluble Jonesboro native is like his organization: On a roll.

With hardly a stop for breath, Charles Welch reported that the system has adopted Henderson State University and rescued it from poverty, is granting diplomas this year to the first graduates of the first American university in Mexico — ASU’s Campus Querétaro — and has agreed to keep an osteopathic medical school on its flagship Jonesboro campus for at least 15 more years.

The Little Rock-based network is also set for a more normal fall of on-campus instruction as Arkansas emerges from the worst of the COVID-19 pandemic.

“It’s obviously a hectic time, with the end of the spring semester coming up in the middle of a legislative session in the middle of a global pandemic,” Welch told Arkansas Business last week. “Obviously it has been a little crazy, but we’re getting there, and it looks like we’re seeing light at the end of the tunnel on almost all of the above. So that makes life a little bit sweeter.”

Though Henderson State is now a full-fledged addition to the system, it will be keeping its name, colors and mascot.

What it isn’t keeping is a recent reputation for letting students slide on their debts and failing to keep adequate budget reserves; Moody’s Investors Service upgraded Henderson’s credit rating this year, noting ASU’s soundness, and Welch says Henderson no longer needs an untapped $3 million line of credit it secured to bolster liquidity.

“We started assisting Henderson informally in June 2019 and formalized that in August with an MOU [memorandum of understanding]. At the end of calendar year 2019 their board and our board voted to pursue a merger.” The state Legislature ratified it in February.

“I tell people it’s a multiyear turnaround project,” Welch said. “We are light-years in better shape, even with the pandemic, which threw us some curveballs. We see progress in trends, and it’s going to take more time, but we feel good. We have good people in the right places, making the right decisions.”

One of those, he said, is Henderson’s interim chancellor, Jim Borsig, who took the reins in July after leading the Mississippi University for Women.

A search for a permanent chancellor started more than a year ago, “but when COVID hit, we shut it down,” Welch said. A comprehensive, collaborative in-person search was impossible, “so we brought in a long-term interim.” Borsig plans to stay for another year, Welch said.

COVID-19 also wreaked havoc in Querétaro, where Mexican rules banned all in-person instruction last year. Still, 41 graduates weathered the storm out of an initial group of 200 freshmen, and Welch expects a total Mexican enrollment of about 1,000 this fall.

“Starting a campus from scratch is challenging, but starting one from scratch in an international setting takes a whole different perspective,” Welch said. “But it’s exciting to have a campus in a beautiful, business-rich area two-and-a-half hours north of Mexico City.”

Welch said students are intrigued by what he called a unique concept in Mexico: a college where students live on campus. “That’s not the norm there, and it’s bringing an American-style higher education model to an entirely new group.” Courses are taught in English by a faculty that isn’t employed by ASU, but rather by a private Mexican foundation partnering with the system. Some publicized faculty issues with pay and benefits have been ironed out, Welch said.

Fixing Henderson’s financial condition will take a little more time.

The Arkadelphia public university got into trouble by having “effectively no reserves,” Welch said. “We’ve been slowly rebuilding that, though it’s still nowhere near what it needs to be. They were really struggling from a cash flow perspective, and payroll was at risk.”

Henderson took out a $3 million line of credit to avoid falling short on any particular payday, but eventually didn't need it. “We never tapped that, though the university was behind on its payment schedules and accounts payable. We’ve been able to get caught up there,” Welch said in an hourlong phone interview.

On Feb. 16, Moody’s upgraded HSU’s rating from “negative” to “stable,” and noted that “joining a large state university system will be beneficial, providing for stronger fiscal oversight in addition to brand recognition.” While Henderson will keep its name, the ASU System logo will accompany its branding.

The Arkadelphia campus, which had a total enrollment of about 3,600 in 2018, slipped nearly 12% to about 3,147 last fall, costing HSU about $2 million in revenue. Henderson’s overall budget in 2019 was $69 million, but the financial cracks were evident, and the college moved to cut salaries 3% and reduce its match to retirement plans from 10% to 6%.

With HSU’s better bottom line, the ASU System has worked to restore those cuts.

Keys to a Turnaround

Moody’s foresees “more balanced operations at HSU over the long term,” the upgrade said. “Over time, we expect improvement in financial performance and stabilization of liquidity, but a steep fall 2020 enrollment decline” poses difficulties. Fall enrollment was down across the board at public colleges in Arkansas last year, following a nationwide trend.

One key to the turnaround was applying an academic cost accounting model, Welch said, using data to reduce classes drawing too few students. “We didn’t start having 200- or 300-student classes, but went from having seven students in a class to having, say, 15,” Welch said.

Henderson offered optional early retirement incentives that attracted some staffers. “As we refill those positions, or don’t fill them, we’ll look to get a little bit more right-sized,” Welch said. Henderson has a full-time faculty of 182.

The ASU System’s total operating budget this fiscal year was $348 million.

In another development, Welch has elevated Henry Torres to systemwide chief information officer, implementing management software and improving technical efficiencies at ASU’s sites in Jonesboro, Querétaro, Beebe, Mountain Home, West Memphis, Heber Springs, Searcy, Newport, Marked Tree and Malvern.

Welch was clearly pleased with the medical school partnership extension this month. Under the deal, the New York Institute of Technology College of Osteopathic Medicine will continue to partner in the school at Jonesboro’s historic Wilson Hall through 2036. The osteopathy school will also continue running the A-State Student Health Center. Terms of the deal weren’t revealed, and relevant numbers were redacted from state records released via freedom of information requests, the Arkansas Democrat-Gazette reported.

One goal for the medical school was to train and keep physicians in the Arkansas Delta, which has an acute shortage of doctors and other professionals. “Our Nursing & Health Professions College has been one of our largest academic units for many years, and that spurred some of our initial discussions on the osteopathic college,” Welch said.

The school, started in 2016, adds a new class of about 115 students per year, and by summer it will have graduated 200 doctors of osteopathic medicine. Welch called it a “formidable partnership” in addressing the Delta shortage, and noted other fruits of the relationship.

“With 650 students and employees, along with spouses and families, the medical school has had a substantial economic impact.”