Year of Publication



Martin School of Public Policy and Administration

Date Available


Degree Name

Master of Public Financial Management

Committee Chair

Urton Anderson

Executive Summary

Higher education in America is at an inflection point with numerous challenges threatening the traditional business model relied on by institutions across the country. These forces include, but are not limited to: 1) A decrease in the number of high school graduates due to historical declines in birth rates (Grawe, 2018; Western Interstate Commission for Higher Education, 2020) 2) Sustained disinvestment by many states in their higher education institutions which has effectively shifted the cost of education to students and families (Kunkle & Laderman, 2023) 3) Increasing skepticism among Americans of the value of higher education, particularly given its rising costs (Kelchen, 2023; Schleifer et al., 2022) 4) Rapid technological advancements leading to widespread adoption of online learning programs (Hamilton, 2023) The result of these pressures has been escalating private institution closures and mergers as well as consolidations among public institutions (Castillo & Welding, 2023; Kelchen, 2023; Kurzweil et al., 2021; Lundy, 2023; Sanchez, 2024). The acceleration in closures is particularly concerning given the negative impact experiencing a college closure has on various student outcomes such as reenrollment, completion, and time to degree (Burns et al., 2023; National Student Clearinghouse Research Center, 2023). These trends led the State Higher Education Executive Officers Association (SHEEO) to publish a white paper containing recommendations for state coordinating and governing boards to enhance the financial monitoring of their postsecondary institutions (Tandberg, 2018). Kentucky’s public postsecondary institutions have had widely publicized financial difficulties due in part to the aforementioned forces but also largely attributable to financial mismanagement. The most prominent example is the financial distress experienced by Kentucky State University (KSU). On July 20, 2021, Governor Andy Beshear issued an

executive order directing the Kentucky Council on Postsecondary Education (CPE) to “provide an assessment of the current financial status of KSU” and “assist the KSU Board of Regents in developing a management and improvement plan with goals and measurable metrics” (Kentucky Council on Postsecondary Education, 2021, p. 6). As part of this study, CPE conducted a financial health assessment and analyzed cash flows and other financial information. Another Kentucky institution that has recently experienced financial distress is Northern Kentucky University (NKU). In late 2022, it was announced that NKU had a $23.7 million deficit caused by a variety of factors including increased competition for students, declining enrollment, unsustainably high financial aid, and other factors. NKU’s president, Ashish Vaidya, departed from the institution shortly after the announcement and the university’s chief financial officer, Jeremy Alltop, resigned as of October 2023 (Nguyen, 2022; Planalp, 2023). On a positive note, the nearly $24 million deficit was reduced to $9.6 million in the fiscal year 2024 budget with further reductions expected in fiscal year 2025 (Granger & Payne, 2023). Financial distress among Kentucky’s postsecondary institutions has not been limited to its public institutions. In the past decade, two private not-for-profit institutions, St. Catharine’s College and Mid-continent University, have also closed their doors (Fain, 2016; The Lane Report, 2014). Considering these financial difficulties, CPE has recommended to the General Assembly that “a process should be implemented for CPE to actively monitor and regularly report to the General Assembly and Governor on the financial health of the state’s public colleges and universities” (Kentucky Council on Postsecondary Education, 2023, p. 70). As such, a primary goal of this study is to aid CPE in determining a process for monitoring the financial condition of the state’s public postsecondary institutions. Given the minimal research in this subject area, a secondary goal is to inform future studies measuring the efficacy of financial monitoring and oversight policies across the states.

Available for download on Wednesday, May 01, 2024