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Kentucky State representatives, from left, Regent Paul Harnice, Board of Regents Chairperson Elaine Farris, Vice President of Finance and Administration Greg Rush and Acting President Clara Ross Stamps appear before a House subcommittee Thursday. 

Kentucky State University representatives appeared before a Kentucky House subcommittee Thursday, and their testimony told why the $23 million requested from the General Assembly is needed.

“There’s not much from a financial standpoint that’s changed since last time we were before your committee,” Greg Rush, KSU’s vice president for finance and administration, told the budget review subcommittee on postsecondary education. “Our projections are about the same.”

Rep. James Tipton, R-Taylorsville, chairs the subcommittee, and he’s the primary sponsor of House Bill 250, which would appropriate $23 million to Kentucky State for the 2021-2022 fiscal year. The bill would also require the Council for Postsecondary Education (CPE) to make recommendations for repayment and to provide annual reports on the status of the KSU loan.

“I know many of you have heard of the $23 million request that Rep. Tipton has addressed in House Bill 250,” Rush said. “What that is comprised of is a number of actions that were taken by the past leadership of the university that essentially pushed expenses forward into the current fiscal year, led to a depletion of the university’s cash reserves and essentially a cash flow crisis going into this fiscal year.

“Sen. (Christian) McDaniel (R-Taylor Mill) had asked earlier and Chairman Tipton has asked a number of times the university’s cash position throughout the fiscal year, and at this point the university will have to begin borrowing on what’s called a revenue anticipation note, which is similar to a line of credit, in mid to late March to continue to operate, and that line of credit will be depleted in mid-April.”

Rep. Bobby McCool, R-Van Lear, asked the KSU representatives if there are plans in place if the university does receive the $23 million and if it doesn’t.

Rush said as a public institution, Kentucky State has few options.

“We’re dependent on the General Assembly,” he said. “As for going forward, even if the university receives $23 million from Chairman Tipton’s bill, that essentially gets the university back to zero. The budget next year has to be dramatically revised to make sure the university is living within the resources it has available.

“That’s a firm requirement. There is no option. The university will not have sufficient reserves to continue to operate with their budget not balanced. That’s one of the things we’ll be working on over the next couple of months, is to make sure whatever steps have to be taken to make that happen are taken.”

Elaine Farris, chair of the KSU Board of Regents, said the school is in for some changes regardless of the outcome of HB 250.

“In discussions with CPE, Kentucky State University can no longer operate as usual,” she told the committee. “There will be some tough decisions to be made with or without the $23 million. Kentucky State is still going to have to make some tough, hard decisions so that she can continue to operate within her financial means.”

Rush said “significant operating deficits accumulated over a three- to four-year period have resulted in the situation that we face now, where there was a significant number of expenses and bills essentially carried forward from prior years into the current year.”

M. Christopher Brown II resigned as KSU’s president in July, and Clara Stamps Ross was named acting president.

“As acting president, it is my job to make certain we understand where we are, what we’re capable of and how we can move the institution forward," Stamps told the subcommittee, “suspending unnecessary travel, suspending unnecessary purchasing, making sure we understand our budget, working with our CFO to break down how the institution brings in and how we should spend our budget because we don’t get all of our finances in one lump.”

Farris also said once the board became aware of the school’s financial issues, it pulled minutes and videotapes of its past meetings, and she said those showed that the board asked financial questions of the prior administration.

“Many of those questions we asked about the financial status of Kentucky State University, we were given inadequate information or false information,” she said. “As you know, the board conducts its business in a public meeting and so as a Board of Regents, we have to make decisions based on information we receive.

“We were making our financial decisions on information the administration was giving us. We thought that was adequate information. When we found out and had concrete evidence of financial considerations we had to deal with as a board, we had a meeting and the board dealt with those issues. That’s when we decided we had to go in a different direction with leadership.”

Farris used an analogy of a fish bowl to describe the situation at KSU, and when fish in the bowl begin dying, it’s time to change the water.

“I think that’s where we are at Kentucky State University,” she said. “We have to make external and internal changes in order for us to build the culture that we want to see Kentucky State thrive in.”

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