Five days before Rhonda Phillips took over as Chatham University’s new president, faculty and staff received an email from her. “While excited to officially begin my tenure,” she wrote on June 26, “this is not the tone nor tenor of the first message I envisioned sending.”
Earlier that morning, Board of Trustees Chair David Hall told faculty and staff via email that the private university faces an increasing deficit in its operating budget, projected then to be between $8-12 million, and likely needs to “realign costs and revenue” over the next two years. That’s a substantial sum for Chatham, which brought in about $52 million in revenue in the 2022 fiscal year, according to audited financial statements.
So far, the university has limited health care benefits and laid off staff members. The board also passed a resolution allowing university leadership to begin a “campus-wide reorganization,” Hall wrote in his email. The process was already underway by the time Phillips messaged the faculty and staff about half an hour later.
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The incoming president shared that she plans to restructure Chatham’s leadership team over the current academic year. At that time, that meant the departures of the vice presidents of finance and administration; academic affairs; strategic planning and Title IX; and advancement. The effort was necessary, she wrote, to streamline administrative decision-making and help establish “new approaches to supporting our students, employees, and alumni.”
And she was forming an academic advisory committee, partly composed of faculty, staff and students, to review the university’s programs, outcomes, pricing and funding. She told the faculty and staff that she’d hold a campus update on “Chatham’s situation and plans” the week of July 3 and would schedule additional meetings in the summer and fall.
“I fully recognize the uncertainty and impact the days ahead will have on our community. As we chart our path, please know that it is my goal to always lead with empathy, support for our mission, and by providing clear direction for Chatham as we move forward together,” Phillips wrote.
Emerging indications of Chatham’s fiscal crisis bring to Pittsburgh a problem faced by many universities as enrollments dip, costs rise and federal pandemic relief money runs out. And even if Chatham tackles the deficit, the university may face additional headwinds in the future. The state has the fourth-highest number of higher education institutions in the country, and they’ll likely compete for an undergraduate population that’s expected to fall sharply in the coming years.
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Chatham pay, insurance benefits trimmed
Bill Campbell, a spokesperson for the university, said that the deficit is now projected to stand at $6 million. The university estimates that it will shrink to $3-4 million next year, but he noted that all numbers may fluctuate.
To get there, the new administration has made significant cuts.
Phillips announced the layoffs of about 20 staff members in an early August email to faculty and staff. Two librarians, including the archivist for the 153-year-old university, were among them, two professors told PublicSource.
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Employee benefits were substantially limited, too. In September, the university reduced its maximum retirement match for faculty and staff from 8% to 3%, a move one professor described as “draconian.” Spouses who have insurance through their employer will no longer be eligible for the university’s self-insured plan in January.
The university also cut the salaries of the leadership team by 10% on Aug. 1 and plans to implement a 5% reduction on Oct. 1 for faculty with annual base salaries of more than $100,000. The university had weighed whether to cut the salaries of faculty earning between $50,000 and $100,000 a year but decided not to as of mid-August.
“I cannot emphasize enough how low the morale is. People are just devastated and feel so victimized by all of it,” said Jennie Sweet-Cushman, an associate professor of political science. “How do you get up in the morning and put in a 12-hour day instead of an eight-hour day when your retirement’s been cut and your benefits have been cut?”
Top of mind for many faculty, she said, is job security. Some professors expressed concern to PublicSource that the work of the academic advisory committee would lead to programmatic cuts and faculty layoffs.
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Campbell did not explicitly state whether the university anticipates cutting any academic programs but said that “additional operational cost controls, some temporary in nature, will continue over the reorganization period.”
“I’m not saying that administrators aren’t working very hard,” said Erin Marie Williams-Hatala, an associate professor of biology and program coordinator for the biological sciences, “but we are being asked to be cheerleaders for an institution that doesn’t necessarily have our back.”
What caused the deficit?
Hall, the board chair, attributed the deficit to several factors in his email to faculty and staff. Graduate student enrollment, “a central part of the budget,” dropped by about 25% from 2012 to 2022, though undergraduate enrollment nearly doubled. Maintaining buildings, investing in technology and upgrading classrooms has become more expensive since the pandemic began. The university also lost a long-term tenant at Chatham Eastside.
Campbell also attributed the deficit to “an aging financial system and reporting infrastructure that did not keep pace with the University’s growth and needs.”
The university’s expenses have outpaced revenue largely since fiscal year 2016, a review of audited financial statements shows. That fiscal year, revenue and expenses totaled about $53 million and $59 million, respectively. In fiscal year 2022, revenue totaled $52 million and expenses amounted to $71 million. During that period, the university reported that its revenue was greater than its expenses only in fiscal year 2021.
Though the financial statements from the most recent fiscal year show a roughly $19 million gap between revenue and expenses, Campbell said the statements include expenses that “are not necessarily” part of the annual operating budget, where the deficit is.
The university's endowment grew from around $75 million in 2016 to $101 million in 2021, but then dipped to $89 million last year, according to the audited financial statements.
Despite those mounting challenges, Hall wrote that the board only became aware of the deficit ahead of its June meeting, adding that the influx of COVID-19 relief funds had delayed the impact of the budget shortfall.
Three professors who spoke with PublicSource said they were aware of most of the circumstances outlined in Hall’s email but didn’t know of the deficit until early this summer. “Nobody ever presented a picture that was negative. It was, ‘We have some challenges, and we're working on those.’ But we were all blindsided,” Sweet-Cushman said.
“I feel bad for President Phillips because it wasn't her fault,” another professor said. “She has come into this budget crisis. So I think a lot of us are angry with the board. Why didn't they know?”
Hall and other board members PublicSource attempted to reach did not respond to inquiries at the time of publication.
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President’s early departure led to advisor
The timing and handling of a late-spring leadership change hinted to some faculty that the university faced challenges. A May 19 email from Hall alerted faculty that then-President David Finegold would "transition out of the day-to-day leadership" almost immediately, speeding a departure that had been set for July 1.
Campbell did not respond to a question on Finegold’s departure.
Hall announced that Chatham had hired a chief operating officer and “special advisor” to the board, Eileen Petula, who would begin immediately. A committee of board members would manage the university’s operations with Petula and the leadership team before Phillips took over. Petula would work “closely with all parties to ensure effective operations and provide support … in all transition activities and planning,” he wrote.
“While unconventional for Chatham given the longevity of our leadership through the years,” he wrote, “the Board feels a role such as this will provide additional experience, skills, and support to successfully prepare for Dr. Phillips’ arrival.”
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An uncertain path forward
Phillips and Petula briefed faculty and staff on the university’s financial situation in July, reiterating what Hall had shared days earlier and, according to three professors, outlining the cuts to retirement benefits and possible salary reductions for faculty.
One professor said the meeting prompted them to search for other job opportunities. “Money is not everything for me, but I do want to be at a place that has growth opportunities,” they said.
That professor, though, said they believe Chatham “is in good hands” with Phillips and added that, “I think we will come out of this.” Another said they’ve found Phillips to be a good listener who is willing to change her mind. A third, however, described the administration’s approach so far as “spreadsheet leadership.”
Sweet-Cushman said that faculty – who lack union representation – should have greater input in the decision-making.
“The bigger thing is not that we have magical thinking and imagine that nothing should be cut, because we understand that we're facing a crisis here. It's that it's being unilaterally decided on in almost every instance,” Sweet-Cushman said. “Between the administration and the Board of Trustees, there's some groupthink that goes on there.”
She appreciates that Phillips has assured faculty that Chatham will come out of this period “stronger than ever,” but the broader state of higher education in Pennsylvania concerns her.
“I think [the deficit] is a hit that could hinder our ability to be flexible enough to weather those storms,” she said. “I don't want to leave Pittsburgh. I don't want to leave Chatham. My vision was to spend my entire career in my sweltering office that has no air conditioning.”
“So, I appreciate her optimism. I don't know how accurate it is. And I'm not alone in that.”
Timeline: Chatham University's growing deficit
- Sept. 7, 2022: President David Finegold announces that he’s stepping down at the end of the 2022-2023 academic year.
- May 19 at 4 p.m.: Board of Trustees Chair David Hall informs faculty and staff via email that then-president David Finegold would “transition out of the day-to-day leadership” of Chatham at the end of the week. He announced the hiring of a chief operating officer and “special advisor” to the board, Eileen Petula, who would begin immediately.
- June 26 at 10:09 a.m.: Hall informs faculty and staff via email that the board was made aware of an “increasing budget gap” ahead of its June meeting, announcing that Chatham needs to “realign costs and revenue by $8 to $12 million over the next two years.” He shares that the board has passed a resolution to allow university leadership to begin a “campus-wide reorganization.”
- June 26 at 10:46 a.m.: Incoming President Rhonda Phillips announces via email that she plans to restructure the university’s leadership team over the next academic year, beginning with the departures of four vice presidents. She also informs faculty and staff that she is creating an academic advisory committee to review programs, outcomes, pricing and funding.
- July 1: Phillips assumes full-time duties as university president.
- July: Phillips and Petula brief faculty and staff on the university’s financial situation, reiterating what Hall had shared days earlier and, according to three professors, outlining the cuts to retirement benefits and possible salary reductions for faculty.
- August 3: Phillips announces the layoffs of about 20 staff members in an email to staff and faculty.
- August 16: Phillips announces that faculty with an annual base salary of more than $100,000 will receive a 5% reduction in pay, effective Oct. 1. She writes that there will not be any salary reductions for faculty and staff with annual base salaries below $100,000.
- August 24: Petula reiterates in an email to faculty and staff that the university’s maximum retirement match is being reduced from 8% to 3%, effective Sept. 1. She adds that spouses with health insurance through their employer will no longer be eligible for Chatham’s self-insured health plan in January.
Correction: Chatham's campus is primarily in Squirrel Hill North. A prior version of this story placed it in another neighborhood.
Emma Folts covers higher education at PublicSource, in partnership with Open Campus. She can be reached at emma@publicsource.org.
