Northeast State president James King sets to rightsizing the cash-strapped college


Photo above: James King in the Northeast State library. Photo by Scott Robertson

By Scott Robertson

Northeast State Community College has been long on ambition since the arrival of now-former President Dr. Janice Gilliam in 2009, but has been increasingly short on cash. New satellite campuses have been opened in Bristol and Johnson City yet Northeast State has actually been losing students. Spending, until now, has gone unchecked. According to James King, Gilliam’s successor as president, the college based its budgets on student population projections that were higher than the number of students who would actually attend, then took cash from reserves to fund the difference. Discrepancies noted in state audits were blamed on “bookkeeping errors.” After the Tennessee Board of Regents replaced the college’s chief financial officer with one of its own earlier this year, Gilliam was asked to resign.

The fallout is that Northeast State today finds itself making a $5-plus million “budget realignment,” including $2.2 million in personnel reductions including 28 non-faculty full-time positions and 19 full- and part-time temporary positions. In addition, six vacant full-time faculty positions will remain unfilled. Administrators have identified $2.8 million in cuts to operating, travel and equipment budgets.

In addition, a $30 million emerging technology building that was to have opened its doors last fall is on hold with only preliminary site work having been done. The college had told The Business Journal last fall it had almost completed the fund-raising effort to provide the $3.2 million it needed to match the state’s $26+ million investment. As of now, no funds exist to put toward that $3.2 million.

King sat down with The Business Journal July 26 to discuss the college’s long- and short-term plans to address the financial shortfall, how it plans to maintain the level of the educational experience while making cuts, its priorities in education and workforce development going forward, and how the business community can trust the college and the Board of Regents to do better in the future when it took a faculty revolt to get the TBR’s attention in 2016.

James King

What follows is an edited transcript of that conversation.

The Business Journal: A lot of people have been very supportive of Northeast State for many years under Dr. Gilliam and Dr. Bill Locke before her. The business community supported and supports the Regional Center for Advanced Manufacturing in Kingsport, for instance. But waking up one morning and reading that you have to cut $5 million in one year’s budget to get back where you need to be makes it hard for some to trust the system that got the college to this point, even with a new president. How did this get past Nashville and how do you answer questions of accountability?

James King: It’s not a simple answer, but it actually ended up being a perfect storm of things happening right at the same time. There has been over-projection of enrollment pretty much for the last five years. Then when you don’t reach that enrollment projection, you used reserve funds to balance the budget. So from the (Board of Regents’) standpoint, it looks like, ‘Alright, you didn’t make projection, but you did balance the budget –’

The Business Journal: If I can interrupt real quick, who is responsible for making those projections?

James King: Everything falls upon here, and at the end of the day, the president and staff. So that model was working so long as there were reserve funds. But the day reserve funds end is the day you have to tighten up the budget. By then, you had branched out into Johnson City and into Bristol. You had significant expenditures there, but on a new campus, you didn’t increase enrollment. Those folks living in Johnson City who had been driving to Blountville just stayed in Johnson City. So you created a pretty significant campus with all its operating expenses, but you brought in no new bodies and no new revenue. That’s very similar to what happened in Bristol.

Normally, you would have had reserve funds to cover that until the new campuses got on their feet. Here those funds were already depleted. So you had significant losses because you were in the hole on both those campuses the first couple of years. That just created a bigger hole.

There has also been a slight decrease in enrollment based on the economy improving. In manufacturing at Eastman, anybody who wants a job can get a job with the training. During the recession you had significant enrollment, but you never reduced staff levels once that ended and enrollment started back down. So that was the perfect storm. It all caught up at one time.

That’s the basic answer. It’s probably a little more complicated. You give the campus credit. When they equipped the Johnson City campus – when they equipped the music industry program at Bristol – they did it first class.

At the same time, you had this emerging technologies building coming on board and the match, this 10 percent match basically had no outside funds in it. All of a sudden you no longer have a match. So we’re halting that building temporarily to right-size it.

There are a lot of people to point fingers at, but none of them are here today. The best way to define my role is, I’m coming in as the solution. I’m summing this up the best way: it’s time we right-size the campus, and that’s what we’re doing, a right-sizing that’s been overdue.

The right size is down somewhere around $5 million. If I renegotiate some of our leases and some things like that, that number will reduce. I’m working on that right now. In Bristol, Johnson City and Elizabethton we are paying too much for most of those buildings.

We have identified $2.8 million to be culled from operating, travel, professional development, things like that. But when 75 percent of the budget is personnel-related, looking at things like travel is nickels and dimes. It sounds good, but you don’t get any money. You don’t save any money by cutting the staples budget. That’s nickels and dimes too. But you have to look at everything. So what we’re doing is turning over every rock.

Still, at the end of the day about $2.2 million in staff reductions are going to occur. I can’t tell you the number of people today, because the number of people depends on what levels of salaries you’re cutting. It takes a lot of $24,000-a-year people to reach $2.2 million. It takes fewer $50,000-$100,000 people. That figure takes into account salary and benefits, and the state benefit package is pretty nice, so you’re looking at about 30 percent. That will include some attrition of positions where people have retired. We probably didn’t have enough of those.

Then you have temporary positions as we restructure the scheduling of classes we will probably be using less adjunct. We’ll not open up as many sections. Where maybe in the past it was shotgun sections, you’d put ten sections of the same class out there and offer a lot of choices. I got quoted in the Chronicle of Higher Education one time about the TCAT system as saying, ‘We’re not like Burger King. You can’t have it your way.’ We’re going to do a little more of saying, ‘This is what you can take’ instead of having classes out here that may have eight people in them. We have to make sure all our classes are full first. We’re not saying we are going to overpack. We just want to make sure classes are full, and more will be taught by full-time faculty.

One example of something we’ve already done is student orientation. In the past we have brought teachers in during the summer and paid them to do orientation. We chose not to do that. I stepped up – everybody stepped up – volunteers. We got vice presidents, deans, people who have not done that in years, and we had a good time doing it. There was energy in the room. Everybody had a blast. Again, those are not great costs, but they are costs.

Another thing, as we look at off-campus sites, they have been staffed almost as stand-alone operating centers. That’s not the norm. You use the folks on the main campus. You have the basic staff here. So we’ll reduce those and operate like I think it needs to be operated.

The chancellor asked me, ‘Can you operate the campus if you cut this many people?’ We have strategically looked at every position. We have involved the deans, the vice presidents, and yes, we can do it. I don’t think we’ll miss a beat.

Getting back to your question, we are making it more accountable. I can tell you without a shadow of doubt that whether it’s Eastman or Joe’s Body Shop, they will not miss the services. The faculty will be the least impacted because they’re the people that impact students. Business and industry programs – apprenticeships – those will be the least impacted. We will take care of those.

I told the deans, if we take John Doe out of your department, it’s your job to find ways to spread out everything John does or do it yourself. I think people will step up. You’re not going to see students go without academic advising, students go without financial aid advising. We’re going to maintain the same level of service to the students. I truly believe that. I said when I came here, if I couldn’t add quality, I wouldn’t be here. We’re not going to do things halfway.

Again, back to accountability, yes, there were some mistakes made. But we are right-sizing this campus. The projections are going to be real. The budget management is going to be real. We have a new CFO. You have me as the new president, and there’s going to be a different mindset. We’re not going to take chances on not doing things the right way. I have a history of that, and I have brought that here. (As TCAT director) I am well-respected nationally for managing a system of 27 campuses without actually being on the campus. Now I am here every day. I think I can do the work.

The Business Journal: Let’s talk about the number of campuses at Northeast State (there are six). You mentioned renegotiating the lease agreements on some of the campuses. Is it true that the lease agreement for the Bristol campus is with a property owner who is actually on the Foundation Board at Northeast State?

James King: (Pauses and nods his head in the affirmative)

The Business Journal: Pardon me for editorializing, but that doesn’t seem like a best practice.

James King: It’s probably not.

The Business Journal: That being the case, are any of the campuses likely to be just done away with?

James King: Possibly. Yeah, seriously. I mean, some aspects of this process are going to take place over a year. I can truthfully tell you that within a year we will have this thing stabilized. It’s a bold statement, but I have no doubt. But we can’t do some of those things today without impacting students. If I close something in January, those students will have from now till January to get ready to go to Blountville. Some of those sites we may look at based on the lease agreement. It could be this time next year, around July 1 when we do it. It is a possibility.

In actuality, let’s go back to the Bristol site. There’s nothing illegal about that. I mean, that was approved at all levels. I had nothing to do with it, but it was approved at all levels up the chain. It was looked at by legal. And there were a lot of renovations to that facility that were done by the owner. It’s a nice facility. Now is it a facility that we will actually need in the future? That is what I have to determine. That’s the same way with Gray. It’s the same with Elizabethton and Johnson City.

Elizabethton has been there 20 years. It has always been in the black. I’m not saying I am happy with the rent. I think we pay too much for it considering we have been there 20 years. That will be looked at. But you have a campus that has been stable and has served that community for a long time. My question is, by now, why haven’t we built our own facility there?

What’s going on at Kingsport is amazing right now. You have a lot of shaking and moving going on. It has proven itself and its value…We’re meeting a need (in workforce development) and we’re not going to cut it off. No one understands marketable skills more than I do and the value of these campuses to business and industry. Eastman still has faith and we’re going to be accountable. We’re going to be more accountable than we have ever been.

The Business Journal: We talked briefly about the new emerging tech building project that doesn’t have the matching funds we had been assured it had. It raises questions about Northeast State’s ability to join partners in workforce development like Bell Helicopter and to play its role in Aerospace Park. Are we 365 days away from even considering moving forward with that building?

James King: First of all, one of my bosses, Parker Smith (Eastman VPGM, Worldwide Manufacturing Support & Global Quality) is on the Tennessee Board of Regents. Parker bends my ear every day about Bell Helicopter and about Aerospace Park. He’s highly involved in that. I’ve assured him we are staying on track with that. The state allocated so much money, and part of that money was equipment in the building. The first thing the prior administration said was, ‘Alright, we need a bigger building. So let’s move the equipment out of the building and put it into another building.’ Well now you have a building with no equipment in it. So are you going to build a bigger empty building?

We are going to right-size the building. There are two approaches I am going to take on this. The first is to get back to what we originally requested. That’s about $30 million. We have about $26 million of state money sitting there waiting for us to do something. We have approval from the building commission to hold that money. We aren’t going to lose it. If we look at building this building for $26 million, I hope I can go and get a waiver because of circumstances that would allow us to do so.

The second thing we’re going to immediately start is some sort of capital campaign. You know, that $3.2 million had no outside money. There are a lot of people interested in this building. I can say, ‘Guys if we ante up a little bit to have some match and show good faith, we can get this building going.’

So I really don’t see 365 days. They’ve already turned dirt and torn up parking lots because the state already issued those contracts. That wasn’t money coming out of here. It was part of the $26 million. We had to complete that work and pay those guys. So we’re stopping at this point…But no one understands the need to move forward more than I do. Not to take anything away from humanities or anything else, but right now we are in an era of marketable skills and we have had a history of training folks that do something. But we need space and equipment, and then I think we will increase enrollment by doing that. So I hope we’re not looking at saying 365 days from now, ‘Alright, we still need to find the money.’

We have a good group of legislators up here. In the last two days I’ve met with five of them. They were not aware of this situation. They haven’t been as involved as they want to be. Those guys are willing to step up. No one’s asked them to.

The Business Journal: But still we come back to the question: If I am a person in the business community and you come to me for help with these matching funds, having heard everything you’ve just said, I still want to know how nobody saw the reserves dwindling to this crisis point. How I can trust that everything’s fixed?

James King: That’s a really good question. I think we have corrected the flaw at the Board of Regents as to why this happened. It’s unprecedented. It really is. You’re looking at a system that has been operating since 1965 and in anything like that at some point, there is going to be a screw-up. We have learned from that. It has not led to the program closing, the building closing. It looks bad on paper, but it is not disastrous. We’re right-sizing. We’re not bankrupt.

     If we right-size, we will come back stronger because we can hire more faculty and buy more equipment if we don’t have all the staff sitting here at the Blountville campus. The administrators and the administration of people – if we can do those functions with a lot less people – it’s not that the campus is underfunded. We’re just out of whack. We’re overspending and we have to readjust back to where our priorities are.

     I think we got out there (during the previous administration) and we didn’t know how to say no. That’s one of the biggest things.

The Business Journal: The iNortheast program where everybody gets an iPad was not –

James King: – was not sustainable. Putting a site in every town around – well, shoot yeah, everybody wants some. But you know, we have a site a few miles down the road at Gray. We’ve got one in Johnson City. One in Bristol, Kingsport, Elizabethton. Everybody has their own. Was that a smart investment? No, it’s not.

     This isn’t actually the first time this has happened in our system. We have had other community colleges across the state where it looked really good to build a big off-campus site. A campus that had 3,000 students built a big off-campus site one time and when it was done they had 1,500 students on one site and 1,500 students on the other with twice the operating expenses and not one nickel of new revenue. They’ve had growth since then, but those first year or two were tough. You have to have the same financial aid folks at both places – everything. You’ve actually just cut your campus in half. We’re afraid we’re going to get to that point at Blountville. So we need to look at these. And if we do, we will be more accountable to the state, and that’s what my role is.

And you’re right. Just this weekend I called the chancellor and said, ‘I’m still so frustrated over how this got out of whack. I’m dealing with it here, but I’m saying you have a problem and you have to figure out how this got this way. You can’t let anyone else get this way.’ And now, everyone that was involved in this, in one sense, is not there. You no longer have the vice chancellor for community colleges. You no longer have the chief academic officer in the system. You no longer have the chancellor who was in place then. You no longer have the same president here, and you no longer have the same CFO. So there’s not a single soul left that participated in dropping the ball here. Throwing rocks won’t help anybody here.

The Business Journal: And we’re not talking so much about blame game as we are about how moving forward in the future Northeast State rebuilds people’s trust. What specific steps will be taken? As you said, this has happened before where someone was allowed to overspend to very little net positive effect.

James King: One thing that has already been done is there is a whole new look at reserves. The vice chancellor in the business office and new CFO of the Board of Regents, Danny Gibbs, dealt with this on his first day. So he’s had a wake-up call and is already examining every campus in our state. Danny was a long-time finance officer at a community college, Roane State, and at Ball State. You have a chancellor now (Flora Tydings) who truly has been a very successful community college leader for years. She’s not going to be embarrassed again.

When you look at what we’ve done in such a short window – it’s unprecedented that in one day, two community college presidents (Gilliam and Motlow State President Tony Kinkel) were asked to resign. They were asked to resign for different reasons, but the accountability is greater now. There has been a wake-up call, not just here but system-wide.

Also, it may be a good thing that we no longer have the (four-year) universities in the Board of Regents. It’s 13 community colleges and 27 TCATs. Having six universities took a lot of the chancellor’s time. They were the 10,000-pound gorillas of the system. Now we have two sets of schools where the people running them are in their comfort zone.

     I will still maintain my role as executive vice chancellor keeping an eye on everything that has to do with TCATs.

The Business Journal: You’re going to be a busy fellow.

James King: Well, right now I’m not doing much of that because I’m concentrating totally on here, but at the same time I have a staff that still oversees the TCATs. Those guys know what they’re doing, but we’ll still be watching.

     So again, it’s a great question. All I can say today is we have stop-gapped some things and made corrections but you’re not the only one asking that question. I have asked that question every day I have been here. I have yet to get a good answer. Fortunately, the problem was caught before it got over the top – we’re not bankrupt. But it’s a hard question for anyone to answer.

     One lesson we learned is that you can’t take the word of any administrator solely. I’ve mentioned how frustrated I am reading these lease agreements. When I look at them now, some of them just are not good lease agreements, but the previous chancellor had signed it. As I said before, I called the current chancellor and said, ‘You can’t let this happen again.’ We have to be smarter. It’s hard for me to sit here and argue about a lease when everyone in that office that had anything to do with it has signed it. But I’m calling it like it is. We’re cleaning up those things. So if you ask the chancellor how it happened and about accountability, her answer would probably sound a lot like mine. She’d say, ‘It’s not going to happen again.’

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