Barry University faces up to $8 million revenue gap. What happens next?

Barry University, the 77-year-old Miami Shores institution that has taught students in the progressive Catholic tradition of its founding Adrian Dominican sisters, is confronting financial strains on its mission of serving a diverse, working-class student body.

Barry’s president, Sister Linda Bevilacqua, held forums with faculty and staff members on Friday to discuss a projected 2017 budget gap of up to $8.6 million and accompanying cutbacks, including eliminating 25 staff positions, implementing a hiring freeze, temporarily reducing the 401(k) match, and closing the school’s Davie campus. A six-figure vice presidential position is among those being eliminated.

Bevilacqua plans on Monday to address students, who have been asking professors where their degree will come from upon graduation and whether Barry might close.

“The discussions to reduce expenses are distressful, and the decisions to do so are agonizing when they involve colleagues with whom we work,” Bevilacqua wrote in an email to “members of the Barry community” on Feb. 28.

She outlined decisions made – such as placing the fund-raising and marketing division on hiatus – and shared strategies under consideration – such as streamlining operations and re-examining tuition discounts.

Barry, which has seen its undergraduate enrollment dip from 4,619 to 3,514 since 2012 — a 24-percent drop — has also weathered a $12 million decline in tuition revenues from 2013 to 2015. Barry depends on tuition for 90 percent of its funding, about three times higher than the national average for private colleges.

Fitch Ratings, the New York-based credit-rating agency, revised Barry’s rating from Stable to Negative in an October 2016 report, citing Barry’s continued decline in enrollment — 7.1 percent decline in 2016 after a roughly 6 percent decline in fall 2015 — and tuition discounting.

Some of this decline was intentional, said Sara Herald, vice president for Institutional Advancement and External Affairs at Barry. She said the university upped its qualifications for enrollment around 2013 and shifted its scholarship funds to more academically prepared students.

“Barry puts its students first, and it seeks students that adhere to a value system that makes them different,” said Joe Klock, a Barry board of trustees member and Miami lawyer. “Barry fills a special role in Catholic education in our community and in serving a special constituency. These are hard-working kids, many from immigrant families. They’re not debating which island they’re visiting for spring break or which type of Maserati they’re buying.

“I’m a big fan of Barry and the type of affordable, personal, public-service oriented education it offers.”

Founded in 1940 as the Barry College for Women, the 122-acre school is renowned for its social work and nursing degrees as well as its podiatry clinic. The student body is 65 percent women, 27 percent Hispanic, 25 percent black, 25 percent white and 7 percent international.

Alumni of Barry and St. Thomas University, a 2,752-student school located in Miami Gardens and run by the Archdiocese of Miami, were alerted March 3 by the schools’ presidents to the start of “joint strategic planning to explore options for the reconfiguration of our universities.”

The vague wording – and “talking points” distributed to staff – raised questions about whether a merger was an option.

The suggested answers emphasized it is “too early to say” what a possible “strategic alliance may look like” and that neither university is in danger of closing.

“A merger? Who knows? That’s been discussed on and off for 10 years,” Klock said. “There is no reason to do it unless they think they can provide better services and programs. Merging solely to save money is not a valid reason to do it.”

 The gated west entrance of St. Thomas University in Miami Gardens Wednesday, March 15, 2017Patrick Farrellpfarrell@miamiherald.com

Haley Struthers, a 2012 Barry graduate, got the email from Bevilaqua and discussed it with her boyfriend, Miyen Spinelli, a 2011 St. Thomas graduate. Both were scholarship soccer players at their respective schools.

“I think it’s awesome if they can offer more majors and minors,” said Struthers, who intended to major in journalism at Barry before the program was cut. She was editor of the school newspaper. “If I could have taken classes at St. Thomas, I would have. But if they combine, you would lose some of the personality of each.”

Spinelli said he thrived on the intimate campus of St. Thomas.

“Sharing courses is a good idea,” said Spinelli, a native of Argentina. “But if the history is lost, that’s a downside.”

Talks between the schools – which are only eight miles apart – have not begun.

“At this point, there’s nothing ruled out,” said Herald, whose $200 000-plus position is being eliminated April 1, according to the Feb. 28 email that Bevilacqua sent out to the Barry community.

St. Thomas traces its roots to Havana, where the Universidad de Santo Tomas de Villanueva was founded in 1946 by American Augustinians. When the Friars were expelled by Fidel Castro in 1961 they came to Miami and founded Biscayne College, which changed its name to St. Thomas in 1984. St. Thomas says it is “renowned for leadership development in justice, science, business and ministry.”

St. Thomas’ bottom line has been erratic in recent years —$332 842 in the red in 2014 but bouncing up to $3,131,207 in the black the next year. Since fiscal year 2013, the tuition per student rose more than $3,000 to $28,800 – the exact same as Barry’s in fiscal year 2017 – although it will not rise next year, according to school spokeswoman Hilda Fernandez.

You have the perfect storm in higher education right now

Sara Herald

St. Thomas and Barry are buffeted by the same market forces challenging other nonprofit, private universities and colleges, especially women-only, religious and historically black universities: Online classes and more competition for students — at a time when there is a diminished number of students due to changing demographics.

“You have the perfect storm in higher education right now,” Herald said.

At a time when families are seeking more bang for their higher education buck, smaller schools can’t offer the same resources — fancy gyms, high-tech labs, big-time athletics, a smorgasbord of course offerings — as large state-supported universities.

“These are the kinds of places where we’ve seen a real struggle to grow revenue,” said Dennis Gephardt, a vice president and higher education analyst at Moody’s Investors Service, the credit-rating agency. “It’s especially tough in Florida because the public universities are such a good value. The small schools keep their sticker price so low it makes it that much harder to compete without a strong brand.”

Although only a handful of nonprofit, private colleges have closed or merged in the last decade, the number is expected to grow, according to a Moody’s report. Saint Joseph’s College, a private religious school in Indiana, shuttered unexpectedly in February following years of debt.

These schools all face inconsistent enrollment, which they are heavily dependent on, and don’t have cushy endowments to draw from. Barry had a $36.2 million endowment in 2015; St. Thomas had $24.9 million. A much larger neighbor, the University of Miami, had $887.3 million stashed away in 2015. The University of Florida had $1.6 billion in 2015; Harvard had $37.6 billion.

Endowments are important because schools can accrue investment income, diversifying their revenue streams beyond tuition, fees and grants.

Fitch lowered Barry’s credit rating in part due to the school’s dependence on tuition for 90 percent of its revenue. A National Center for Education Statistics study showed the average private nonprofit school derived only 30 percent of its revenue from tuition and fees in 2013-14. Investment income accounted for 25 percent of income, on average, of private, nonprofit colleges and universities, the study found.

“Enrollment is a very key driver of their finances,” said Margaret Johnson, a primary analyst for Fitch. “We think over the course of the next year things could potentially decline.”

90percentage of Barry University’s revenue tuition makes up

But a school’s price tag doesn’t translate to tuition revenue. Most students don’t pay the sticker price. At St. Thomas, 90 percent of students receive financial aid.

“Nobody is getting stated tuition,” Herald said. “That’s not just Barry. That’s everywhere.”

Barry’s discounting of tuition, however, is another concern cited by the Fitch report, which noted that Barry’s tuition discounting rate is expected to increase to 29.8 percent in fiscal 2016 up from 25.6 percent in fiscal 2015. That’s higher than the 18.8 percent median rate, the report said.

Herald called the current budget straits “a hiccup in finance that can be accounted for” but not a sign of crisis.

“We are not borrowing money,” she said. “We are paying bills as we normally do.”

Klock, who believes Catholic universities play a distinct role in the higher-ed ecosystem, said he’s not panicked about the future of either school.

Herald said Barry and St. Thomas have always been devoted to educating underprivileged students.

“You have two institutions who have a very long history of working together in a common mission,” she said. “How do we make sure it perdures?”