Tiny U. of La Verne Awash in Debt : 4-Year Plan to Save the School Includes Higher Tuition

Struggling to stay afloat under $5 million in debt, the 94-year-old University of La Verne has adopted a four-year plan that will raise tuition and possibly eliminate popular but budget-draining programs, school officials said last week.

Trustees have approved a list of fee increases and budget cuts recommended by university President Stephen Morgan, who had ordered administrators to conduct an in-depth probe of school finances earlier this year. Morgan’s plan is expected to save the university $762,000 over the next two years.

The school already has set aside $1 million of its $20-million operating budget in this fiscal year for debt retirement and expects to allot another $1 million for that purpose next year. Morgan said the school would try to budget $500,000 each year thereafter until the entire debt is paid.

Morgan took over the presidency of the small, private college in February, and has since gained a reputation among trustees and faculty members as a shrewd, unflappable administrator whose attempts to whittle away at the debt problem appear to be succeeding.

“Steve has the capacity to implement the plan,” said Robert Monteith, a trustee who lives in Westlake Village. “You can have a plan but if you don’t have anyone to implement it it isn’t worth much.”

Keeping the university afloat financially has been Morgan’s top priority during his first nine months in office.

“My motto is to try to behave like a duck,” Morgan said. “Remain calm and cool on the surface but paddle like the devil underneath.”

His list of recommendations to the trustees includes a minimum 5% increase in tuition, which now averages $6,600 a year, and a 15% hike in dormitory fees. He also recommends increasing the overall teacher-student ratio from 1 teacher for 17 students to 1 for 19.

The university has a number of off-campus programs that will be affected, including continuing education and some college-credit courses at military bases. The courses at military bases are likely to be cut back, while continuing education tuition will be raised 20%.

Morgan also has asked heads of academic divisions to cut costs and consider merging some departments.

The trustees said they are also trying to decide what to do with several costly and under-enrolled programs, most notably the La Verne Law School, which has been operating at a loss since it was created in 1970.

While insisting it is only a remote possibility, the trustees acknowledged that the Law School could be closed or sold if does not break even in the next few years. Law School Dean Kenneth Held said, however, that he is confident the Law School can meet most of its costs by the end of the next academic year and all costs by 1990, as Morgan’s recommendation specifies. Held says he plans to begin an an aggressive recruiting program to boost enrollment and that he plans to raise tuition from the current $4,800 per year for a typical full-time law student to about $6,000.

According to the business office, it has cost $4.4 million to operate the Law School over the last five years, $1.1 million of that a deficit.

Other university programs that now operate in the red include a day-care facility for the children of students and faculty members, and doctoral studies programs in public and educational administration and health care. The day-care service would probably be the first to be eliminated if it cannot be made cost-effective, board member Donald Wilson said.

“I think we spread ourselves over too many programs,” Wilson said. “I just hope we can pull it all together.”

According to Morgan, the liberal arts college, which has an enrollment of 775 undergraduates, 491 graduate students and 108 law students, has overspent its budget for most of the last 10 years.

“Plain and simple, we were spending more money than we were bringing in,” Morgan said.

The school’s financial woes, along with his own poor health, were among the pressures that forced Morgan’s predecessor, Armen Sarafien, to step down in July, 1984, board members said. After Sarafien’s resignation and a seven-month search, Morgan, who has worked in fund-raising for various schools and colleges around California, was hired for the job.

Morgan has put his tightfisted management style to full use at the school, instituting a get-tough collection policy on outstanding student debts and saving payroll money through attrition. He has sought the help of the community, appealing to alumni and other potential donors to help the school out of its budget crunch.

Sarafien, also an accomplished fund-raiser, was the university’s president in 1980, when the Commission for Accreditation of Senior Colleges and Universities placed the school on probation.

It cited deficiencies in, among other things, the university’s doctoral program and in out-of-state training programs that have since been dropped.

The commission warned at that time that if lack of funds continued to compromise the quality of academic programs, the school would lose its accreditation. The probation was lifted a few months later, and the university is scheduled for its next accreditation review in April.

Morgan said he is confident that despite the school’s financial problems, the accreditation panel will find the quality of the university’s programs is still high. “I certainly hope they will see that we’re taking the situation seriously,” Morgan said.

The university’s debts began to accumulate in 1972, Morgan said, when the school borrowed $1.3 million to help finance a new student center. Although the loan on the tentlike, avant-garde structure has since been paid off, earlier efforts to meet payments on it were among the factors that forced previous administrations further into debt, he said.

Morgan said it has been difficult to pinpoint the origin of many of the loans on which payments are still due because most of the administrators who negotiated them are no longer with the university.

He said that much of the current $5-million debt is the result of struggling to meet payments on old loans, including $2 million borrowed since 1984 to help pay operating costs and retire long-term debt.

The remaining $3 million is interest and principal owed to banks, friends who made loans to the university, and money owed on bonds used to build a dormitory.

In addition to the loans, Morgan said, the loss of an off-campus high school equivalency program at area military bases and the Law School’s deficit have contributed to the school’s financial problems.

The high school equivalency program, which was started in the late 1960s, was aimed at military personnel stationed at bases throughout Southern California. It was abandoned by the school in 1975, however, after the Veteran’s Administration ruled that La Verne and other schools were overcharging the military. La Verne was ordered to refund $300,000 and immediately dropped the program, which had been a major source of revenue for the school each year, Morgan said. Some of that debt is still outstanding, Morgan said.