Ashland University’s most recent tax forms show a $2.7 million surplus for the 2013-2014 school year, which was first reported by Inside Higher Ed in its story about the cuts made to faculty before this fall semester began.

That number, found on the university’s IRS-990 form, could lead an observer to think AU has fixed many of its financial woes.

Stephen Storck, AU’s Vice President of Business Affairs, disagrees.

“What I worry about is when a faculty member would read that,” he said, “and they say, ‘Wow, they had a surplus of $2.7 million. They could have afforded to give me a raise,’ when the truth of the matter is no we couldn’t.” 

That surplus comes from an $8.3 million loss in total assets, and a drop in total liabilities of $10 million. 

“You think when we’re rolling in money, when in actuality we are not,” Storck said.

Most of the drop in liabilities came from paying down debt. In that year, the university paid about $6.5 million on mortgage debt, with $40 million still left to pay. 

“We were paying back our debt very aggressively,” Storck said. “That’s what was caused us to use up all of our cash.”

That cash shortage was first made public in October 2014, when William Crothers, AU’s former interim president, said the university could not have made another payroll during the previous summer. 

“This institution, frankly, has been spending well beyond its means,” Crothers said during a student speak-up in October 2014. “At the end of this summer, we did not have the capability of making one more payroll for the institution. If we had had one more payroll, people would have not gotten paid.”

The university had to borrow about $10 million that summer, Storck said, but that wasn’t near the university’s debt limit.

“Our board authorized us to have lines of credit up to $13 million,” he said. “We only drew up to $10, so if we had to do a couple more payrolls, assuming a bank would have given us the line of credit.”

Last spring, AU sold $40 million in bonds to refinance the university’s remaining debt, which should free up cash to reinvest in the university.

“With this refinancing of the bonds that we did, we are going to be paying less money each year in debt service,” Storck said, “and that’s going to reduce our draw on cash by about $2 million for the next couple of years.”

While refinancing gives AU more flexibility in the short term, it does mean AU will spend more in interest over the long term.

“By refinancing, we are going to be paying back less each year. The good news is it improves our cash, assuming enrollment stays where it is,” Storck said. “The bad news is we are taking longer to pay off our debt so the longer you take the more interest you pay. But we have no choice. We have to live within our means and this is helping us to do that.”