Gwynedd Mercy University cuts staff, restructures academics amid higher ed financial turmoil

Although Gwynedd Mercy University is showing signs of financial struggle — the school is reducing its number of schools from three to two and laying off a small number of staff amid operating losses and a 29% drop in overall enrollment since 2018-19 — its president says the school’s position is far from dire.

At the Catholic university campus in Montgomery County last month, an open forum to announce the changes grew contentious at times, and one staff member who asked not to be identified because he is not authorized to speak said employees are worried, given the recent college closures in the region. Cabrini, a Catholic university in Radnor, will close for good at the end of the month after 67 years; University of the Arts closed abruptly earlier this month.

Gwynedd Mercy president Deanne H. D’Emilio said she understands the nervousness, given what is happening in the sector and the competition among the large number of colleges surrounding Philadelphia.

» READ MORE: Gwynedd Mercy University sells 150 acres for $31.5 million; same land it bought for $12.1 million in 2018

“It would be irresponsible for anyone in higher education in this region ... to not pay attention to what’s going on,” she said.

But she asserted that Gwynedd Mercy, which is celebrating its 75th anniversary this year, is in a strong cash position, given its sale two years ago of properties that brought in $40 million, and a $25 million capital campaign, the goal of which the university has almost reached.

She also pointed out that the school’s Standard & Poor’s bond rating remains at BBB, indicating that it has adequate financial resources despite the financial pressure it’s been under in recent years. And deposits from prospective first-year students are up 11% from last year, she said.

An independent review of the school’s finances covering the three fiscal years ended June 30, 2023, also indicated that Gwynedd Mercy is not facing the financial peril that UArts and Cabrini were.

That review, completed at The Inquirer’s request, was conducted by Julee Gard, vice president for administration and finance at University of St. Francis in Illinois. She developed her Financial Viability Index, which is designed specifically for smaller, private, nonprofit colleges, while obtaining her doctoral degree at the University of Pennsylvania’s Graduate School of Education.

On a scale of 1 to 100, Gard gave Gwynedd Mercy a 68, placing it in the green zone, indicating very good health. The school benefits from its strong financial reserves. UArts, meanwhile, scored just 28 on her scale, putting it in the most dire red zone, and Cabrini, which got a 33, also was red. However, Cabrini’s score in fiscal 2022, the year it decided to close, was 44, which indicated marginal financial health.

» READ MORE: At Cabrini University, there will be no next year: A chronicling of its final semester

Gard’s system looks at eight factors based on data gleaned from schools’ audited financial statements. A big component in Gard’s calculations is how much of the institution’s operating expenses are covered by tuition, room, and board. Other aspects look at liquidity and how well financial reserves can cover a year’s worth of operating expenses.

Despite Gwynedd Mercy’s relatively strong position, cuts are necessary, D’Emilio said, to bring it in line with a smaller student body and adjust to less operating revenue. The university is facing a $3 million shortfall in its $50 million budget this year, she said, up from about a $1 million gap last year.

“The plan is that we will return to a balanced budget if not next year, the year after that,” she said. “But [the shortfall] will be cut in half in the next academic year.”

Many schools around the region, including La Salle and Temple Universities, have faced significant enrollment losses in recent years. Mergers, including several in the region, have become more common. The market for higher education is particularly turbulent, with another drop in high school-age students forecast later this decade.

» READ MORE: The University of the Arts is closing June 7, its president says

Asked whether Gwynedd Mercy, which was founded by women and has only ever been led by women, was considering a merger, D’Emilio said: “That is not a strategic initiative that Gwynedd Mercy is looking at right now.”

Gwynedd Mercy’s overall enrollment stood at 2,165 during the fall, down from 3,056 in 2018-19, according to recent bond filings. That’s a drop of 891 students.

The number of students living on campus also has fallen, from 370 in 2019-20 to 257 in 2023-24.

» READ MORE: St. Charles Borromeo Seminary bought part of Gwynedd Mercy campus for new home

But the president said that the university intentionally reduced the number of students living on campus after the pandemic, offering only single rooms. And when the university sold 15 acres, part of that sale included one of the residence halls, she said.

The university anticipates having 284 students living on campus this fall, up 27 from last year, with a total capacity of 313 beds.

She also contended that enrollment is beginning to trend up, with the number of freshmen from last fall 22.5% higher than the prior year. The university’s freshman-to-sophomore retention rate also increased by seven percentage points, she said.

Ideally, she said she would like to see Gwynedd Mercy’s enrollment grow to between 2,200 and 2,400 over the next three years.

» READ MORE: La Salle University’s enrollment dropped 28% since 2019. What is the school doing to cope?

Gwynedd Mercy in 2022 sold 150 acres for $31.5 million, the same land it bought from Merck & Co. in 2018 for $12.1 million. That same year, the university sold 15 acres to St. Charles Borromeo Seminary for $10 million so it could build a new home.

“Because of the sale of those two pieces of property, that put us in a very unique position in that we have a lot more flexibility to really think about what we want to do and how we want to do it,” D’Emilio said.

Asked how much of the money from the former Merck property sale is left, the president said, “all of it.” And unlike most endowment funds, none of it is restricted. At UArts, 98% of its $62 million endowment was restricted, according to its latest 990 tax return, meaning the university couldn’t use it to plug the cash shortfall.

“When we sold the Merck property, we set up a separate endowment,” D’Emilio said. “We have not used that for operations. We have used earnings from that money to fund strategic initiatives.”

The university paid off debt and other expenses with the $10 million from the property sale to the seminary.

Some members of staff have questioned why the university wouldn’t use the money to ease the crunch.

“We’ve made a decision up to this point we want to preserve that,” she said.

The university is making investments on campus, including building a new $23 million health-care innovation center, due to open next year. It also recently completed renovations on a baseball and softball complex and improvements on its oldest residence hall, she said.

» READ MORE: Gwynedd Mercy rises 71 places in U.S. News rankings

D’Emilio acknowledged discontent among some staff over the academic restructuring.

“Change is hard, and some people are not always happy about change,” she said.

The college in 2020 moved from four schools to three, and now, following recommendations from a 14-member task force, will drop to two: The school of arts and sciences and the school of business and education will be combined into the College of Arts, Science and Professional Studies. The second is the College of Nursing and Health Professions.

The deans from the two prior schools will lose their jobs, along with the dean for student success. All three were given the opportunity to apply for the new dean’s job, and one of them recently got the position, she said.

She said that of the fewer than 10 layoffs among the university’s 326 employees, none is of faculty. The university also plans to reduce its retirement plan match from 7% to 3.5% for the next academic year to help close the shortfall, she said.

“We are intelligently dealing with the challenges we are facing,” she said. “We have a very clear vision and plan on how to move forward and we are seeing positive momentum on that plan.”