One SBC pastor’s candid look at SWBTS’ financial challenges

Note to readers: this information was received recently. The author is an SBC pastor who has spent a good bit of time looking at public documents concerning Southwestern Seminary. We’re posting it anonymously although the author did not ask us to do so. None of us has scrutinized the data or conclusions. The team here has reached out to key leadership at SWBTS and received no response whatsoever. It would be a simple thing in our view for the seminary to state that they appreciate the concern of Southern Baptists and are working diligently on all the challenges of the school going forward. Or, to state that information is being prepared and will be released when ready. We received no response. Others have expressed the same frustration that no information about his situation is coming forward from SWBTS.

We’re just pastors who are both observers and supporters. If there are sincere questions asked by Southern Baptists of our organizations, they should be answered if possible but certainly acknowledged.

We appreciate our brother who took the time to pore over public documents and gather this information.

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Finances for any SBC entity, from a big picture perspective, are not hidden if one knows where to look. Two helpful resources are the SBC Annuals found here and the Association of Theological Schools reports (for seminaries) found here. The most recent Annual was prepared for the 2018 SBC Annual Meeting, and it presents data for the 2016-2017 fiscal year (FY) ending July 31, 2017. The one unfortunate reality is that the data lags by a year or more at a time. Perhaps interim financial data is given to the Executive Committee for their Spring and Fall meetings that can be requested. That being said, the SWBTS financials thru 7/31/17 as recorded in the 2018 Annual reveal the following:

LOANS

The school had $20,378,678 dollars in notes (loans) to be repaid for 252 new student housing units. The loan was taken out in the 2012 FY. Of biggest concern is that $17,125,488 is due December 15, 2021, unless otherwise restructured. See note 12 in the Annual for details about the loan’s structure.

BORROWING RESTRICTED FUNDS

To add to the debt, the school has, over time, borrowed a cumulative $25,870,967 from restricted funds that needs to be reimbursed, with over $25M of the total coming from temporary restricted funds (funds that are released when the donor specified time and/or condition is met). One must also know that tens of millions can be released from temporary restricted funds each year as donor restrictions are met. In the 2017 FY, ~$21M was released and used as revenue to help offset annual expenses. However, with ~$25M of the total ~$30M of temporary restricted funds already borrowed, apart from an increase in temporary restricted fund giving in the 2018 FY that was also allowed to be released in FY 2018, the school seemingly only had access to approximately $5M for appropriate expenses if more than $5M was allowed to be released. Which brings me to…

RELIANCE ON RELEASED RESTRICTED FUNDS

Finally, the financial report shows that the 2017 FY operating revenue was highly dependent on temporary restricted funds coming available. Perhaps this is not unusual for an academic institution. On the year, the school brought in ~$3M more than what was spent (~$50M in revenue vs ~$47M in expenses), which is great. However, the ~$50M in revenue includes ~$21M in temporary restricted funds that were released. If SWBTS continued to spend anywhere near $47M in 2017-2018 and only up to $5M in temporary restricted funds were available to be released, it’s very feasible that the school could’ve spent millions and millions more than their revenue if additional unrestricted giving or even additional temporary restricted giving to be released in 2017-2018 did not come in.

SUMMARY AS OF 7/31/17

In sum, the school faces ~$46M in debt (loan / borrowed restricted funds) to repay with possible operating budget losses per year. The school had almost $250M in net assets, the leader of SBC seminaries; yet, not enough is liquid.

THE GOOD NEWS

I think the school can survive this situation with the Lord’s provision and some decisive leadership. According to Baptist Press, the trustees set a 2017-2018 budget for the school at $36.8M, approximately $10M less than what was spent in 2016-2017. This gives me hope to believe that current trustees are actively working with the SWBTS administration to move the institution out of the present financial dilemma. Consequently, I’ve been led to believe that the school had a fruitful financial year in 2017-2018 and was able to repay approximately $12-$13M of the borrowed temporary restricted funds. FY 2018 financials will reveal much.

Based on the 2017 FY data, here are a few suggestions for moving forward. Note: at least one of these suggestions has already taken place in part since 2017 and maybe others of which I’m not aware.
  • The administration should strive to find ways to get auxiliary enterprises to break even, as opposed to losing money, to functionally gain ~$1M/yr.
  • The administration may need to strive for a leaner staff. In FY 2017, the school spent $27.5M on instructional needs and institutional support for 1222 FTE students (4076 students taking 1 hr or more). In comparison, SBTS spent $27.2M for 2238 FTE students (5513 students taking 1 hr or more). If SWBTS staff was as lean as SBTS, based on FTE, SWBTS could save $12.6M/yr. Based on total students, the school could save $7.4M/yr.
  • Furthermore, reversing the enrollment decline will help bring in more tuition/fees revenue and possibly more Cooperative Program revenue. It seems this reversal has been started as the Association of Theological Schools indicates a Fall 2018 FTE enrollment of 1521, up from 1222. If not already, the goal ought to be to create such a Christ-centered, theologically and academically robust, humble-minded, excellence-driven, ministry-equipping, church-serving, missions and evangelism-oriented culture that anybody west of the Mississippi, and even an easterner, doesn’t have to think twice about where to pursue seminary education because of what’s going on at SWBTS, particularly those from Texas, Oklahoma, and Arkansas.
  • SWBTS could consider increasing tuition as the 2017-2018 SBC rate per hour was $250 versus $276 at SEBTS, $294 at SBTS, and $296 at MBTS. The result would be an additional ~$1M if bumped to $275/hr and slightly over $2M if bumped to $295 based on FY 2017 tuition income.
  • Expanding the current donor base ought to continue to be an aim as well.
As of 7/31/17, the situation before SWBTS was absolutely challenging. But with the help of the Lord through faithful trustee and administration leadership, I’m hopeful for the financial future and kingdom impact of this theological institution in the days to come. In the meantime, pray for wisdom for the trustees as they continue to search for a new president who can lead the school through, and far beyond, these days for the sake of the gospel.