Many problems, but firstly, if it is really just to know how much they need to allocate in resources it can be asked the same way race is asked. Demographically, firewalled-off from decisions, with decline to state being an option. No problems for me there.
But the bigger problem here is how few understand the fucking Kinsey scale. Very few are 100% straight OR gay. Many haven't figured out where they fall yet. So if the questions were to be used for more--such as dorm residency, it would be very problematic.