Some questions answered on revenue reduction; more details to come later

A message from Ed Ray, president of Oregon State University:

The financial news of recent weeks, as we all know, has been deeply troubling, both nationally and closer to home. With the release last week of a new revenue forecast from the state economist, we know the expected extent of the downturn’s impact on Oregon’s public agency budgets: at least a $142 million reduction for the current biennium. As many of you know, Gov. Kulongoski has issued a directive that state agencies implement a 1.2 percent budget reduction to address the shortfall.

Fund reductions graph

The impact of budget reductions announced last week can be seen in red at the top of each bar, designating the amount to be reduced between now and June 30. (graph: OSU Office of Budget and Fiscal Planning)

The Oregon University System’s share of this cut is expected to be $10.2 million — 1.2% of the current general fund budget.  For Oregon State University, this represents a minimum level of cuts of $2.8 million from our general fund budgets; $1.4 million from our statewide public service programs (OSU Extension, Agricultural Experiment Station and Forest Research Laboratory); and $120,000 from the OSU Cascades Campus.

OUS has announced that it will determine how it will allocate the reductions among the campuses in early December once the governor’s budget is released.  They have indicated that this will allow the system to align current reductions with the Governor’s budget for the next biennium. We will not know the exact level of current biennium reductions until early December, but now expect them to be roughly as outlined above.

There is much still to be determined.  It is possible that the next state revenue forecast in late February 2009 could be followed by another series of reductions.  In December, under the direction of Provost Sabah Randhawa, a series of planning sessions will begin with academic leadership to discuss changes to be made in the next biennium and beyond.

We are already updating the strategic plan that we launched in 2004 and that effort will provide the context within which to chart our course for the next five years. Therefore, this is an optimal time with our core mission in mind to determine what key areas we need to protect; what areas best meet the demands of our mission and the needs of our students; and those that we will need to downsize or even eliminate in order to sustain our current level of quality and service.

The update of the strategic plan will be completed during winter quarter. Through an open and transparent process we will finalize our plans for the next biennium by June 2009.

Many of you may have immediate questions concerning how these financial concerns will affect you and your units. Among the most pressing questions we’ve heard so far are these, as well as answers:

*       Will hiring processes move forward for vacant positions? It is difficult to articulate an institutional policy, as some positions are critical to essential functions of the University and to the strategic priorities of the University.  Unit administrators are asked to review open positions, taking into account unit budget realities and importance of each position to essential functions of the unit. Some positions will not be filled.

*       Will salary increases go forward? Yes. OSU has planned carefully and conservatively in this area and will support implementation of those increases, including merit/equity raises scheduled for January. These increases are in line with decisions made at the other OUS institutions.  And, with OUS salaries already below national averages, we cannot afford to balance the budget by reducing our ability to attract and retain the best talent for our faculty and staff. OSU’s faculty and staff are responsible for the level of success and quality that the university has attained, and your extraordinary contributions must be recognized through equitable compensation.

*       How has the downturn affected the university’s endowment, payouts from which affect many salary and operational issues around campus? As you might imagine, our endowment is down, though less so than many of our peer institutions.  While the Standard and Poor’s index was down more 15 percent through the end of June, the OSU Foundation endowment was only down 4.66 percent. This put us in the top quartile of performers for endowments of our size. We do not yet have final numbers for the third quarter, but like others, we expect a loss. The university is fortunate to have an exceptionally experienced group of business professionals serving on the OSU Foundation’s Investment Committee, and they continue to carefully steward endowment resources in difficult market conditions. 
     
These are challenging, difficult times.  At times like these throughout OSU’s history, the university family has come together in thoughtful and creative ways to keep moving forward on our mission to serve the people of Oregon. The current economic situation demands that we work together again. And I have confidence that we will succeed, as we historically have, through the caring actions of committed individuals across our campuses and in the communities that we serve.

I will continue to make the case for OSU as aggressively and compellingly as possible, so that we can leverage all available resources for a university whose future is so closely tied to that of Oregon’s. As this state’s land grant university, with a founding and current mission of serving every county in Oregon, we will not waver from our commitment to providing excellent teaching, research and service, even in the face of circumstances that would sometimes dictate we do otherwise.

Thank you for your commitment to that mission and for your dedication to OSU.

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