This voluntary program is one of several avenues that President Ray and his leadership cabinet are using to reduce expenditures. The downturn in the economy created a revenue shortfall resulting in a 5 percent cut to the university for the 2007-09 biennium, which must be taken by June 30. Of the $13 million total, $9 million will be taken from Education and General Funds and $4 million from OSU’s Statewide Programs. (For details, see: http://oregonstate.edu/leadership/budget/budget-update-2-27-09.html)

“These are unusual times. My highest priority, shared by all in senior leadership, is the preservation of the student experience and the retention of outstanding faculty. Every move we make to keep OSU fiscally sound is important,” Ed Ray, president, said. “I am proud of the sense of community I have felt from the leadership team in this move and their unhesitating interest in being part of the solution in this fiscal challenge we are facing.”

Among other actions the university has taken are the implementation of a hiring “chill” under which all job searches must be centrally approved; an across-the-board salary freeze; the adoption of a restricted travel policy; and a strict approval process for new academic programs and Extended Campus courses.

President Ray and his senior leadership team already have taken the steps for their voluntary reduction, which has the effect of reducing their yearly salary at a yearly rate of 4.6 percent. A number of other OSU senior leaders are following suit.
One of those is Sherm Bloomer, dean of the College of Science, who says the move is important as both a cost-saving measure and a message that “everyone must share the pain.”

“The state is facing truly unprecedented financial circumstances and the leadership of the university is committed to doing whatever we can to meet the fiscal constraints Oregon faces and continue to provide access and opportunity to all of our students.”

(To see OSU President Ed Ray’s comments on the Governor’s budget, click here.)

Much of the proposed increase would go to a larger capital construction program, including renovations at Strand Agriculture Hall and completion of work at Education Hall, and a phase-in of debt service from prior biennia capital projects.

The governor’s proposal, which goes to the state Legislature for consideration when it convenes in January, includes a 1.7 percent reduction in OSU’s statewide public service programs (Agricultural Experiment Station, Extension Service, Forest Research Lab).

A glass-half-full view of the budget, said Jock Mills, OSU government relations director, is that the Governor’s proposal has $53.1 million more in general and lottery funds than the budget approved by the Legislature for the current biennium ($949.5 million vs. $896.4 million). Many other state agencies faired far worse, especially considering their increased case loads and costs.

For a glass-half-empty view, Mills said, the general funds devoted to higher education classroom services are 4.3 percent below the essential budget level – the level of funding necessary to provide the current level of service.  The Governor’s overall budget also relies on a number of tax proposals such as increasing the corporate minimum and cigarette taxes, both which were included in the Governor’s budget last biennium, but were rejected by the Legislature and Oregon voters.

The Dec. 1 budget release by the Governor is a first step in a long process that is largely dependent on future economic forecasts.  In the midst of a national recession, the proposal demonstrates an intent to minimize the damage to education programs across the entire spectrum, from pre-kindergarten through graduate school, Mills said.

But whether the proposal sticks will depend on an economy that is far more turbulent and uncertain than in previous biennia, he said. “With no expectation of a favorable forecast on the horizon, it is probably safe to say that it won’t get any better than this, and it could get far worse.  Nevertheless, given the prudent actions we have taken in the past, and our focus on managing our funds, OSU is about as prepared as we can be to address the upcoming challenges.”

The next significant step will be in late February when the state economist delivers the next quarterly revenue forecast.  It will indicate whether further cuts need to be taken during the current biennium while also will guiding the development of an alternative budget to be crafted by the Joint Ways and Means Committee chairs.

Legislators will not make any final decisions until May when the next quarterly forecast is issued.  That forecast will include information about income tax receipts based on the April 15 tax deadline, and will be used to guide “final” budget decisions, Mills said. “I use ‘final’ because it is likely a number of decisions will be postponed to February 2010, when the Legislature is likely to reconvene in another supplemental session.”

To read the press release that outlines the Governor’s Recommended Budget, click here.

For more detailed information, use this link to the higher education section in the Governor’s Recommended Budget. (Once in the PDF, go to page B-14. While you will find a number of interesting elements in the document, you will not find a definitive way to determine the extent of reductions from the current level of spending — the Essential Budget Level which is the amount that would be required if the same level of service provided this biennium were to be extended to the next one.)

For a summary of the Governor’s Recommended Budget prepared by the Oregon University System, click here.

For a link to a release from Senate President Peter Courtney (D-Salem) and Senator Margaret Carter (D-Portland) taking the budget to task for its cuts to human services and corrections, click here.

A press release from Senate Republican Leader Ted Ferrioli (R-John Day) criticizing the taxes included in the Governor’s proposal and calling for greater fiscal restraint appears here.

For a link to a release from Speaker of the House designee Dave Hunt (D-Clackamas County) calling the effort a good first step but in need of work, click here.

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.

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.