CORVALLIS - Oregon State University is considering a plan to reconcile a $19.1 million shortfall in its 2001-02 budget by cutting administration, reducing operating expenses, and deferring the balance of the differential until the second year of the biennium, when there is more budget flexibility.
The proposal was presented on Thursday to the OSU Faculty Senate, and is being made available to the university's faculty, staff and students for input.
Tim White, OSU provost and executive vice president, said the university's goal is to limit operating and administrative costs to better support core functions, especially student instruction and support.
"This is a budget reconciliation plan that will require change by every unit on campus," White said, "but we will be diligent in protecting the quality learning experience that our students have come to appreciate and to expect."
The proposed plan identifies $4.6 million in one-time savings for fiscal year 2002; $7.3 million in recurring savings; and $7.4 million that will be deferred until fiscal year 2003, according to Sherm Bloomer, dean of the College of Science, and Clara Pratt, interim dean of the College of Home Economics and Education.
Bloomer and Pratt co-chaired a group of university leaders who drafted the plan. That group included Nancy Rosenberger, president of the faculty senate; Justin Geddes, president of the Associated Students of OSU, and several others.
"One of the guiding principles as this plan was developed was to reduce administrative expenses to the greatest extent possible," White said. "But you can't reconcile a $19 million shortfall without affecting people. Because of contracts and fairness, personnel reduction in this fiscal year is going to be limited. But it is something the university will have to address in the coming months.
"Those decisions must be made strategically and humanely," White said. "I think there is general acknowledgement that our human resources need to be refocused in areas of the greatest importance to the university's future."
OSU officials say they cannot yet estimate how many jobs will be affected by budget reconciliation. Among the measures the plan proposes:
- OSU will reduce operating expenses in non-academic units by 6.5 percent, producing an estimated $3.5 million in recurring savings.
- OSU will reallocate 3.25 percent of funds from all academic units, producing an estimated $3.3 million that will be reinvested in areas of greatest importance.
- OSU will fund faculty raises at a rate of 2 percent in January instead of a planned 4 percent increase, creating about $900,000 in one-time savings for fiscal year 2002.
- OSU will freeze most hiring for the rest of the fiscal year, and reduce travel expenditures, telecommunication costs, and other expenses that will save approximately $2 million in one-time and recurring costs.
Rob Specter, OSU's vice president for finance and administration, said the university will expend reserves, $3.5 million; and defer projects to improve technological capabilities, $1.4 million, some capital expenditures, $1.2 million, and other infrastructure investments, $1.3 million, until the 2002-03 fiscal year.
"These deferrals represent a combination of financial obligations and necessary investments," Specter said. "We will accomplish them, but not this year."
Specter said vacation liability is one issue the campus needs to address. The university finished the 2000-01 fiscal year with an $18 million surplus, he pointed out, but the state requires public agencies to have sufficient funds to cover the portion of vacation time payable to all employees at retirement - as if they were to retire at the same time. For the Corvallis campus of OSU, that amounts to nearly $11.5 million. "Such an occurrence would never happen," Specter said. "So, to reduce that huge accounting liability, we either must reduce our vacation accrual by encouraging employees to take personal leave, change the maximum number of vacation hours that may be paid upon retirement, or both." Changing the maximum payout requires a rule modification by the Oregon State Board of Higher Education.
OSU recognized last spring that it was facing a shortfall of about $10 million if it hoped to fully fund faculty salaries, invest in academic programs, and meet rising health care and energy costs. That figure, though daunting, was manageable, OSU officials said.
During the summer and fall, however, a series of new economic factors arose. The Resource Allocation Model, which provides funds to Oregon University System schools on a per-student basis, was reduced, costing OSU $2 million. Oregon Gov. John Kitzhaber instructed state agencies to take a 2 percent general fund cut, and an administrative cut. Those cuts, plus an additional "hold-back" by OSU in preparation for potential future reductions, totaled $3.7 million. And the university exceeded its cap for the funding of graduate students, resulting in a $1.75 million shortfall.
"Oregon State University has gone through an incredible period of growth and success, and we are doing exactly what the state of Oregon and its students want us to do," White said. "Now we are taking it upon ourselves to change the way we do business in order to continue meeting those needs, and take on new opportunities as they arise. This budget plan is the first step in that process."