On Jan. 26, the Portland State Finance and Administration Committee will meet again with the Board of Trustees to discuss PSU finances, a necessary increase in student tuition, and cuts to other areas of the budget to offset the increase.
“The biggest challenge is balancing the expenses, the costs that we anticipate, with the diminishing revenues that we anticipate,” said BOT Chair Pete Nickerson. “There are a number of contending fixed costs that are far above the revenues that we have.”
Multiple factors have led PSU to its current predicament: an increase in various necessary school payments and an expected 4.3 percent increase of the Education and General Fund budget needs, totaling about $14 million. These numbers are approximations made by PSU’s FAC.
Of the current year’s budget, $83.8 million was collected from state funding: $157.5 million over the two years of FY15–17, with the first year receiving 49 percent of the figure and the second year receiving any remainder. A similar amount is expected from the state for FY17–19.
Lower enrollment, rising wages, inflation and an expected decrease in state funding are the main contributors to the shortfall. In addition, there has been an approximate $12
million increase in retirement contributions to the Public Employees Retirement System by PSU. In 2016, PERS was deemed a crisis by several media outlets.
In December, the governor’s office released its 2017–19 budget, in which $10.7 billion was allocated for education, an increase from the previous biennium of $9.4 billion. Education makes up 53 percent of the 2017–19 General Fund/Lottery Fund Budget.
“The governor’s recommended budget holds the Public University Support Fund flat for the next biennium and is one of the many scenarios we had planned around,” said Kevin Reynolds, vice president Finance and Administration at PSU. “We recognize that difficult choices need to be made and are grateful that the investment in higher education made in the last biennium is retained. That said, flat biennial funding creates a significant gap in our budget which will need to be address through budget cuts and tuition increases.”
As expected, the budget will likely not cover PSU needs according to FAC, but there is still time for many changes to happen before the budget is finalized. Next, the governor’s budget will be sent to the Ways and Means Committee for review.
PSU is expecting approximately $158.6 million of the current budget over the next two years, according to FAC.
The Jan. 26 Board meeting is the next step in PSU’s theoretical budget planning.
“We will be asking for some clear directions from the committee on setting tuition rates and things they want to see reflected in the budget for FY18,” said PSU University Budget Director Andria Johnson.
“I would like to leave the meeting with confidence that we have a balanced budget that will continue to allow the university to meet its objectives,” Nickerson said.
In November, Oregon tax measure 97 received a no-vote with 59 percent voting against it. The measure was expected to generate upward of $3 billion per year, some of which was promised to Oregon schools. The measure would have removed a cap on corporate gross sales tax, or minimum tax, and changed it to a 2.5 percent tax on gross sales which exceed $25 million.
Reynolds, along with other members of his team, presented the school’s finance reports in November and offered two possible scenarios to fulfill the school’s monetary needs.
Unfortunately, all data on the matter is theoretical until as late as June. The PSU budget should be finalized and available to Banner, PSU’s accounting system, by July 1 to allow the university to plan allocation of funds for the upcoming year.
Although tuition is a large factor in PSU’s budget, it is state funding which provides the largest budget challenges. According to the Brown’s Budget, “In the next biennium, reduced federal funding, increases in the cost of state services and mandates from the ballot leave us with a projected $1.7 billion budget shortfall.”
Governor Kate Brown’s proposed budget in December prioritized education, allocating the largest percentage of funds to it. The budget will likely undergo some changes when it goes to state legislature in January. One subject which may be addressed is that the governor’s budget includes using expected new revenue, which could prove problematic. Potential changes will reflect various reviews and the feedback received from state agencies and general public. The final vote of how it will be split up may not occur until as late as June.
Often K–12 schools will be given higher priority because state dollars are their primary source of funding.
The state funds given to colleges and universities will then go to the Higher Education Coordinating Commission, which makes decisions on disbursement amounts. There is no specific deadline for this to all be worked out, which is why PSU funds hang in a theoretical framework.
Brown’s budget allots $667 million of the $10.7 billion dollars in education spending to the seven public universities in Oregon. Of that, PSU expects approximately $158.6 million. Together, the schools asked for $765 million, according to FAC.
Brown’s budget also cut lottery funding for PSU equaling $1.1 million according to FAC. Of those funds, 80 percent would have gone to athletics and 20 percent to graduate student scholarships.
At FAC’s last meeting with BOT in November, the audience was full of department chairs and professors, possibly concerned with potential cuts to their budgets and positions.
Both scenarios included cuts to salary remainders, termed structural salary savings, which appear naturally in salary budgets in the form of unstaffed positions and other unspent money.
Another cut was a personnel reduction which could affect any university staff, of which the faculty are included, as are all school employees.
Scenarios were preliminary and will be adjusted with the finished state budget figured in; more are likely to be presented at the Jan. 26 meeting.
The two scenarios presented feature either a 5 or 10 percent tuition increase, and both feature some of the same cuts:
–Structural Salary Savings $3.5 million
–Personnel Reductions $2.85 million
–Moving Costs to other funding sources $510 thousand
–Services and Supplies Reduction $1.1 million
–Reduction in amount held for Risk Abatement $1.6 million
The 5 percent tuition increase scenario would use $10.9 million in the school’s Education and General fund balance which is accumulated continuously over the years.
At the close of the 2016 fiscal year the balance was $55.3 million, but much of it was designated to specific areas of the school, leaving $17 million available for use. After three years of decline in the Education and General Fund balance, FY15 began a positive increase.
The 10 percent scenario would only use an estimated $2.3 million of the reserve.
A flat, across-the-board cut in funds was advised against during the November meeting.
Students are the largest source of funds for the university by way of tuition. Of the 2016–17 Education and General Fund of approximately $325 million, $83.8 million was from state funding.
PSU has a larger part/full-time student body population than both Oregon State or University of Oregon, but PSU lags behind these schools in the number of out-of-state students they recruit. This means significantly less money as out-of-state tuition is almost three times that of in-state.
Board member Gale Castillo brought up increasing the funding of department at capacity as a way to generate more tuition money. She asked department chairs from the audience if they believe more students would attend PSU if there were more openings in their programs. The answer was yes in some departments and no in others.
Another committee member sought to look into untapped funds from property the school owns, which includes student parking.
PSU tuition falls low on the fee scale for universities across the country. For example, the University of Illinois undergraduate resident tuition and mandatory fees came in at above $15,000 in the 2016–17 academic year. The University of Oregon and Oregon State both cost above $10,000 in the same year, while PSU tuition and fees totaled $8,337.
Some discussion was made that many students choose to attend PSU over other Oregon universities due to PSU’s lower cost and that the raise in tuition could hurt school funds rather than help.
The next meeting between PSU’s FAC and BOT will be Jan. 26. The meeting is open to the public. For now, PSU finances will continue to hang in limbo.