May Legislative Update

With the June 30^th deadline for adjournment just over a month and a half away, the Oregon Legislature is nearing a final vote on a $2 billion revenue package, is considering over 90 amendments to a comprehensive joint “carbon action plan,” and is considering various proposals for addressing housing costs and efforts to control cost increases in the state’s public employee retirement system (PERS).

Senate Republicans have conducted a four-day walkout protesting a vote on a corporate tax increase when the legislature has not yet taken steps to address PERS costs. Assuming that vote is eventually taken, the next significant step will be on May 15 when legislators receive the next quarterly economic forecast, which will include revenue projections for the next biennium. The legislature will rely on the May forecast to set the final general fund and lottery budgets for all state activities, including Oregon’s public universities.

This update reviews how higher education and Oregon State University priorities have fared since the legislature convened in late January, and the work remaining in the 2019 legislative session.

Joint Public University Priorities

University Operating Budgets – The Public University Support Fund (PUSF – HB 5024)

Late last November, in an effort to force legislators to include funding for Oregon’s public universities and community colleges into a $2 billion revenue package, Governor Brown proposed a base budget that provided no funding increases for post-secondary education, while eliminating funding for a key university engineering program.

Over the last year throughout lengthy deliberations regarding both how to raise and spend new revenues, the Joint Committee on Student Success rejected the Governor’s proposal and steadfastly remained committed to allocating all new revenues solely to Oregon’s early education and K-12 programs.

Nevertheless, a broad consortium of education interests has worked throughout the session in seeking a $186 million (25%) increase to the PUSF which supports all seven public universities. The universities have also signaled that a $120 million (16%) increase would enable them to avoid tuition increases over 5% while seeking to keep operations intact.

In mid-March, the Joint Ways & Means Co-chairs proposed a budget that included a $40.5 million (5.5%) funding increase, based on how the state calculates the universities’ “continuing service level”(CSL). The CSL is the amount of funding needed during the next biennium to provide the same level of service as was provided during the current period. Universities have long objected to the methodology used by state budget writers in calculating the CSL because it does not accurately reflect state-mandated employee retirement and benefit costs. Over the last decade this difference of opinion has resulted in shifting these costs onto students in the form of tuition increases.

Prognosis: Final resolution of state funding for Oregon’s universities will rely heavily on the May revenue forecast. If the forecast shows increases over the February forecast, these funds could be made available for higher education. Many other state-funded programs, including caseload increases in human service programs, will also be relying on these funds to fill remaining budget holes.

While the February forecast showed that revenues for the current biennium were some $750 million over the May 2017 forecast – resulting in kicker refunds for Oregon personal income taxpayers – the forecast also indicated that the revenue curve was flattening significantly. The past rate of increase has a significant probability of flattening – meaning that increases between the February and May forecasts could be negligible, and could evaporate during the next two years due to macro-economic factors.

Budget writers will also be reviewing possible increases from the “corporate kicker.” Corporate tax receipts that exceed the two percent kicker limitation, could be made available for a variety of investments, including higher education. But kicker payments are one-time funds, and cannot be relied upon for future biennia. As a result, the corporate kicker may solve problems for the oncoming biennium, but would only create difficulties for the long run.

Finally, a number of legislators have discussed the potential for using general funds “freed up” by the proposed $2 billion revenue package to help support university programs. It remains to be determined just exactly where these funds may be drawn from.

Meanwhile, Trustees at Western Oregon University and Oregon State University have proposed tuition increases that are below the five percent threshold that requires approval by the Higher Education Coordinating Commission (HECC). These institutions are on the pathway of implementing significant budget reductions that could be mitigated by any legislative funding increases approved by the legislature. Following a decision in April to raise tuition by 4.3%, OSU Board of Trustees Chair Rani Borkar wrote a letter to legislators regarding the Board’s decision and urging the legislature to increase funding for Oregon’s universities.

Without additional state support this legislative session, OSU and its students, faculty and staff are on an unsustainable path. Over the next academic year, the university is considering leaving vacant, or eliminating, approximately 100 faculty, graduate assistant and classified positions. The university could be forced to reduce student success advising and mentoring; defer repair of critical building systems and recruit a higher proportion of out-of-state students able to pay higher tuition. Taking these actions will threaten the attainment and quality of an OSU degree while directly eliminating access to those Oregonians who are least able to afford a post-secondary degree.

– OSU Board of Trustees Chair, Rani Borkar

Other universities are on the cusp of proposing up to double-digit increases due to concerns over the effects that further programmatic reductions will have on students attending their campuses. These institutions will be subjected to a review by HECC over the next month. Two years ago, in the midst of an acrimonious HECC process, universities were able to reduce tuition increases to below the five percent threshold when the legislature increased funding for the PUSF by $70 million in the closing weeks of the session.

The Oregon Opportunity Grant Program (OOG)

The OOG is Oregon’s only need-based grant program for university students. The Governor proposed an increase of $121.5 million to the program in her investment package, a 45% increase over the current biennium. Public universities and higher education partners, including the Governor, advocated for OOG funding to be included in the student success proposal, but ultimately legislators did not include it.

Prognosis: The Co-chairs’ budget did not specify funding for the OOG program. Universities continue to advocate strongly for the sole source of state funding for need-based grants.

State Programs

State Public Service Programs include 14 distinct programs located across the public universities with distinct missions and goals. Programs housed at OSU (but which often include participation by faculty from the other public universities) include the Oregon Climate Change Research Institute, Oregon Natural Resources Institute, the Tallwood Design Institute, Signature Research, Fermentation Science Program, and a Marine Research Vessel program.

While the Governor simply proposed to flat-fund these programs, the Ways & Means Co-chairs called these programs into question, and asked the Ways & Means Education Subcommittee to review the efficacy of these programs, leaving open the potential that some might be reduced or eliminated.

In April, the Subcommittee conducted two days of hearings to provide approximately ten minutes each to those who implement the programs to describe what these programs do and why they should be continued. The Subcommittee also spent a significant portion of a hearing listening to program supporters. Committee members frequently commented on the favorable aspects of these programs and provided no indication of concerns regarding any of the line items.

The Subcommittee conducted a similar review of the $25.5 million Engineering Technology Sustaining Funds (ETSF, formerly known as “ETIC”). Scott Ashford, Dean of the OSU College of Engineering, and Sneha Sinha, President of OSU’s College of Engineering Student Council, each provided compelling testimony in support of this program.

Universities have also sought to recover the $14.1 million Sports Lottery support for athletes and athletic programs across all seven universities.

OSU is working with a community of advocates for the Outdoor School program which was established by voters in the 2016 elections. The program was partially funded ($20 million in lottery funds) during the current biennium to account for phasing in the program. Advocates are seeking a $20 million increase in lottery funds to enable full implementation of the program as approved by voters. Legislators showed no inclination to eliminate or reduce funding for these programs.

Prognosis: After three days of hearings and various legislative visits, no state programs emerged as likely targets for reductions or elimination. How the budget leaders treat these programs will determine on the May forecast.

University Innovation Fund: OBDD Budget (SB 5524)

Governor Brown proposed a $10 million fund in the supplemental budget of the Oregon Business Development Department (OBDD) to enable universities to use state matching funds when competing for federal grants. Her proposal was not in the agency’s “base budget” but would have been enabled with the passage of proposed revenue increases. Universities submitted a letter of support for the concept during the Ways & Means process and OSU Professor Rich Carter testified in support of the concept during a February 28 hearing. The Co-chairs’ proposed budget did not include funding for the concept, but it continues to be the subject of consideration. Another concept – Oregon Corps – which universities also developed with OBDD did not attract legislative attention. This $7.5 million proposal would create a training and skills development program to assist faculty at Oregon public universities in connecting early stage research to real-world industry interests while assessing product and marketing opportunities for innovations. It is not likely to be included in the OBDD budget.

Prognosis: Final decisions regarding funding for the University Innovation Fund will be determined following the May 15 quarterly economic forecast.

Capital Budgets

Unlike the operating budget which involves all seven public universities working together to increase funding that is distributed by a set formula among the campuses, the capital budget involves individual university projects that are ranked by the HECC and recommended by the Governor. This year the Governor recommended deferring all but three individual projects, the most significant of which was $65 million for deferred maintenance to be distributed by an agreed upon formula among the seven universities. In a letter last week to the Ways & Means Capital Subcommittee, university presidents agreed on a general approach that encompasses Governor Brown’s November proposal which includes reserving state debt capacity for the 2020 legislative session.

The delay is intended to enable the completion of a HECC 10-year strategic capital investment plan. During the 2018 session, legislators called for a review, but the HECC was unable to contract for the work to be done prior to evaluating projects proposed by the universities for the 2019-21 biennium. Among other goals, the HECC analysis aims to create clarity around enrollment trends across university campuses, while also assessing the status – capacity, age, and condition — of existing capital structures.

Prognosis: Because bond sales for these projects will not occur until June of 2021, waiting until 2020 will not result in a significant delay in funding for projects, though it creates uncertainty for those who are providing matching funds. Universities with significant matching funds for projects may be able to start construction activities, using non-state funds, as soon as the legislature approves the bonds.

Legislators have not agreed to the delay, or to an amount that is appropriate to devote to capital construction for university projects. Budget writers have expressed concerns over the amount of general funds that are committed to retiring debt in the out-years, although this concern is generally accommodated in the State Debt Policy Advisory Commission which has a standard of not committing more than 5% of general fund revenues to retiring debt.

Based on the May 3 Ways & Means Capital Subcommittee hearing it is clear that legislators have concerns regarding university capital projects, but is not clear what direction they will take over the next six weeks. In sum, the current climate around capital spending remains uncertain and contentious.

The following groups submitted letters of support for OSU capital projects for the current biennium:

Beaver Caucus

Associated Students of OSU-Cascades (ASCC)

Now4 OSU-Cascades

And, the Bend Bulletin recently published an editorial regarding the Student Success Center.

OSU Initiatives

Operating Budget: OSU Statewide Public Service Programs – “The Statewides” (SB 257)

Last May, the OSU Board of Trustees endorsed a proposal from the leadership of the three Statewide Public Service Programs (Extension, Agricultural Experiment Station & Forest Research Laboratory) to work with stakeholders across the state to determine the need for increased funding and the programmatic areas that should be included. In October, the board endorsed the proposal and President Ray transmitted the endorsement in a letter to the governor seeking a $30 million increase for the OSU Statewides.

Sen. Arnie Roblan (D-Coos Bay) introduced SB 257 which is cosponsored by a bi-partisan and bi-cameral group of 22 rural and urban legislators from across the state. A total of 46 legislators (18 Senators and 28 Representatives, equally divided by party) have signed onto a letter to the Co-chairs of the Joint Ways & Means Committee supporting the $30 million increase. A wide variety of stakeholders also support the effort.

The Senate Education Committee approved the bill in early April and forwarded the bill to the Joint Ways & Means Committee. Ultimately any funding increase for the OSU Statewides will be included in HB 5024 which appropriates funding to the HECC.

Prognosis: A full $30 million increase is not likely this session. Funding will depend on the May revenue forecast as well as potential political leveraging, as has happened in the past for these programs. The Co-chairs’ budget calls for a 5.5% increase – approximately $7 million. Roughly $15 million is needed in order to avoid further reductions in the Statewides. The situation is complicated because a number of bills, all of which are currently in the Joint Ways & Means Committee involve programmatic increases for the Statewides, including bills aimed at integrated pest management (HB 2816), residential pesticides use (SB 844), and funding for new dairy facilities (SB 536). If the legislature mandates these programs without adding significantly more than $15 million to the statewides budget, these programs will somehow have to be implemented at the expense of existing programs, presumably through vacancies.

Marine Energy

OSU is seeking $1.6 million in state funds to match a $40 million US Department of Energy marine energy grant to construct a wave energy test site off the Oregon Coast. These funds would be a final installment in a partnership with the state which has already allocated $3.8 million to support this effort. OSU is committing an additional $4.6 million in non-state funds to match the federal grant.

Prognosis: A budget note from the 2018 session appears to indicate support for the final installment for the wave energy match, but no commitments have yet been made.

Advocacy – OSU Day, April 17, 2019

Over 90 students, alumni and supporters participated in OSU Day at the Capitol on Wednesday, April 17. They discussed their experience at OSU and why it is important to invest in Oregon students and capital projects at OSU-Corvallis and OSU-Cascades. Students shared their unique story about college accessibility and affordability, various programs they are involved in, and how investing in OSU will help contribute to their education, the economy, and generations of students to come. Advocates also joined Statewides Day at the Capitol on March 18^th to support the $30 million increase to the Statewide Public Service Programs.

Benny’s Excellent Day in Salem, OSU Day – April 17, 2019

Benny greeted everyone who was visiting the Capitol.

Benny oversaw the House passage of SCR 22, a resolution honoring the 2018 National Champions in baseball, as Rep. Shelly Boshart Davis (R-Albany), an OSU Alum, carried the measure on the floor.