Governor Brown issued her recommended budget (GRB) for the 2017-19 biennium yesterday.  Facing a projected state budget shortfall of at least $1.4 billion compounded by rising personnel and health care costs, the GRB includes many difficult decisions.  This update provides a summary of the major elements affecting higher education in Oregon.  To review the entire budget document:  http://www.oregon.gov/das/Financial/Documents/2017-19_gb.pdf

In short, despite increasing costs driven by state-mandated employee health and retirement benefit programs, the GRB provides no programmatic increases for the state’s seven universities.  The university presidents, who had sought at least a $100 million increase in order to meet current service levels while keeping tuition increases at a manageable level, issued the following statement:

“Oregon’s public universities commend Governor Brown for prioritizing students and higher education in her recommended budget. Ensuring a college degree is accessible to every Oregonian without taking on a lifetime of debt is how our state will remain vibrant and competitive. With limited resources, Governor Brown took great strides to protect students. The investments outlined in her budget will mean Oregon does not balance its books at the expense of those who are most vulnerable.

“As the Legislature weighs difficult budget choices, we urge lawmakers to increase operating funds beyond the Governor’s budget. By doing so, every campus can keep tuition at a manageable level for the next two years and maintain vital support services that keep students on track to graduate. If we want to enable more Oregonians to earn college degrees at an affordable level of tuition, additional resources will be needed.

“Public universities are educating the workforce and leaders of tomorrow, and we act as incubators of ideas and solutions that can change the world. Oregon must protect students by recognizing that higher education is a fundamental necessity for a robust economy and a living wage. We stand as partners with the state, ready to work with the Legislature and the Governor to address the challenges that lie ahead.”

In comparison, K-12 State School Fund received a 9% increase in funding, for a total of $8 billion.  This figure is approximately $500 million below what the Oregon School Boards Association says local schools need to maintain current service levels.

 

The Public University Support Fund (PUSF)

The PUSF is funded at the 2015 Legislatively Approved Budget (LAB) level of $667.3 million.  Flat funding when costs are increasing means that universities will need to turn to tuition increases, personnel reductions, service cuts, and other actions to balance their budgets. The GRB was a significant improvement over Department of Administrative Services (DAS) internally driven proposals that would have restricted university access to general funds to support retirement and health insurance cost increases.  The Governor sought to shield public universities and students from taking a disproportionate cut, but since nearly 70% of the academic personal costs are born by tuition revenues, 70% of those cost increases will be covered by tuition increases.

The university presidents had sought to insulate students from these cost increases with their request for at least a $100 million general fund increase, which would have driven the PUSF to $765 million.  Now it falls to the legislature to determine whether or how this gap can be filled.  Legislators initially convene in January for organizational purposes, and then go into full business mode the first week of February.

 

OSU Statewide Public Service Programs – Agricultural Experiment Station, Extension Service, and Forest Research Laboratory

The GRB proposes no increases for the OSU Statewide Public Service Programs – the Extension Service, Agricultural Experiment Station, and Forest Research Laboratory, known as the “OSU Statewides.”  This spring, the OSU Board of Trustees sought a $9.4 million continued service level increase for these programs – simply the amount of funding that would be needed to provide the same level of service next biennium as what was provided during the current biennium.

Last session, after a year of activism by a broad coalition of advocates, the legislature approved a $14 million increase for these programs.  The resulting $118 million funding level enabled OSU to hire some 40 new research and extension positions across the state to address significant challenges facing Oregon family farmers, low income families, and Oregon’s natural resources enterprises.  This was a monumental step reversing a 15-year decline when these vital programs were forced to eliminate positions that served a diversity of Oregonians in all 36 counties.

The GRB will have the effect of eliminating nearly 70 percent of the programmatic increases the legislature approved last session.  Because the vast majority of these funds are used to cover personnel costs, the primary tool the Statewides have to manage their costs during budget reductions is through the elimination of positions.

While academic programs at OSU rely on state general funds, they also are able to turn to tuition when the legislature cuts their funding.  The Statewides do not have access to tuition revenues and so feel the full impact of state funding reductions.  However, because many of the Statewides’ positions are “shared appointments” which have both teaching and research responsibilities, there will also be impacts on the university’s education enterprise.  The elimination of research positions also inhibits OSU’s ability to compete for federal funding.  OSU estimates that every state dollar invested in the OSU Statewides leverages nearly $10 in economic benefits to the state.  The Governor’s budget puts these economic returns at significant risk.

It is too early to identify the precise number and location of the positions that could be eliminated as a result of flat-funding the Statewides.  The first step available to program managers is to leave position vacancies un-filled when they occur.  Managing through attrition is not a strategic approach to addressing Oregon’s challenges in the coming biennium, but it is the only practicable alternative currently open to the Statewides.

In order to maintain the same level of service for the Statewides the legislature will need to find $9.4 million in general fund resources.  OSU is committed to work with legislators and the broad coalition of stakeholders who have supported these programs in the past to find practicable solutions for addressing the funding challenges facing the Statewides in the 2017-19 biennium.

Outdoor School:  Due to the passage of Measure 99, which established and funded “Outdoor School” with $44 million in Lottery Funds, the GRB also includes a $44 million increase to the OSU Extension Service which, under the measure, is responsible for administering the funds and developing the curriculum for the program.  OSU has estimated that about $1.6 million of these funds will be needed to meet Extension’s responsibilities under this program.  Despite the ballot measure provisions, the legislature will ultimately make the final funding decisions, both for the amount of lottery funding that will be provided to local school districts and to Extension to administer the program.

 

Other Highlights in the GRB

Sports Lottery (Title IX Scholarships):  The Governor eliminated all funding for this program which under state statutes is supposed to provide 1% (approximately $12.5 million in 2017-19) of the economic development fund from the state lottery fund for scholarships for athletes and graduate students. Most of the scholarships are used to meet Title IX requirements for women athletes.  In previous legislative sessions (including 2015) legislators have capped the funding for this program at $8.2 million.  Previous Governors have also recommended eliminating funding for this program, but have faced legislative opposition.  The seven public universities will mount another campaign in 2017 to recover these funds.  During the current biennium, OSU received $1 million.

Public University State Programs/ETIC:  The GRB essentially provides flat funding for multiple state programs administered by the universities.  Funding for programs that are administered or located at OSU include:

• OSU Marine Research Vessel Program:  $638,929
• OSU Fermentation Program:  $1.3 million
• OSU/UO Center for Advanced Wood Products:  $3.5 million
• OSU Natural Resources Institute:  $411,420
• OSU Climate Change Research Institute:  $322,492
• ETIC Sustainable Funding:  $25.2 million (distributed by a formula to all seven universities; about $14 million to OSU in 2015-17)
• Signature Research: $1.1 million (distributed among OSU, PSU, and UO; about $500,000 to OSU in 2015-17)

Oregon Talent Council/Oregon Inc./Signature Research Centers:  The GRB indicates the Oregon Talent Council is “winding down” and the work on the Talent Development Plan will be continued by one of the former OTC partners.  It is funded at $200K for one limited duration position in 2017-19.  There is not sufficient detail in the GRB to provide information regarding the other programs.

Student Financial Aid: The Governor increased funding for the Oregon Opportunity Grant by approximately 8% from last biennium, bringing the total funding amount to $151 million.

Community Colleges/Oregon Promise:  The Community College Support Fund was also held at 2015-17 LAB levels at $550 million.  The GRB includes $39.7 million for the Oregon Promise “Free Community College” program, an increase of over $29 million to expand the program to cover two new cohorts of students over the next biennium.

OHSU:  Funding for OHSU is at the 2015-17 LAB levels, consistent with universities and community colleges.

 

Higher Education Coordinating Commission (HECC) Agency Budget

The GRB reduced HECC’s General Fund Budget by 3% from the 2015-17 LAB.  The total funds budget for the agency was reduced by 11%.  The GRB included the following HECC Policy Option Packages (“POPs):

• Replacement of the Financial Aid Management Information Systems
• Addition of internal audit and human resources positions
• Funding for issuance of community college and university bonds

The GRB also included targeted reductions in the HECC budget, including:

• An 11% reduction in positions through the elimination of limited duration position authority
• Reductions in personnel services and supplies
• Reductions in GED, ASPIRE, and match against federal Perkins Loans
• Reclassification of 3 positions

 

Business Oregon

The Governor’s Budget removes the Small Energy Loan Program (SELP) from the Department of Energy and places it in Business Oregon and includes $2.7M for administration and to initiate a recapitalization of the program.  Specific information regarding the Signature Research Centers is not enumerated in the budget and will be provided at a later date.

 

University Capital Funding

The HECC Agency Request Budget prioritized the original “Tier One” projects recommended by the seven university presidents earlier this year. At the request of the Governor, the HECC also prioritized additional OSU-Cascades projects that had not been included in the Tier One.  In November, UO sought additional state capital as a partial match for its Knight Campus project.  At that time, the HECC raised the rankings of two Cascades projects – the Site Reclamation for $9 million and Infrastructure for $11 million and inserted the Knight Campus project for $100 million at #13.  This resulted in the projects originally ranked at #11 or below all moving down three steps, including the OSU Fairbanks project moving from #13 to #17 (out of a total of 20 projects).

The GRB recommends $269.6 million in capital support.

New Funded Projects:

• ALL – Capital Improvement and Renewal $45.7 million
• PSU – Grad Education Building $40.5 million
• OSU – Quality Food & Beverage Building $9 million
• OSU – Gilkey Hall Renovation $3 million
• EOU – Information Technology Equipment Facility $1.2 million
• OSU – Cordley Hall Renovation Phase I $15 million
• OIT – Cornett Hall Renovation $38 million
• UO – Classroom Building $44 million
• SOU – Central Hall Deferred Maintenance $6 million
• WOU – Oregon Military Building Renovation $7.7 million
• OSU-Cascades – Site Reclamation $9 million
• OSU-Cascades – Infrastructure $11 million
• UO – Knight Campus $34 million
• EOU – Loso Hall Renovation, Phase I $5.5 million

Eliminations:

• OSU – Fairbanks $11 million
• OSU-Cascades – Academic Building $39 million
• OSU-Cascades – Student Success Center $10,000
• OSU-Cascades – Graduate and Research Center $490,000
• EOU – Fieldhouse $6 million
• WOU – IT Building $5.5 million

Reductions:

• PSU – Graduate School of Education project reduction of $4.5 million
• OIT – Cornett Hall project reduction of $2 million
• All – $20 million reduction to $45 million for seven campuses for capital renewal and maintenance. (2015-17 funding was at the $65 million level).

No ranking changes except what resulted from project eliminations:  The GRB included capital funding of $75.2 million for eleven projects as well as $15 million in lottery bonds for competitive grants for public safety improvements at Oregon’s public universities and community colleges.