2014-15 Budget Frequently Asked Questions
At the beginning of this year, PSU projected a $15 million budget shortfall for 2014-15 and determined that we must make strategic decisions to balance the budget and put us on a sustainable fiscal path. This fall, we are starting an inclusive process to study potential consolidations, efficiencies and cost controls, as well as ways to increase revenues. By creating a sustainable revenue and spending plan, PSU can make the kind of long-term investments in academic programs, faculty research and student support that are essential to our growth and success. The $15 million gap is about 5 percent of the projected $276 million education and general fund budget for 2014-15.
Over the past five years, the cost of wages, PEBB and PERS have gone up by nearly $47 million. Those increases were offset by an increase in income from tuition and fees of $47 million. But over the same time period, state funding has decreased by $15 million, leaving an ongoing structural shortfall.
PSU was able to fill the gap in 2009-10 and 2010-11 with temporary federal stimulus funding through the American Recovery and Reinvestment Act of 2009, as well as a 6.5 percent enrollment increase and significant tuition hikes in 2009-10. There was also a 1.7 percent rise in enrollment in 2010-11.
Since then, the stimulus funding ended, enrollment has flattened and tuition increases have been modest, leaving an ongoing shortfall. In the past two years, we have made across-the-board reductions and tapped our reserves to balance the budget. This year, we are starting discussions early to bring the campus into a deeper conversation about PSU’s future.
These budget decisions are part of the reTHINK PSU initiative, a university-wide effort to serve more students with better outcomes while containing costs through curricular innovation, community engagement and effective use of technology. The goal of this process is to balance the budget for the long term, with a goal of avoiding year-to-year budget instability and reductions.
Potential new sources of revenue include more state support, philanthropy, new curriculum development, online offerings, partnerships, grants, licensing, real estate and student recruitment.
An across-the-board cut is a blunt instrument that doesn’t consider our priorities and goals as a university. We need to think strategically and make sure that we are investing in the areas that best advance our mission.
In 2013-14, PSU’s ending balance is projected to be 8 percent of its operating revenues, down from 12.5 percent in the 2011-13 biennium. Sound fiscal practices require that we maintain an ending balance of 5 percent to 15 percent for cash flow and contingencies. Without closing the $15 million gap in 2014-15, the level would fall to 3.3 percent, well below the required range. PSU must have cash on hand year round to pay its regular and unexpected expenses.
The Legislature reduced future pension costs and allocated state money to “buy down” tuition increases this year, resulting in no net gain for universities. A fall tuition increase of 3.5 percent has been rolled back to 2 percent for winter and spring 2014 and will remain frozen at that level through spring 2015, which will be the first time since 2001 that tuition has not increased year to year. The relatively small increase in state support still leaves us millions of dollars short of what we received from the state five years ago.
At the four-week mark, enrollment is essentially flat at 28,766 students, with more new freshmen and transfer students than last fall. However, graduate enrollment declined by 3 percent. PSU cannot expect growing enrollment to make up for the recent decrease in state funding and frozen tuition next year.
Personnel costs make up 81 percent of PSU’s operating budget, so any increase in compensation, including the outcome of collective bargaining, will impact the budget. We are hoping to avoid layoffs, but they may be necessary to achieve the level of savings we need to balance the budget.
- Administrative restructuring
- Setting academic priorities
- Energy and real estate savings
- Student service savings and efficiencies
- Staff and benefits savings
- Savings in other areas such as athletics and public safety
Some decisions can be made administratively, but most will need discussion and review that will continue into 2014.
President Wiewel will make the final decision with the executive committee: Sona Andrews, provost and vice president for Academic Affairs; Françoise Aylmer, vice president for University Advancement; Jackie Balzer, vice president for Enrollment Management and Student Affairs; Lois Davis, chief of staff and vice president for Public Affairs; Jonathan Fink, vice president for Research and Strategic Partnerships; Jilma Meneses, chief diversity officer; David Reese, general counsel; and Monica Rimai, vice president for Finance and Administration.
Recommendations will be considered on an ongoing basis, and final decisions must be made in time for implementation on July 1.
You will have an opportunity to discuss the budget and share your views at a town hall during winter quarter. You can also post comments on the Finance and Administration website (www.pdx.edu/fadm), and discuss the budget in meetings in schools, colleges and administrative units. We also will use our shared governance channels to engage campus stakeholders.
Why are we spending money on the new Viking Pavilion and expansion of the School of Business Administration? Why not redirect that money to academic programs?
Those two building projects are funded with private donations and state bond funding for capital projects. That money cannot be used to pay for salaries or academic programs.
Tuition is by far our main source of revenue. Increases in tuition over the past five years have been substantial, and the Legislature gave us additional money this year to “buy down” tuition increases. That means that a tuition increase of 3.5 percent increase this fall was rolled back to 2 percent for winter and spring quarters. Tuition will remain at that level in 2014-15.
Scholarships are funded separately from the education and general fund budget and will not be reduced in the budgeting process. If anything, money for scholarships will increase because raising money for scholarships is a top priority for PSU.
It’s too soon to say exactly how class sizes and offerings will be affected. We aim to improve the overall experience and outcomes for students and will keep that goal at the forefront of any decision.
Why are schools and colleges planning for an 8% reduction of their budgets when the gap is about 5% in the university’s total operating budget?
The Academic Leadership Team (provost, vice provosts and deans) decided that school and college reductions would not be across the board. To achieve a 5% budget-balancing average, plans need to be greater than a 5% reduction because some schools and college may see changes greater than the 5% average. It is also the case that schools and colleges will see a combination of reductions and revenue enhancements to equal the budget-balancing targets.
In recognizing the need to balance the university budget, questions have been raised about our program array. Academic Program Prioritization will help determine if our investments in our programs are aligned with our mission, needs and the academic quality we strive for. It may result in position reductions, although we will try to avoid that as much as possible. We will not know until we conduct an assessment of our programs. That assessment will be through the shared governance process, and the Faculty Senate Steering Committee is working with the provost on this topic.
The Provost’s Challenge funds were one-time dollars that do not affect year-to-year budgets. The funds are restricted and are used to support technology-enhanced courses and programs.
The Finance and Administration website (www.pdx.edu/fadm) will be your source for budget background, updates and feedback. Click on “budget feedback form” under “What’s New” to submit comments. In addition, PSU's schools, colleges and administrative units will continue to discuss proposals in the upcoming weeks, and we also will use our shared governance channels to engage all of our campus stakeholders. President Wiewel will provide further updates when appropriate.
Why not eliminate the football program completely?
Without football, PSU would be required by law to add other men’s sports to satisfy Division I and Title IX requirements. As a result no significant additional savings would be gained from cutting football entirely. Making football self-supportive, i.e. not subsidized by the general fund, enables PSU to save $800,000 while continuing to offer a unique student experience that contributes to a vibrant and diverse campus community.
Why not eliminate the entire Athletics program?
PSU is committed to being a major public research institution and Athletics factors into that future. The benefits of Division I Athletics to an institution as part of the academic experience is significant, even at PSU. Also, Athletics generates substantial tuition revenue for PSU through walk-on and scholarship participants, as well as generating external revenue not available to PSU through other means, such as from ticket sales, corporate sponsorship, and facilities rentals.
How will the budget impact salaries?
Unrepresented, unclassified staff members who earn over $100,000 will not receive any pay increases in the next two years.
PSUFA (Adjunct Faculty Association) will receive a 3 percent increase in the minimum salary effective January 1, 2014. Also, a 1 percent salary increase for adjunct faculty above the new minimum salary.
Unrepresented, unclassified staff members who earn an annual salary of less than $100,000 will receive a 2 percent pay increase in 2014 and another 2 percent in 2015 for the first $50,000 of their salaries. That means staff members who earn $50,000 will receive a raise of $1,000 next year, and a staff member who earns any amount between $50,000 and $100,000 will also receive a $1,000 raise.
SEIU (Service Employees International Union) signed an agreement in September for a 1.5 percent increase for members on December 1, 2013, and another 2 percent increase on December 2, 2014.
Maintaining fees for online courses will result in approximately $2.1 million in projected revenue for the university in the 2014-15 fiscal year. Reducing the amount originally projected for debt service for capital projects saves approximately $500,000 next year, and that does not affect state bond projects such as the renovation of the School of Business Administration. Adjusting the expected inflation costs for certain operations in 2014-15 will reduce costs campuswide by an expected $500,000.
What is the budget impact of the AAUP settlement?
PSU originally allocated $3.4 million over two years to cover projected pay increases for AAUP-represented faculty and staff for 2014 and 2015. The contract settlement has increased that amount by $3 million to a total of $6.4 over two years. In the short term, the difference will be made up by drawing down the university’s reserves and will not come from a tuition increase or significant cuts in other areas.
In the long term, however, increases could result in reserves dropping below the amount considered prudent in case of emergencies or unexpected expenses. The university will rely on a mixture of increases in enrollment, legislative support, and possible cuts in future years.
How will budget decisions be made?
PSU’s budget is administered by the Office of Finance and Administration under Vice President Monica Rimai, and spending priorities are set by President Wim Wiewel in consultation with Provost Sona Andrews, other members of his Executive Committee, the Faculty Senate Budget Committee and academic leaders across campus.
Will any salary adjustments be made for unrepresented unclassified employees as a result of the AAUP settlement?
As previously announced, unrepresented unclassified staff members who earn an annual salary of less than $100,000 received a 2 percent pay increase this year on the first $50,000 of their salaries. They will receive the same raise in 2015. The one exception is for academic department chairs or chair equivalents, who will receive the same increases as AAUP represented employees.
How will information be communicated about budget changes?
Budget updates, including frequently asked questions and spread-sheet summaries of revenue and spending, are posted on the Finance and Administration website, pdx.edu/fadm, will be shared with the Faculty Senate Budget Committee and will be communicated through university channels, with a campus budget forum to be scheduled later this spring.