Proposed 9.2 percent tuition hike this fall

This month, Portland State President Wim Wiewel will ask the State Board of Higher Education to increase the tuition for PSU students by more than 9 percent.

Wiewel’s decision arises from a recommendation he received last week from PSU’s Tuition Review Advisory Committee that tuition increase this fall by 9.2 percent for undergraduate students, by 6 percent for non-resident undergraduates and by 6 percent for all graduate students. The increases are one part of a three-pronged strategy PSU will employ next year to cover an expected $24 million shortfall in its budget.

Wiewel fully accepted the tuition advisory committee’s recommendations and will now present them to the state board, which sets

tuition at all Oregon University System schools. Public hearings will be held in mid-May, and the board is expected to make a decision on the proposed rates sometime in June.

“The board looks at the cost to run the essentials, the state money coming in and how many students are expected in the future,” said Vice President of Finance and Administration Lindsay Desrochers.

Even after the board makes its decision, the Legislature has the ability to add “budget notes,” which could further impact the budget. Though these notes do not have the force of law, they are strong recommendations by which the board usually abides.

The tuition increases will only cover 50 percent of PSU’s funding gap. Other measures the university will implement to fill the need include a 3 percent spending cut across campus and using $8.1 million from the university’s reserve fund balance.

Wiewel said the budget gap is the result of decreased funding from the state, scheduled increases in payouts for state employee benefits and general increases in the cost of operations. The shortage is for the biennium, but the current plans only solve the first year; the second has yet to be addressed.

“The tuition increase is much higher than I’d like to see,” Wiewel said. “[But] if PSU implements too many cuts, it’ll damage the services it provides students.”

The state is reducing its financial commitment to PSU in the coming school year to $57 million, which is $12 million less than its current funding level. Cuts in the level of state support are the primary cause of tuition increases, Wiewel said.

“The state cuts have left us with no alternative,” he said. “The state has walked away from its responsibilities.”

Adjusted for inflation, the university spends the same as it did on students 20 years ago, though back then the state paid two-thirds of the cost of education. Today, students pay two-thirds of the cost and the state pays only one-third, according to Wiewel.

In terms of cost, the higher tuition rates would bring PSU about even with University of Oregon, Oregon State University and urban peer institutions such as San Diego University and University of Memphis, according to Desrochers.

One of the other factors contributing to the budget shortage is a scheduled 6 percent increase in public employee health and retirement benefit costs, which contributes between $8 and $9 million to PSU’s budget gap. However, those numbers could be subject to change, Desrochers said.

Governor John Kitzhaber has asked the Public Employee Retirement System and Public Employee Benefits Board to consider cost sharing and to take on premium increases, according to Desrochers. No one at the governor’s office could be immediately reached for comment.

Any changes in state employee benefits are subject to the collective bargaining process between the state and employee unions.

The remaining $4 to $6 million of the budget shortage was already a problem for PSU but was being coved by the fund balance as it will continue to be. The expenses include the need for more instructional faculty in the College of Liberal Arts and Sciences, additional investment in faculty research and continued operational support in Student Affairs. Other specific areas in need funding may still be identified. 

“The University Budget Team will be looking at several needs, most especially not losing ground on enrollment,” Desrochers said. “Other strategic investments will be considered, but we are only a part of the way through the process.”

PSU is going to spend $8.1 million, which is 45 percent of its current reserve fund balance, to cover most of the shortage. The fund balance is the sum of money left over every year that is not spent. At the beginning of this school year the fund balance stood at $17.8 million and was 13 percent of the university’s operating revenue.

By the end of next school year, however, it will be at about 8 percent. Administrators are hoping that at the end of the biennium the balance will not be less than 5 percent of the university’s operating revenue, which is the State Board of Higher Education’s lowest acceptable balance threshold.

“[We have] tried to be careful with spending to develop a fund balance but it needs to remain modest otherwise it becomes too attractive to the state and it could be swept to spend elsewhere,” Wiewel said.

Because OUS schools are currently classified as state agencies, their reserve money can be “swept” by the state to be used in other areas. There is currently a proposal before the Oregon Legislature that would curb this practice by changing the classification of OUS schools as state agencies to public institutions.

Despite careful planning, there is still a level of uncertainty to all of PSU’s plans.

“This is all premised on what the governor has recommended,” Wiewel said. “If [the Legislature] decides to go another direction, then we have a real problem.”

However, There are several factors that could positively affect the budget. PSU is currently projecting a 2 percent enrollment increase in for the coming year, which could boost the bottom line. An increase in the number of non-resident students, who pay nearly three and a half times the tuition of in-state students, would also increase revenue.

Additionally, nominal rates of differential tuition are factored into the current tuition model. Each college has the latitude to propose modestly enhanced tuition rates for specific purposes. For next year, the School of Business Administration, Maseeh College of Engineering and Computer Science, CLAS and Department of Fine and Performing Arts have all introduced individual tuition rates.

The 9.2 percent tuition increase for resident undergraduate students will produce tuition revenues, a portion of which will be used for financial aid to help students cope. Fee remissions may also be utilized if the budget allows. A fee remission is a full or partial forgiveness of tuition payments. 

“We use fee remission for many different purposes and one reason is to help needy students,” Desrochers said. “But, there is a lot more to the story there. Of course when we do that the institution loses revenue and therefore it must be carefully managed.”

This year the tuition advisory committee comprised seven faculty and staff members, three employee union representatives and six students, five of which were undergrads and one was a graduate student. Members included Desrochers, Provost and Vice President of Academic Affairs Roy Koch and Associate Vice President of University Budget and Planning Michael Fung.

The committee met three times before making its recommendation to the president. The first meeting was used to analyze the overall budget situation, the second was used to review tuition needs and decisions were made during the third meeting, according to ASPSU President

Katie Markey. 

“We took great pains to go over this situation to show how we arrived at that number [the

$24 million],” Desrochers said.

The student body president and other student representatives were always invited to be part of the tuition setting process as per the state board’s request. However, student participation was formalized this year. Also, if Senate Bill 242 passes through the Legislature, it will be institutionalized that the committee be composed of at least 50 percent students.

“That is a great mark,” Markey said. “Students will have a clearer role in the process.”

This year the student body president is invited to speak at the state board’s meeting during which Weiwel will make PSU’s tuition proposal, instead of having to get on speaker’s list as in years past.

In April the Oregon Student Association and ASPSU will have a rally in Salem, complete with a sinking ship named the SS Higher Ed to signify the effect of decreased investment in higher education. The aim of the event is to convince lawmakers to give more funding to higher education.

“Now is a good time for students to weigh in with the Legislature and support higher [education],” said Chris Broderick, assistant vice president for communications and marketing at PSU. “If one in 100 students called the Legislature and expressed the need to support funding, it would make a significant difference.” ?