PSU expects $5.2 million budget deficit

Portland State is expecting at least a $5.2 million budget deficit for next year, and administrators are looking to increase enrollment and cut spending to balance the budget.

The university is set to spend $2 million more than what Gov. Ted Kulongoski proposed to the state Legislature for the 2007-08 school year. Administrators plan to try to increase enrollment, hire lower-paid faculty members, and cut costs throughout the university to offset the deficit.

Lindsay Desrochers, vice president for finance and administration, said the $2 million shortfall will reoccur each year unless the university receives additional state funding or finds an internal way to fix the problem.

Administrators also plan to cut $3.2 million from the budget next year to stabilize a 10 percent university fund balance, an emergency savings account that Portland State is required to maintain. The fund balance must be between 5 percent to 15 percent, and Desrochers said a 10 percent balance of PSU’s $199 million general fund is the optimal choice.

If the Legislature approves less of the governor’s budget when the state budget comes out in June, PSU could be forced to cut more from next year’s budget. Provost Roy Koch said the administration could be forced to eliminate jobs or programs, but they plan to bring in more tuition money and cut costs first.

“We are doing our best to try to minimize the impact,” Koch said. “We are trying to focus and accomplish this without reduction in support staff or academic staff.”

PSU was forced to reduce the budget by $4 million for 2006-07, causing reductions like $400,000 from the library’s budget from 2005-06.

In order to save PSU staff from losing their jobs, Koch and Desrochers say they plan to replace departing full-time professors with assistant professors, who are generally paid much less, and to increase enrollment. Enrollment decreased by about 300 students from 2005 to 2006.

“Things like that don’t hurt our ability to carry out our programs,” Koch said.

Chair of the Faculty Senate Budget Committee, Ray Johnson said raising graduate-level tuition might also be an option. He said undergraduate tuition levels are capped, but graduate levels are not.

The choice between raising tuition and cutting necessary programs is clear, Johnson said.

“If the choice is raising tuition or cutting vital courses you might choose to raise tuition rather than cutting things that are essential to the institution,” Johnson said.

Portland State must cut the additional $3.2 million because the university has used the fund balance to offset previous budget deficits and spending. In the last three years the fund balance has dropped from $22.5 million to about $17 million.

The fund balance currently sits at around 8 percent of the total budget. At the start of this school year, the budget was about 10.7 percent.

“(We are going) to try and balance the revenue and expenses so we aren’t using our savings account on a regular basis,” Koch said.

One percent of enrollment is equal to about $800,000, according to Desrochers. To find $5.2 million dollars in revenue through tuition, PSU would have to increase enrollment by about 6.5 percent, or nearly 1,500 new students, next year.

Desrochers said PSU would not find that many new students this year, but can find enough to significantly affect the budget.

The hope, Desrochers said, is to find enough new students to cover $1 million to $ 1.5 million of the shortfall. After that, the university would find other ways to tighten up spending, including cutting equipment costs and paying closer attention to spending in departments at PSU, specifically the College of Liberal Arts and Sciences.

She said administrators might work on curriculum, making sure classes are full to cover the cost.

Koch said the other plan, replacing retiring full-time professors with assistant professors, will not hurt the university, unlike eliminating the positions altogether.

“When we hire someone at a junior rank to replace a senior rank, we can put that into the reduction of ongoing expenses,” Koch said. “Things like that don’t hurt our ability to carry out our programs.”

“I don’t know that that’s a viable long-term solution,” said Johnson, who is also a professor of accounting. The university would be unable to know exactly when full-time professors are going to retire and it can’t force retirement on them, he said.

Desrochers said she does not know whether positions will be cut or whether departments will feel major impacts, because funding at PSU depends on a final state budget. She said she is confident that the university can find the money.

The final fund allotment for Portland State, due in June by the Legislature, could be notably less than even the governor’s recommended budget, Koch said, forcing PSU to go back and redo the budget process.

“We have to play this balancing game,” Koch said. “Letting people know what we want to do next year before we know how much money we’re going to have.”

The University Budget Team, which includes Desrochers and Koch, is meeting today to finalize a budget recommendation based on proposals from all departments on campus. Their recommendation will be delivered to the Faculty Senate Budget Committee April 2 with a final proposal delivered to PSU President Daniel Bernstine on April 23.

Two open budget forums are set to be held April 9 and 11.