Portland State could be in a state of financial emergency in just a few years, unless state funding increases or programs and jobs in the university are cut, PSU administrators say.
Southern Oregon University (SOU) was forced to cut programs and tenured faculty positions after declaring financial exigency in November–an uncommon financial emergency which has not occurred in the state of Oregon since Portland State declared it in 1981–and administrators say a similar situation could occur at PSU.
Lindsay Desrochers, PSU vice president for finance and administration, said that the current Portland State budget track is a few years behind Southern Oregon University’s funding downturn, but said a similar financial dilemma is very likely to occur at Portland State because of the decrease in funding to Oregon universities over the last four years.
If this downward trend continues, Desrochers said, PSU could easily run out of reserve funds, which she said will be a disaster, resulting in loss of jobs, cutting of programs and raising of tuition.
”In two to three years we could be completely out of fund balance,” Desrochers said. “If we don’t make some further adjustments, if we don’t see any new money from the state, that will happen.”
SOU was forced to declare financial exigency because their reserve fund balance, the percentage of a university’s general fund budget that is set aside for emergencies, fell to around 3 percent of the university’s overall budget. A state reserve fund balance mandate requires universities to maintain at all times between 5 and 15 percent of the school’s budget as reserve funds.
If the Portland State reserve fund were to drop below that 5 to 15 percent floor, like at SOU, Portland State would be forced to make drastic cuts or raise tuition in order to compensate.
At the start of the 2006-07 fiscal year, the PSU reserve fund was just over $21 million, or about 10.7 percent of the university’s $199 million general funds budget. PSU has spent nearly $5 million more than was budgeted, bringing the reserve fund balance to nearly 8 percent of the overall budget, according to Jay Kenton, Oregon University System (OUS) vice chancellor for Finance and Administration.
SOU this year was the first OUS school to go below the mandated 5 percent mark since the policy was put in place three years ago.
In the last three years, PSU has seen a steady decline in its reserve fund balance, from $22.5 million in 2004-05, to about $17 million currently. The university’s general fund budget has seen $20 million in budget increases since the 2004-05 fiscal year.
”Obviously if people keep spending more than they bring in, they are going to burn their reserves,” Kenton said.
Kenton said demand for PSU’s services is so high that even if the university were to raise tuition, the demand would not wane too much.
”PSU is one of our more resilient institutions in the system in terms of embracing change,” Kenton said.
One adjustment in the PSU budget could come from faculty salaries, Desrochers said. She said faculty salary bargaining agreements next March could be difficult if the state does not provide adequate funding. She said the state has mandated higher salary increases in the past than OUS has funds to cover.
”If we negotiate contracts that the state doesn’t provide sufficient salary dollars for,” Desrochers said, “we have to take it out of the hide of the university’s programs.”
Staff levels are “perilously low,” according to Desrochers, and she said PSU will need to hire more staff even if it means giving less of an increase to faculty salaries.
”When we negotiate, there’s a reasonable understanding that we have to do some building back of staff, not just salary increase,” she said. “We’ve got enormously dedicated people, just too few of them for the size of our institution.”
The PSU chapter of the American Association of University Professors, the faculty union, will be advocating salary increases as well as increasing the number of full-time faculty, Executive Director Julia Getchell said. PSU faculty are paid at 84 percent of the national average for university teachers, according to OUS, and Getchell said this has hurt the university’s ability to retain faculty.
”One of the problems with retaining people is salary,” Getchell said. “People are leaving early in their career. It’s hard to hire people at these wages, and it’s hard to retain them.”
Desrochers, Kenton and Getchell all said the lack of state funding is the major issue with the financial state that PSU and the other OUS schools find themselves in.
State Sen. Richard Devlin (D ?” Tualatin), chair of the legislative Emergency Board Education Subcommittee, said the legislature is working hard to make sure education is fully funded in Oregon. Devlin said the state will be in considerably better financial position by the next session, which begins in January. He said a major problem is not providing enough revenue to universities to compensate for enrollment growth, which he acknowledges must be changed.
Devlin, a PSU graduate from 1976, said the legislature has been very inconsistent in its funding for universities. In the next biennium he said he hopes the state will provide fairer funding for all of its schools, from preschool to grad school.
”Hopefully there is some really clear direction that we will have a more consistent commitment to higher education,” Devlin said.
Oregon currently ranks 48th in the nation for per-student funding, down from 25th in 1990. The state also was graded with an F for affordability on the National Center for Public Policy and Higher Education’s annual report card.
Desrochers said the school is awaiting the governor’s approved OUS budget, which will be released this Friday or next Monday. OUS submitted a $190.2 million increase for it’s 2007-2009 budget, putting the total for the seven OUS universities at $922.6 million.
Desrochers said she is unsure that the budget will come back with that much, but is hopeful. Whatever it is, she said, the university must keep their options open, being fully prepared to make reductions as necessary.
”We need to go in and rearrange some dollars in order to deal with the reducing fund, who we’re keeping on, how many contracts we need to keep,” Desrochers said. “[We need to be] conservative and conscious.”