“There is no financial crisis at PSU,” expert says

Portland State University is overestimating expenses, underestimating revenue and overpaying administrators says a financial expert after analyzing the 2010 Oregon University System audit.

Portland State University is overestimating expenses, underestimating revenue and overpaying administrators says a financial expert after analyzing the 2010 Oregon University System audit.

Dr. Howard Bunsis, a professor of accounting at Eastern Michigan University, presented a

financial audit of Portland State and the OUS on Friday, May 20, in the Academic and Student Recreation Center.  

The presentation, organized by PSU’s chapter of the American Association of University Professors, offered the 2010 OUS financial audit as the best evidence that academic cuts at PSU are unnecessary.  

“Both the OUS and PSU are in solid financial condition,” Dr. Bunsis said. “That may surprise you, but that claim is really incontrovertible.” 

The audit was performed by KPMG, one of the four largest global financial auditing services. Bunsis stressed the importance of audits in assessing the financial health of an institution. 

“Budgets are plans of what may occur,” Bunsis said. “Audited financial statements report what actually occurred.” 

According to the audit, PSU reported a profit of $30 million in 2010, leaving it with reserves in excess of $60 million. This $60 million in unrestricted assets was reported just one year after the PSU-AAUP agreed to voluntary pay cuts for PSU faculty. 

According to OUS figures, PSU reported profits of 7.2 percent in 2007, 6.3 percent in 2008, 5.3 percent in 2009 and 7.1 percent in 2010. 

“The profit margin for PSU in 2010 was 7.1 percent,” Bunsis said. “Wal-Mart doesn’t make that much, but in 2010, PSU did. Congratulations. This is evidence that the 2009 furlough was unnecessary. It’s also evidence that cuts to academic programs are not necessary at PSU, and that the administration is straying from their own core academic mission.” 

PSU has since issued a statement responding to the presentation, part of which stated: 

“This is not an objective analysis. What is clear is that the Oregon Legislature has not yet determined the extent of cuts in store for Oregon’s public universities in 2011–13, nor has the State Board of Higher Education set tuition rates for fall 2011. Those amounts are critical to determine Portland State’s budget for next year. Once those amounts are announced in the coming weeks, both the university and AAUP bargaining teams will have the kind of information necessary to move forward with negotiations and reach an equitable contract.” 

Bunsis, who is also secretary treasurer of the national AAUP, said that Oregon’s disinvestment in higher education does not necessitate the kind of drastic cuts that are being proposed by PSU administrators. 

“PSU has a wide variety of revenue sources,” Bunsis said. “$30 million of federal stimulus money is gone for the 2011–13 biennium; however, that decline is not debilitating. The OUS has many other revenue sources, they don’t rely heavily on this support.” 

A key talking point in the presentation of the 2010 OUS audit was the matter of unrestricted asset reserves, which were in excess of $60 million at the end of the 2010 fiscal year. These represent liquid, unrestricted assets, and do not include funds earmarked for specific purposes or those invested in capital assets, such as buildings. 

Buildings, Bunsis said, represent not only the majority of PSU’s financial assets, but also may be part of the reason that university administrators are hesitant to spend some of their cash reserves. 

“If all revenue ceased today,” Bunsis said, “PSU could continue to operate for two entire months. That’s pretty good for a rainy day fund. Why have these cash reserves and not use them? These cash reserves could prevent the need for academic cuts.”

Bunsis added that while PSU has seen a large increase in tuition over the past several years, it has also seen cuts to instruction and academic programs.

“There has been a shift from instruction to administration, and at the same time, students are paying more and more tuition,” he said.  

The PSU-AAUP is currently engaged in collective bargaining with university administrators, negotiating the terms of the contract for the coming biennium.

“This analysis really shows very plainly what is happening here at PSU,” said Mary King, vice president of collective bargaining for PSU-AAUP and an economics professor at PSU. “With Howard’s credentials, I don’t think anyone can argue with this analysis.” ?