I write to update you on the university’s budget planning for the coming fiscal year.
This afternoon, we will present to the Finance and Administration Committee of the OSU Board of Trustees a preliminary Fiscal Year 2021 budget that outlines prudent actions in response to what we know will be a challenging year financially, but a plan that avoids overreacting in the face of limited information.
As you know, we face tremendous uncertainty with respect to the course of the COVID-19 pandemic, undergraduate and graduate enrollment and associated tuition and fees, state funding and the prospect of any additional federal emergency aid. Last week, the state released its revenue forecast, which projects total state revenues at $2.7 billion below expectations for the current biennium. The forecast projects $4.4 billion and $3.4 billion shortfalls in the subsequent two biennia. Thus far, Governor Kate Brown has asked all public agencies and institutions to anticipate a 17% reduction in state funding for FY21.
While domestic student enrollments for next year are tracking reasonably well under the circumstances, we know that international student enrollments will be down significantly, given travel restrictions and delays in visa processing. Moreover, even predicting domestic enrollment is extremely difficult given the uncertain course of COVID-19 and emerging evidence that current and prospective students are highly uncertain about their college-going plans. As well, each of our self-support auxiliary units — especially University Housing and Dining Services and OSU Athletics — absorbed substantial losses in spring and will face shortfalls again in the coming year given the anticipated lower density on our campuses and curtailed sporting events.
Considering all of these factors, the Office of Budget and Fiscal Planning has developed six financial scenarios for the university. You can learn more about these scenarios (PDF), which project FY21 shortfalls ranging from $78 million to $214 million for all funds, including $31 million to $79 million shortfalls in Corvallis Education and General funding (E&G) and $800,000 to $3 million in E&G shortfalls at OSU-Cascades. E&G funding is primarily composed of state funding and tuition and fees.
Much remains in doubt in Washington D.C. and Salem. Congress is adjourned until early June and it is unclear whether another major relief measure will be adopted or include funding support for state governments and higher education. And while a special legislative session to balance the state’s biennial budget was first expected to occur in April, Oregon House Speaker Tina Kotek now indicates a special session is not likely to occur before August.
The budget we are asking the Board of Trustees to approve projects a $49 million or 7.7% decline in Corvallis E&G revenues. Recall that on April 15, I wrote you indicating that we had asked all units to develop contingency plans for possible E&G reductions of 3%, 7% and 10% for FY21. Units have been engaged in that planning for several weeks and we are starting to gain a clearer picture of what we might do at the unit level and institution-wide.
We cannot delay taking action to mitigate these projected revenue shortfalls. But we must do so without overreacting in ways that would do lasting damage to the mission of the university, those we serve and our faculty, staff and students.
Focusing on E&G funds, here are actions we are taking — or anticipate taking — to close the projected $49 million gap:
These measures within colleges, divisions and units may be adjusted as we receive detailed plans from unit leaders. While discussions with United Academics of Oregon State University on the details of a temporary salary reduction plan are continuing, we will make a decision shortly on the scope of a salary reduction for senior executives to go into effect July 1, 2020. As a reminder, in October we made the decision to freeze senior executive salaries for 2020, even as we increased classified and professional faculty salaries.
It is important to know we will announce specific budgetary actions in mid-June to be implemented in July. If necessary, we will take further actions as we learn more about the extent of future spread of COVID-19; the status of instruction by modality (mix of in-person, remote and online instruction); the extent to which enrollment of resident, non-resident and international students at the undergraduate, professional and graduate levels match our forecasts; and further impacts on OSU’s auxiliaries.
Looking ahead, we anticipate potential losses for auxiliary units to be much greater than for academic and administrative units as the factors that influence auxiliaries’ revenues vary widely under alternative university, local and state resumption scenarios. While we are approaching the budget challenge from a university-wide perspective, we also will tailor budget reduction efforts for auxiliaries to their unique situations. We will announce specific auxiliary budget plans and actions in the coming weeks.
I know the last two months have been hard for each of you and realize there is substantial uncertainty in many aspects of our own lives going forward. But I believe in each of you and all of us as a community.
We will come through these difficult times with lessons learned and be more certain than ever that the work we do profoundly benefits those we serve. And that our creative work and Oregon State University’s graduates remain our most important contributions to the future.
Edward J. Ray