President Schill announces $4.5M in budget cuts

Dear University of Oregon campus community,

Over the past few months, I have spent a lot of time in Salem talking with lawmakers about the urgent need for additional state funding for public higher education. Elected officials tell me they understand the critical importance of higher education to the future of the state, but Oregon’s challenging political and fiscal realities—specifically a $1.6 billion budget shortfall in the next two-year budget cycle—make it difficult for them to meet all of the state’s needs, including those of public universities.

It is with a significant level of uncertainty that we must move forward with budget planning for the 2017–18 fiscal year that starts on July 1. The UO must take steps now, some of them difficult, to prepare for this uncertain future. As we move forward, I am committed that we minimize the impact on our academic core.

To recap developments from the last few months, the state is proposing flat funding for public higher education, which in practical terms is a $2.5 million cut next year given the way state appropriations are distributed over the biennium. In addition, the university is forecasting significant cost increases—largely created by salary growth tied to collective bargaining agreements and unfunded retirement costs—equaling approximately $25 million in additional expenses next year, putting the total gap we need to close at $27.5 million.

With the shortfall in mind, in March the UO Board of Trustees approved a conditional 10.6 percent tuition increase for resident undergraduates and a 3 percent increase for nonresident undergraduates. I believe this tuition increase is too high, but it is necessary given our financial position. Public universities in Oregon have calculated that it would take at least an additional $100 million in biennial state support for most public higher education institutions to keep tuition increases to around 5 percent and preserve core student services next year. This is why the UO’s tuition increase is conditional. For every $20 million in additional state support, we are committed to reducing our in-state tuition increase by roughly 1 percentage point. However, we will not know where state funding will shake out until July, when lawmakers will likely finalize the state budget.
With decades of shrinking state dollars, tuition has become our primary source of funding. We have adopted an enrollment strategy for next year that aims to attract a strong incoming class and modestly increase the number of new students, which would help manage rising costs.

The bottom line is that tuition revenue and state support make up 94 percent of our general education budget, and there is a tremendous amount of uncertainty in those areas with three months left until the start of the new fiscal year. Given what we know at this time, we estimate the UO will still face a budget gap of approximately $8.8 million next year that must be closed with either new revenue or budget cuts.

It is my judgment that it would be imprudent to wait until the late summer to take action. Therefore, I am taking steps now to reduce the projected shortfall by roughly one-half, or $4.5 million, for the fiscal year beginning July 1. Those steps include the following:

A 1 percent reduction in administrative general fund spending. I have asked each vice president to provide a budget reduction proposal to me by May 22. Given that labor costs account for about 80 percent of the university’s general education budget, it is likely that some of these cuts will require hiring freezes and layoffs. I will review the proposed budget reduction plans and they will be vetted by the Office of the General Counsel and Human Resources. We anticipate being in a position to communicate any reduction decisions by July 1, with an October 1 implementation date. Schools and colleges will be exempt from this budget cut.
Estimated savings: $1.5 million

Eliminating the strategic investment fund. In the past, the university has set aside about $2 million a year for strategic investments and asked a budget advisory group composed of students and members of the faculty and staff to review, assess, and award funding to various proposals submitted from campus stakeholders. One million dollars of these funds have already been precommitted to tenure-track faculty hires related to the cluster initiatives. As was announced earlier, we are not running the strategic investment process for the remaining $1 million this year. Any new initiatives for FY 2018 that would normally have been funded under this program will have to be supported with dollars reassigned from within individual units.
Estimated savings: $1 million

Ceasing the distribution of graduation incentive grants. The university launched a program in 2016 to provide $10,000 grants to juniors and seniors at risk of not graduating. While this program, funded by state appropriations, is promising, it is something we must halt—at least temporarily—given the absence of adequate state funding.
Estimated savings: $1.4 million

Ceasing distribution of interest on auxiliary and designated operation funds. Many auxiliary and designated operations funds have been allocated interest when fund balances are positive. Going forward, we will suspend those interest payments and reallocate them to our general fund to help with the budget gap. Interest will still be distributed to grant funds, plant funds, internal bank funds, and restricted gift funds.
Estimated savings: $600,000

While I would like to write that the savings achieved from this $4.5 million of budget reductions would be enough for this year, that is unlikely to be the case. As all of you know, I have assembled an ad hoc Budget Advisory Task Force made up of faculty members, students, and staff members that is looking more closely at additional strategic steps that could be taken to either raise revenue or reduce expenses over the long term. My expectation is that any recommendations that come from this group will be more targeted than the initial steps I have outlined here and will be announced later this summer.

Despite these painful financial realities, I remain very optimistic about the trajectory of the University of Oregon. As we move forward, we will work diligently to protect our academic and research programs, and accelerate our recent progress in enhancing excellence in teaching and research. We will continue to invest in faculty hiring, research infrastructure, and support for student access and success programs. While today’s budget challenges will make this harder, we cannot and will not stall our pursuit of excellence at the UO.

By working together, we will be able to weather challenges that are ahead of us.

Thank you.
Michael H. Schill
President and Professor of Law

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44 Responses to President Schill announces $4.5M in budget cuts

  1. So is the right way to interpret this... says:

    …is to infer that there’s a lot of administrative cruft that can easily be reduced?

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  2. honest Uncle Bernie says:

    Schill doesn’t mention that the Governor last week stated that she doesn’t want tuition hikes on in-state students of greater than 5%. UO is proposing a 10+% tuition hike. I believe anything over 5% has to be approved by the state higher education board, whatever it is called now. No, UO is not “independent”!

    If the max allowed tuition increase is 5%, that will be another $4 million or so that needs to be cut (assuming that the “net” tuition after “discounts” aka scholarships remains at the same rate of about 2/3 of nominal tuition).

    I’ve been saying for quite a while that the 10+% tuition hike is going to be a problem, if only because of the danger of pricing UO out of its market. Now it also looks like a political problem, which is not a surprise either.

    So, get ready for a tussle between the state and UO over another $4 million budget cut.

    I suspect with a psych professor making $155K and suing over the unfairness of it all; and a pres making not too much less than $1 million, that the sympathy is going to be with the Gov, not the UO tuition hike.

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    • UO Matters says:

      The state sets its budget priorities on the basis of sympathy?

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      • honest Uncle Bernie says:

        Call it sympathy, call it political clout, call it naked interest group greed. I don’t think too many people out there are going to think UO should be asking for 10% from Oregon students and their parents. Especially not to pay for PERS and salary raises. Especially when OSU is only asking for something like 7%. I’m not saying they’re right or wrong, I’m just saying what (I think) it is.

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        • Fishwrapper says:

          According to press reports, OSU is asking for 4% in-state and 2% out-of-state increases. The Trustees meet telephonically tomorrow to finalize the proposal, an earlier meeting having been disrupted by tuition-increase protesters.

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          • honest Uncle Bernie says:

            Fish — interesting — earlier reports had said 7% for instate, I believe. Maybe Ed Ray and the boys and girls on the OSU board see which way the wind is blowing. To mix metaphors, maybe they have a better collective ear than some people down south.

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            • Fishwrapper says:

              According to the very local Barometer and on up to US News & World Report (and many in between), the Finance and Administration Committee put forth a recommendation for a 4 percent resident undergraduates and a 2 percent non-resident undergraduates increase.

              My hunch is that they got this number from the agenda materials, specifically the FY2018 Tuition Rates, Mandatory Fees and Student Incidental Fees
              and Operating Budget Outlook
              . Quoting from page 2: “In the end, a majority of the committee preferred a recommendation of a 4% increase in resident undergraduate rates (with 1% – or 25% of the recommended increase – allocated entirely to need-based financial aid) and a 2% increase for non-resident undergraduate rates (with 0.5% being allocated to need-based financial aid).” It is true that discussions of options included higher rates of increase, but the committee determined that, pending state funding, a 4/2 increase was doable, and preferred as it was lower than what other campuses were contemplating.

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            • Fishwrapper says:

              Sherm Bloomer, OSU’s Director of Budget & Fiscal Planning, made a very candid presentation to the March meeting of the OSU Faculty Senate explaining the thinking behind OSU’s planning for the next few fiscal years, with an eye toward how to minimize, where possible, the impact on tuition. Quite a bit of water has flowed under the dam since early March…

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        • Dark Wing Duck says:

          Doesn’t the state mandate how much UO has to contribute to PERS cost increases? On that basis, how do they expect we’re supposed to come up with the money, if they won’t contribute and tuition increases are capped? Pan the millrace for gold?

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          • UO Matters says:

            Oh fine, now everyone knows about the millrace gold. Thanks a lot.

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          • honest Uncle Bernie says:

            I think they expect that we could work harder or do without salary increases.

            You would rather they don’t make UO pay for increased PERS costs?

            Well — some people in the legislature are working on cutting PERS costs by doing things like ending the 6% “pickup” — in essence making us pay for it, in effect a 6% pay cut — or similar schemes. A way to “eliminate increased PERS costs.”

            Be careful what you wish for.

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          • Simplius Simplicissimus says:

            Moffit is charging research grants 75% (+30% hike) OPE starting in a few months. Unlike the millrace gold this is no joke. Federal grant money misappropriated to fill empty UO coffers. Or is it a clever attempt at undermining the UA?

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      • Salty says:

        No, but many Oregonians vote and form their opinions based on sympathy. No university is an island, mind you.

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      • bold leadership says:

        Bold to double the Pres salary, blow 16 million you don’t have on a football coach, then complain about rising labor costs and fire the teachers.

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    • Inquiring Minds says:

      I thought that when UO pushed for independence that a bunch of donors were just lining up and waiting so that they could support us. A few big ones for sure have come in, but not enough to substantially endow the UO as predicted.

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  3. good plan says:

    Step one, better get that football coach contract locked in for over 3 million per year. Step two, we’re broke better fire everyone else saving 4 million per year.

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  4. LArdman says:

    So does the statewide hiring freeze Gov Brown just announced affect the UO?

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  5. honest Uncle Bernie says:

    Here’s a secret plan to deal with the UO deficit. The legislature passes a bill to screw PERS faculty members. Say by decoupling the annuity rate from the assumed rate. Don’t worry about what that means, what it means in reality is a new Tier retiree would face a 30% or so cut in pension if that person worked past a certain date, say Jan. 1 2018. There are real proposals in the Legislature to do just that, and about a dozen other similarly dastardly proposals to screw you whether you are Tier 2, Tier 3, ORP, whatever.

    So, you get a bunch of panic retirements from Tier 1 faculty and staff near retirement. Deficit solved!

    How do you cover the classes taught by said Tier 1 retirees? Well, a lot of them will be on TRP, and teaching at reduced cost.

    For classes that still need to be covered, hire adjuncts! Maybe even hire some of the ones who were just fired.

    Use the savings to hire more TTF.

    Problems solved!

    It’s a wonder they aren’t conspiring on this in Johnson Hall with the Legislature and Governor right now.

    They aren’t, are they?

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  6. Old Grey Mare says:

    And here is the old question one more time: has anyone ever decisively proved that a modest tax on donations to athletics affects donor generosity?

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    • ODA says:

      What about a modest tax on ALL donations with strings? Perhaps every donation should have a requirement that at least some amount, say 7%, go to unrestricted foundation. Also, since all these buildings cost money to keep up and repair over time, or even to fix the design and engineering errors just a few years down the road, perhaps we should have another 5-10% or so go to a building maintenance only fund for all buildings and infrastructure donations.

      If we can’t keep the water out, the heat in, the lights on, and the floors from buckling under foot then the donation aint worth shit.

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  7. honest Uncle Bernie says:

    Don’t want to beat this dead horse to death too often — but Fishwrapper is right, OSU is now asking for only a 4% tuition increase. How do they do this? Maybe the UO flagship should talk to the blokes on that cargo ship and find out how they do it.

    I know this, if UO asks for 10.6%, and OSU for 4%, we will look like a bunch of jackasses.

    And don’t think we are “independent,” we’re not.

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    • Fishwrapper says:

      It’s official – OSU’s board voted today for the 4% in- and 2% out-of-state tuition rate increases. In a letter to the OSU community, Ed Ray wrote:

      I did not propose larger tuition increases despite pending budget shortfalls because I realize that many students are heavily burdened already with student loans and other concerns. Our students should not bear the brunt of covering an anticipated shortfall in state funding for higher education. In fact, students must remain Oregon State’s first priority for support so that they can continue to pursue their studies, graduate and prosper in life and career.

      He also announced a new budget website for folks to, “…keep the OSU community up-to-date on fiscal matters facing the university,” and added,

      I remain deeply disappointed that state leaders have no meaningful plan to manage the budget challenges we face in Oregon — other than by hunkering down and waiting for better times. I have been in Oregon for 14 years. I note that the absence of a state strategy that provides for investment in a better future for all Oregonians during both good and bad times has persisted for too long. The state’s current approach of hoping for better times is not a strategy.

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  8. Widget#298 says:

    SEIU is currently in economic bargaining. Is it any surprise the prez is pointing fingers at wages of employees?

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    • Max Powers says:

      Somewhere between SEIU’s initial offer on the table and the 4.5 million in cuts is reality. Will either side see it?

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  9. Plain Interested says:

    So, the state “picks up” the employer and employee shares of retirement contribution, and that fair? Why not also have someone else pick up FICA, medicare, state income tax on retirement and every other potential retirement cost. It’s senselessly unfair, and that is why there is a health debate about government efficiency and the use of taxes.

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    • UO Matters says:

      You should read up on tax incidence before making statements like this. It’s covered in every microeconomics principles text.

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    • New Year Cat says:

      It was originally proposed by the state, in lieu of salary increases, because it would cost the state less.

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  10. Plain Interested says:

    The employee share of retirement was “picked up” near 40 years ago in lieu of a one time raise. Is that trade off the same today, salaries are forever depressed by that deal? I don’t believe that. I think not a few year later, salaries were back at where they would have been without the pick up. And does guaranteed 2% cola (cost of living allowance) forever makes sense when awarded before the COLA in any given year is known? The bottom line is SEIU never left a bargaining table without more and more. That’s the real reason Measure 97 failed. Real people are tired of paying for outsized pensions, etc. they don’t get. It’s not the greatest time to work in government, which unions contributed the senselessly unfair component to. The negative votes only shown how stuck the system is depending if you are looking in or out. And note UO students are looking in, which is a dilemma for the University in itself.

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    • not a union employee says:

      But why pick on the lowest paid employees? I largely agree about PERs, but pensions are tied to salary and classified staff make less than anyone, at times less than even student workers. Instead complain about the super rich getting richer off PERs pensions like Belotti or administrators. Cap pension salaries at 50k and hardly any classified staff care and the State saves even more.

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    • honest Uncle Bernie says:

      Well, P.I., I was once told by a very senior administrator at UO, one in a very good position to know, that full professor salaries were being held back at UO because of the superior Tier 1 retirement benefits, which brought total compensation more into line with national norms. I also know that UO has always counted the 6% “pickup” as part of “total compensation” in gauging where UO is on faculty pay (rightly, as I have always maintained here, to much disagreement). Myself, when I moved here from another university, I was kind of surprised at the lowball salary UO offered. This was long after the “pickup” went into effect. The UO response was that I should think of the pickup as a 6% boost to salary, and that a salary increase was coming shortly after I arrived, so relax. I did. Here I am.

      So, I have not reacted especially well to talk of eliminating the pickup. I don’t think many others do either.

      Now, you might say that all this applies only to faculty, not other UO staff, or other public workers. And that may or may not be true. The way to handle it is in a negotiation with the relevant bargaining units, or individually with non-union employees.

      Elimination of the pickup is essentially telling public employees to eat a 6% pay cut. Don’t expect them necessarily to thank you for the feast. In fact, you might meet some resistance. It is certainly all discussable, and negotiable, and likely to be disagreeable.

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      • dog says:

        In now way shape or form do I believe that full professors salaries are being “held back” for any reason. Rather, the UO is simply incapable of dealing
        with salary compression such that long time full professors here at the UO (like Freyd) do fall systematically behind when you plot time vs salary (which has always been a stupid plot that UO admins have used – I remember when T. Dyke showed me the
        plot for the CS department and asked me what it meant …)

        Also, remember, that the UO really did not have competitive salaries at the Assistant Prof rank until
        about 2000, so anyone hired before then got a lowball salary.

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        • honest Uncle Bernie says:

          “the UO is simply incapable of dealing
          with salary compression”

          dog, I just don’t buy it — the amount of money we’re talking about is just never that great — a few million dollars — out of, in today’s terms, a “central” budget of about $500 million.

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          • Dog says:

            Give me a fucking break – and look at history

            it has never been about the Money
            this is all about cultural incompetence – how else
            do you explain that full professor salaries are always
            80-85% of peers – oh yeah, I forgot, no they aren’t –
            we just need to live to be 100 to enjoy our full salary plus compensation …

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  11. Concerned Prospective Mom says:

    My son is deciding between UO and a few private schools, in OR and other states, but I think UO is his first choice, and May 1 is looming. How concerned should we be by these budget cuts impacting his and other UO students’ education? I have no idea what past year budget cuts were, but I’ve had two college counselors warn me of issues that they feel can create problems in a large public university, and after reading the president’s statement, I’m worrying more. In addition, my cousin’s wife is a professor there, and she told me her class size went up dramatically this year (to over 100 students). I would appreciate any words of advice in this matter!

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    • UO Matters says:

      This blog contains a lot of complaints about UO. That’s because we’re mostly faculty, we mostly love this university, and we’re mostly trying to make it better. My advice on picking a good school for your son is:

      1) You really should leave it up to your son; and
      2) Suggest he be skeptical of schools that don’t have a healthy muckraking blog. Their faculty probably don’t care as much as we do here at UO!

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      • Concerned Prospective Mom says:

        Thanks! I am trying to leave it up to my son, but I just want him to be aware of the negative aspects of a public university facing budget cuts and firings. And I’m curious how the budget cuts compare with those in the past.

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    • dog says:

      I will be serious here (in contrast to most dog nonsense)

      1. The main advantage to going to a smaller private school is a much more favorable Faculty to student ratio and a much higher probability of graduating in 4 years.

      2. However, most of these smaller places do not over the diversity of courses that the UO does. So, unless you son is considering places like Grinell or CMU, I think UO would likely serve him better.

      3. Large class sizes are the norm for all large universities for a student’s first 2 years – it has always been like that since post WW 2

      4. There is not much real world relation between budget cuts and barriers to students getting a decent college education. If there were, we would have been in trouble a long time ago.

      5. Let your kid go where he wants to – its his life. I had both of my kids go to UO – they survived and like being in Eugene (more so than going to the UO).

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      • Slightly Less Concerned Prospective Mom says:

        Thank you, dog! No, he is not considering either of those schools, but he is considering BU, Chapman, Lewis & Clark and University of Denver. Because they’re all private, I know the classes are going to be smaller. Even at NYU, where my daughter goes, she’s had very small classes throughout. He also got into U CO Boulder but he isn’t considering that. I expect they have similar issues. Points 2 and 4 make me feel better; point 5 not so much ;-) Hopefully they not only survived, but thrived at UO. Would you say the professors are easily accessible? I’ve heard that’s not always the case there. Thanks again!

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        • dog says:

          professor accessibility varies considerably from school to school and department to department. But most professors are quite accessible if the student makes an effort. Hell, even dogs are accessible at times, but no one believes that …

          As for the choices

          BU – yeah I did time at Harvard, I wouldn’t recommend BU for lots of reasons.

          Chapman – well that one is worthy of strong consideration – it is an excellent Academic school, far better than State schools across the country. I have given a few talks there over the years. However, its very intense place and I am not sure it produces the most well adjusted students upon graduation

          Lewis and Clark – I have a high opinion of that Northwest School and some of their undergrad programs are pretty good. Living in Portland is cool as well.

          University of Denver – Well that’s 50K per year and
          definitely not worth it.

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        • honest Uncle Bernie says:

          Prospective Mom — my advice too would be to let him make up his mind, and don’t worry about it too much. We often learn the most by making our own decisions and liking the results or not, and learning from it. I certainly did that in spades when I was starting out.

          Re the budget cuts at UO: it is only about $5 million out of a core (i.e. teaching, academic support, administration, physical plant, but not dorms, athletics research) budget of roughly $500 million. So we’re talking about something like 1%. Probably only going to be visible to your son at the margin, if at all.

          Plus, private schools can and do have budget difficulties, but you generally hear less about these, when they exist, because they are subject to less open disclosure than public universities. I don’t know whether any of the schools you mention are having difficulty, but I would bet that at least one or two might be.

          As for faculty accessibility — what I hear often from colleagues is that their office hours are often empty, even in large classes — they would love to have students come, but are disappointed. Not all faculty, but the good ones, yes.

          A problem with the big classes is that the students find it easy to avoid the professors.

          A way to avoid that may be to get into the “honors” versions of intro courses that many departments offer. Not the Honors College (which also may be good), but the “honors courses” of individual departments.

          The big U. can definitely be an advantage for upper division classes. The opportunities can be much greater than at “good” liberal arts colleges. I’ve seen quite a few dropouts (or refugees) from places like Williams, Reed, etc. come here to finish their last two years, and like it a lot.

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