June Update: Sine die is nigh
This issue provides an update and summary of some of the major budget decisions affecting Oregon’s public universities. Last week when the Governor and House and Senate leaders announced they could not reach an agreement on revenue reform this session, both chambers started moving pell-mell for the exits, with the hope to adjourn well before the July 10 constitutional deadline. The legislature will be working through the weekend and, if necessary, over the 4th of July holiday.
Beware of the “CSL”
The budget documents produced by the Legislative Fiscal Office (LFO) use the term “continuing service level” (CSL) to indicate the level of funding needed in the next biennium to provide the same level of service delivered during the current biennium. When considering university funding, as a matter of its own policy, LFO does not fully account for increases in mandated costs such as employee health insurance (PEBB) and retirement (PERS) costs. For the last two legislative sessions, universities have sought more realistic CSL calculations. They have made some progress, but LFO’s calculations of CSL still do not accurately reflect cost increases. As a result, the budget documents for the 2017-19 biennium show increases in CSL, but in reality, these increases in the level of funding are largely overtaken by cost increases. Universities have filled the gap for most education-related programs with tuition resources. But for programs that rely solely on general fund appropriations–such as the OSU Statewide Public Service Programs–LFO’s depiction of CSL creates real budget cuts. These generally require eliminating personnel.
University Operating Budgets
On Wednesday, June 28, the Ways & Means Education Subcommittee approved an amended version of SB 5524, which provides operating funds for Oregon’s seven public universities. In the coming days, the full Ways & Means Committee and both chambers are expected to approve the bill. The LFO Recommendations Document provides details on all of the budget elements for post-secondary education, including funding for community colleges, the public universities, the OSU Statewides, other state-funded programs, the Oregon Opportunity Grant program, workforce development & education, and the Oregon Promise program–sometimes referred to as “free community college.”
The universities entered the session with a Governor’s Recommended Budget (GRB) for the Public University Support Fund–the primary account used to support education activities–that held them at the same level of funding as was provided during the current biennium: $667 million. The universities united with students and other stakeholders in seeking at least a $100 million increase. As approved by the subcommittee, SB 5524 provides $736 million, a $70 million increase over the GRB.
When compared to the trajectory in the budgets of other state agencies, the increase is remarkable and ranks among the largest increases put forward by the Ways & Means Committee. Though universities started the session well behind most other state-funded entities, the $70 million increase is a significant accomplishment, due largely to coordinated advocacy across the seven universities and the work of students and others across the state.
In order to ensure that the increased funding will go to rolling back tuition increases, a budget note in the bill requires tuition reductions at those universities that sought, and received, HECC approval for resident undergraduate tuition increases greater than 5% for the 2017-18 academic year. As provided in SB 5524, changes in tuition are as follows:
- OIT from a proposed 7.42% increase to 5.0%
- PSU from a proposed 8.37% increase to 5.5%
- SOU from a proposed 11.43% increase to 9.0%
- UO from a proposed 11.48% increase to 6.56%
- WOU from a proposed 7.45% increase to 6.5%
Because resident undergraduate tuition increases at OSU and EOU (4.2% and 4.9% respectively) did not exceed 5% for the 2017-18 academic year, the legislature did not require them to reduce their tuition increases. As a result, both institutions will be able to devote the entirety of their share of the $70 million increase to filling anticipated budget holes. OSU is currently in the process of determining how increased funding will be used over the next two years. Funding provided in SB 5524 will be distributed through the HECC funding formula. Budget note language for the 2018-19 academic year limits tuition increases at all universities to no more than 5%.
For coverage of the higher education budget:
The OSU Statewides
For the 2017-19 biennium, the GRB also “flat-funded” the OSU Statewides–the Extension Service, Agricultural Experiment Station, and Forest Research Laboratory–at $118 million. The GRB eroded about 70% of the $14 million increase the legislature included for the Statewides in the 2015-17 budget. The 2015 session was notable for these programs because it produced the first across-the-board programmatic increase for these programs since 1999.
Since the GRB was issued in December, OSU has worked with a diverse array of supporters in seeking a $9.4 million increase to maintain a more accurate CSL. The budget approved by the Ways & Means Education Subcommittee this week includes a $5.6 million increase, resulting in a $3.8 million shortfall. The difference is largely due to the LFO calculation of CSL. OSU anticipates that, over the next biennium, this shortfall will result in the loss of 17 FTE positions among the three programs.
While the three programs will ultimately be responsible for managing the shortfall, Sen. Arnie Roblan (D-Coos Bay) has expressed concern over the reduction and he and a number of other legislators are continuing to work during the remaining days of the session to recover the $3.8 million shortfall. Roblan has also expressed interest in seeing that future budgets for university programs reflect a more accurate reflection of their costs–and the universities will continue to work for further improvements for the 2019-21 budget cycle.
Outdoor School: SB 5524 also appropriates $24 million of lottery funds to the Extension Service to administer the Outdoor School program as approved by voters with the passage of Ballot Measure 99 during the 2016 November election. The measure calls for approximately $40 million in lottery funding to flow through Extension to enable Oregon’s 197 school districts to provide Outdoor School programs to elementary students. The LFO Recommendation contained in SB 5524 provides:
This amount of funding is estimated to serve roughly 45% of the target population in the first school year and roughly 65% in the second school year of the biennium. Administrative costs may be up to 15% for this biennium of the program, estimates provided by the Extension Service show they plan to spend less than the limit. The costs include programming, transportation, stipends or additional compensation for the classroom teacher, and the administrative costs.
The GRB also flat-funded a wide variety of state-funded programs administered by universities, and the legislature maintained that level of funding in SB 5524. Programs with ties to OSU include:
- Engineering Technology Sustaining Funds (formerly known as “ETIC”): $25.6M
- OSU Fermentation Sciences: $1.3M
- Signature Research Centers: $1.1M
- OSU Ocean Research Vessel: $648K
- OSU Institute for Natural Resources: $418K
- Oregon Climate Change Research Institute: $327K
- TallWood Design Institute: $3.6M (This figure includes a legislatively directed roll-up from the 2015-17 level.)
Oregon Opportunity Grant
SB 5524 includes $160.1 million for the Oregon Opportunity Grant (OOG) program, the state’s need-based funding program for students attending both community colleges and public and private 4-year universities. This figure is up from $138.4 million provided for the current biennium. The Office of Student Access and Completion under the HECC has already made decisions regarding the allocation of these funds for the 2017-18 academic year. Over the coming months we anticipate increased attention among all of the education sectors regarding how these funds will be distributed among university and community college students in the second year of the biennium.
Oregon Promise, “Free Community College”
In an effort to address increases in forecasted costs for the Oregon Promise program which began with a $10 million allocation in the 2015 legislative session, legislative budget writers chose to hold the program at $40 million for the 2017-19 biennium. Legislators are pursuing budget language that will require a means test for Oregon Promise applicants. This approach will eliminate access to those with an “expected family contribution” (EFC) of more than $18,000 per year. (The estimated yearly Adjusted Gross Income for families at this level of EFC is over $100,000.)
SB 5524 recovered $8.2 million in funding for the Sports Lottery, which provides academic scholarships and support for student athletes and graduate students. The GRB had completely eliminated lottery funding for this program. OSU’s share of the total $8.2 million will be slightly over $1 million.
SB 5524 provides $500K for the new Workforce and Talent Development Board, which replaces the Workforce Development Board in the HECC. Funding will enable grants “to address urgent talent gaps, prepare students and current workers to be productive in priority occupations, and deliver innovative and cost-effective education and training.” Funding will enable between two to six grants.
After consideration by the House Revenue Committee, on Thursday, June 29th the Ways & Means Natural Resources Subcommittee approved HB 2270 which, among other provisions, applies a 90 cent/1,000 board foot tax on timber harvested in Oregon. The harvest tax, which requires a 3/5 majority to pass, and is supported by the forestry industry, provides funding for the Forest Research Laboratory and College of Forestry to complement funding provided under SB 5524.
In the next several days, we anticipate legislative action on a capital funding bill that would provide bonding for buildings and campus improvements across all seven university campuses. The most significant issue still in play in this bill is whether, and the degree to which, the legislature will invest in the expansion of the OSU-Cascades campus in Central Oregon. See a letter to legislators from OSU President Ed Ray and WOU President Rex Fuller regarding the attributes of capital investments in university projects here.
One casualty of the 2017 legislative session is HB 2582, which would have provided matching funds to enable Oregon’s public universities to compete for federal grants. We anticipate universities will revisit this issue during the 2018 short session.
We expect to issue a comprehensive review of the legislative session in the coming weeks. In the meantime, if you have questions, concerns, etc. regarding this update or any pending legislative actions during the closing days of the session, please do not hesitate to contact us:
Jock Mills, Director
Karli Olsen, Coordinator
Find this and other updates on the blog: blogs.oregonstate.edu/government