M E M O R A N D U M
TO: Ohio University Faculty, Staff and Students
FROM: Executive Staff and Academic Deans
J. Biancamano, B. Bible, R. Bose, J. Brose, G. Calcamuggio, T. Davis, W. Decatur, D. Descutner, D. Evans, T. Geiger, D. Irwin, K. Krendl, H. Lipman, R. McDavis, C. McWeeny, R. Middleton, H. Molineu, G. Neiman, B. Ogles, J. Schaus, S. Seaman, G. Shepherd, H. Sherman, K. Smith, R. Watts
RE: University Budget
Just two months ago when announcing the state of Ohio's second round of budget cuts this year, Governor Ted Strickland said, "While it is raining now, I fear a much larger storm is looming ahead of us." Current economic indicators indicate that the Governor's forecast may regrettably prove to be accurate.
The Governor's forecast for our state's financial reality was difficult to hear -- much like how many across the nation and the world found it hard to hear the news of impending financial challenges. The effects of this global financial crisis are now reaching Ohio University. It is important that all of us understand some of the financial issues our university community must confront:
- Investment income revenue shortfall -- No corporation, organization or individual has escaped the impact of the highly volatile stock market. While the final outcome is not yet known, Ohio University could experience a $5 to $8 million shortfall in investment income that was budgeted centrally as a revenue source for this fiscal year. The poor market performance will also impact the Ohio University Foundation accounts that support various university activities.
- Additional potential state budget cuts this year -- Higher education in Ohio largely has been spared in two rounds of state budget adjustments totaling $1.27 billion. As a result, many state agencies have already absorbed a 15 percent reduction in 2008. Yet, the state may have to endure another round of reductions before the current fiscal year ends. Should higher education be asked to carry a share of the burden, we must be prepared to respond in a strategic, thoughtful way. For Ohio University, each one percent cut in the state's share of instruction on the Athens campus means a loss of $1 million.
- Defining the unknown and planning for the future -- State funding support and tuition revenue are key factors that the University will take into account as it plans its budget for the next biennium. These factors are highly fluid and are dependent on both economic forces and decisions that our state's leaders will make. This fluidity presents an exceptional challenge to the essential fiscal planning work before us.
This confluence of factors -- to use Governor Strickland's metaphor -- is the storm we face now. The length and severity of this storm is difficult to predict. The Governor, for example, is already asking all state agencies to prepare plans for budget reductions from 5 to 10 percent for year one of the next biennium.
Ohio University's preliminary planning scenarios for FY 2010 are speculative and require planning for a number of unknown variables. External factors include market performance and its impact on investment income, the state's economic performance and its impact on state subsidy, and rising utility and health care costs. Internal factors that require thoughtful deliberation and consideration include tuition and fee rates and compensation investments. In one "perfect storm" scenario melding the worst of both internal and external factors, Ohio University could face as much as a $38 million shortfall next year.
There is perhaps some comfort, however small, in the fact that these challenges and obstacles are not unique to Ohio University. Colleges and universities across the state and the country are taking measures to address similar hardships in dramatic and sobering ways. In the state of Ohio, for example, those actions range from freezing all hiring and reducing discretionary expenditures to the cancellation of major facilities construction.
We raise these concerns not to cause undue concern, but to assure all that we are undertaking a disciplined, strategic approach to managing these uncertain times. By envisioning the most challenging scenarios now, Ohio University will be better prepared to meet them should the need arise.
In the weeks ahead, our work to safeguard this distinguished institution's future amid difficult financial challenges will be guided by one purpose: to preserve and enhance the quality of the core academic mission of teaching, learning, research, and creative activity.
Fortunately, meaningful work within a framework of shared governance will help us prepare. Campus groups that will play a critical role in providing recommendations and leadership in preserving our core mission in these difficult economic times include:
- University Budget Planning and Analysis Office and the Associate Provost for Academic Budgeting -- These financial experts are responsible for a detailed accounting of Ohio University's budget that will provide a clear picture of our revenue sources and expenditures. The information this office provides informs the discussions of the Budget Planning Council in its work to develop recommendations. Later this week, Ohio University's budget analysts will provide a tutorial explaining how our budget is structured.
- Budget Planning Council -- This 15-member advisory committee comprising representatives from every constituent group on campus will continue to consider a full range of planning scenarios as it seeks to reconcile this year's potential shortfalls and meet the challenge of recommending a budget plan for fiscal year 2010. You can acquaint yourself with this body, its charge, and your representatives online at: www.ohio.edu/finance/bpa/council.cfm. All members of the BPC welcome your ideas and questions and will report relevant news to you.
- Executive Staff and Academic Deans -- This team will review the scenarios and recommendations of the Budget Planning Council, align them with the strategic priorities of the institution, and present detailed options to the President. In addition, this leadership group will issue frequent budget updates to keep the campus community informed.
In spite of the difficult days ahead, Ohio University will continue to provide a high quality of education for its students. We are a community of scholars, scientists, artists, and humanitarians whose creativity and knowledge will help us do more than just weather these storms. The pragmatism and passion that characterizes Ohio University will ensure this institution emerges stronger.
Work and communication related to the budget will continue after fall quarter ends on November 22. We ask you to read your e-mail to follow this news during the winter intersession. We will keep you informed of the work ahead, and we ask you to share your ideas and suggestions with us or members of the BPC.