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Committee working to plan budget, prevent deficit for next fiscal year

Feb. 7, 2007
By Joe Brennan

The Budget Planning Council, a committee charged with developing the Athens campus budget for the upcoming fiscal year, is working to find ways to close a potential fiscal year 2008 budget gap of some $6 million to $11 million. President Roderick J. McDavis will discuss details about the university's budget at a press briefing today at 3:30 p.m. in the Baker University Center 1804 Room.

The main reasons for the projected deficit are a shortfall in enrollment this fiscal year, combined with level enrollment next year and no increases in state aid -- coupled with growth in wages and salaries, health insurance and utilities.

Undergraduate enrollment on the Athens campus this year fell short of projections by some 300 students, costing the university $4.3 million in expected tuition income.

Fortunately, the university has been earning more than projected on its investments, and the state of Ohio provided an extra $1.9 million in instructional subsidy. These sources, along with the one-time use of reserves, will allow the institution to cover this year's deficit without resorting to layoffs or departmental budget cuts. However, this year's setbacks will be carried forward, affecting next year's budget. 

"We will work closely with the Board and all stakeholders to plan and achieve a balanced budget in fiscal year 2008 and to strengthen Ohio University's ability to perform its academic mission," McDavis said. "We are committed to continuing to provide an outstanding educational experience for our students." 

Stakeholders involved in budget plan

McDavis formed the Budget Planning Council to ensure greater openness and collaboration in the budgeting process. The 15-member group, which includes students, administrators, faculty, and the heads of all five senates, has been meeting regularly since the start of the academic year.

The Budget Planning Council, which is co-chaired by Provost Kathy Krendl and Vice President of Finance and Administration William Decatur, will present its recommendations to the president by late spring so that he can bring a budget proposal to the Board of Trustees at its June meeting.

"We are being completely transparent about the budget," Decatur said, explaining that he plans to meet with all five of the Athens campus senates over the next several weeks to discuss the budget outlook and the planning process.

The council is currently examining three different scenarios. In the first, tuition and fees would rise six percent; in the second, three percent; and in the third, there would be no increase. All three scenarios assume:

  • Athens campus undergraduate enrollment remains at is present level (which is down from last year);
  • state support grows only slightly;
  • there will be a 3 percent raise pool;
  • additional funds will be spent to improve faculty compensation;
  • health-care costs will grow 10 percent, an increase of $2.6 million;
  • employees will not pay a larger share of their health care premiums;
  • the cost of utilities will grow 11 percent, to $7.8 million.

The Budget Planning Council has begun discussing strategies for closing these potential gaps, Decatur said. The council is examining these assumptions and may change them, Decatur said.

Possible approaches include setting reduction targets for the colleges and divisions, and forming universitywide teams to identify ways to reduce costs and streamline operations. "Everything is on the table," Decatur said.

At its meeting on Thursday, the council will continue to discuss guiding principles and talk about how it will go about setting reduction targets. If cuts are needed, they will be taken selectively and not imposed across the board, Decatur said.

"Enrollment is the major driver of revenue for Ohio University. Tuition and fee revenue, and state subsidy, are all dependent on the number of students we enroll," Decatur said. "We need to focus on improving retention, and at the same time, we need to slow the growth in our costs, especially by finding ways to become more efficient at serving students."

Decatur also stressed that the state's budget situation is not at all clear, and the scenarios may shift in the upcoming months. Planners are assuming that there will not be a meaningful increase in state support next year.

Lower enrollment this year makes budgeting more difficult

A shortfall in the current year's revenue makes the situation even more challenging for the Budget Planning Council. Going into fiscal year 2007, planners estimated that the undergraduate enrollment would grow by 100 students. New first year student enrollment hit its target. But enrollment declined by 200 students due to underenrollment of transfer students and lower retention of continuing students. As a result, the university will receive $4.3 million less than expected in tuition this year. 

A windfall of $1.9 million in additional state subsidy will help make up for the shortfall, Decatur said. He is looking to central reserves and investment earnings to cover the rest.

In addition to having fewer dollars to work with, the university also is dealing with unanticipated increases in some expenditures. The institution has invested some $4 million to strengthen its information technology infrastructure, and a state-wide minimum wage hike passed in November has driven labor costs up by $500,000. These costs were covered with reserves, but that's not likely to be an option next year, Decatur said.

Finding a way to fund Vision OHIO priorities

Last year, the Athens campus reduced spending by some $14 million in order to stave off an $8 million projected deficit. The remaining $6 million was set aside to support initiatives in the university's strategic plan, Vision OHIO.

A task force that included the heads of all 10 Vision OHIO strategic planning teams recommended investments in three areas: undergraduate education, graduate education and research, and faculty compensation. Krendl accepted that recommendation and established processes to identify specific targets for investment.

The Budget Planning Council is exploring whether some of the $6 million Vision OHIO pool could be tapped to ease the anticipated budget deficit next year.

Krendl said that she is committed to increasing faculty compensation, and that more than $1 million will be earmarked for this purpose in fiscal year 2008. She also plans to release $1 million in one-time funding for selected undergraduate education initiatives this year and to invest in graduate education and research, although the exact amount is yet be determined. 

Students gain voice in general fee decisions 

This fall, the administration created a nine-member task force, comprising mainly students, to review how the General Fee is spent. The General Fee Governance Council is aimed at allowing more input from students on how the university allocates the funds each year, and helping the university target the funds for activities that provide the greatest benefits to students. 

The council will review program proposals with guidance from the Budget Planning Council and make a formal recommendation for allocation of any increased general fee revenues to Student Senate and the vice president for student affairs. Both will either endorse or recommend changes to the document before it is taken to the Budget Planning Council for endorsement or changes. The proposal then goes to the president, who will make his final recommendations to the Board of Trustees after consideration of the proposal if amended.

The Athens campus budget represents 67.1 percent of the university's current year unrestricted funds budget of $477 million; the College of Osteopathic Medicine accounts for 4.6 percent; the regional campuses account for 13.5 percent; Auxiliaries represent 14.8 percent. 


Joseph Brennan is the executive director for University Communications and Marketing.

 

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Published: Jan 3, 2007 9:35:38 AM
 
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