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University examines impact of governor's higher education 'compact'
Despite increase in state subsidy, proposed plan still poses challenges

ATHENS, Ohio (March 16, 2007) -- During the State of the State address on Wednesday, Governor Ted Strickland released a proposed plan for state-supported higher education institutions. Strickland wants to create a "compact" between the state and public colleges and universities that provides higher instructional subsidy in fiscal year 2008 -- if institutions forego tuition increases and find ways to save.

The compact -- which calls for a 5 percent increase in state support for FY ‘08 and 2 percent in FY ‘09 -- prohibits institutions from raising tuition next year and holds them to a 3 percent increase the following year.

"We'll know more about the impact of the governor's proposal by early next week, when we have had time to review the details," Vice President for Finance and Administration Bill Decatur said. The Board of Regents released Ohio University numbers today.

"To get their share of this historic funding increase, each public college and university must find ways to operate more efficiently," Strickland said when he explained his budget at Wednesday's State of the State address.

As the proposal stands, compact-participating universities also must report to the Board of Regents how they saved 1 percent through cost efficiencies in the first year and 3 percent in the second.

Universities won't be required to enter the compact, Decatur said, though the increase in funding creates an incentive. 

The Budget Planning Council -- Ohio University's committee of students, staff and faculty members charged with making recommendations for the Athens campus FY ‘08 budget -- began in January looking at three different budget scenarios. One of those was based on a 0 percent tuition increase. The BPC and the Office of Finance and Administration will begin looking more carefully at that model now that they have more information.

Decatur explained that university officials are pleased that the governor has made higher education a priority in a difficult state budget.

"The governor has reallocated money at the state level to support higher education and we are certainly supportive of that," Decatur said. "We think it's very important for the state's economy."

Although the governor's proposed budget calls for a 5 percent increase, the university still will have challenging fiscal decisions to make. The 5 percent goes toward only the portion of Ohio University's budget that comes from the state. In fiscal year 2007, state subsidy made up about 30 percent of the university's funding. About 65 percent comes from tuition and fees, and 5 percent comes from other sources.

"If we get a 3 percent increase in state subsidy, that's around 3 million for us based on that 30 percent of our revenue," he said. "But a 3 percent increase in tuition -- which would affect the 65 percent portion of our budget -- would be about 4.2 million." (Prior to the governor's announcement, the BPC was focusing attention on the 3 percent tuition-cap budget model.)

Decatur added that the university is not guaranteed a 5 percent increase in revenue because state funding is determined by a formula that's based on enrollment, which is expected to be flat next year.

The budget, which is not final, will be translated into a bill and could undergo many changes in the coming months as it moves through the house, the senate and a conference committee. The actual budget numbers will be released when the governor signs off on the bill in June. Ohio University President Roderick J. McDavis must present the university's balanced budget to the Board of Trustees in June.

Most institutions in Ohio are facing tight budgets. Funding per each full-time enrolled student statewide has dropped by more than 20 percent since 2001, when adjusted for inflation.

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Media Contact: Acting Senior Director of Media Relations Sally Linder at 740-597-1793 or linders@ohio.edu

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