Colleges, support units take multi-million-dollar hit

COLUMBUS -- A plan to deal with the state's latest budget cuts for the 2002-03 fiscal year – which slashed a total of $11.2 million in state funding from the university’s coffers – was submitted Friday (4/4) to The Ohio State University Board of Trustees by William J. Shkurti, senior vice president for business and finance.

The plan proposes reallocation of one-time funds at the Columbus campus to absorb the loss of $7.7 million in the state share of instruction, which equals a 2.5 percent budget cut from the state. The plan also calls for $3.5 million in reductions at regional campuses and in other university line items.

The university will make the cuts in the following manner: $5.1 million from college budgets, $2.6 million from support units, $500,000 from the regional campuses, and $3 million from separately funded line items.

Shkurti told trustees that the reductions were carefully coordinated to be in line with the goals of the university’s Academic Plan. Because of this, student financial aid and Selective Investment Funds were protected from the budget ax.

Shkurti stressed that the plan addresses only the reductions already announced by Gov. Bob Taft’s executive order, and additional corrective action will be necessary if there are further reductions in state support.

“These are not cuts Governor Taft wanted to impose, but were necessary to balance the state budget for FY 2003,” Shkurti said. “We are hopeful the governor and the legislature will be able to agree on a package of increased revenues for the coming biennium that will not require additional cuts because additional cuts will have a severe negative impact on future economic growth in the state of Ohio.”

He also said that since the $7.7 million reallocation required the use of one-time funds, permanent reductions will need to be addressed as part of the FY 2003-04 budget process.

The board will be asked to adjust FY 2003 resources and expenditures to reflect changes – including an estimated $2.4 million from higher than expected enrollment, which will be distributed to colleges and support units – as part of the third-quarter budget report at the board’s May meeting.

Trustees also approved a long-term cost management plan that, combined with increased state support, tuition and other revenues, is necessary to achieve the goals of the Academic Plan, Shkurti said.

Recommendations were presented in six specific areas:

• Core processes I (capital project approval, design, construction and commissioning)

• Core processes II (purchasing goods and services)

• Energy cost management

• Health care benefits

• Borrowing costs

• Return on investment from major systems
Teams of university administrators are currently working together to reduce costs and are examining the results of external and internal reviews.

For example, Shkurti said that a review of the approval, design and construction of large capital projects began a year ago and included a detailed review by an outside consultant (Deloitte & Touche) and an internal review conducted by University Treasurer Jim Nichols and Senior Vice Provost for Academic Affairs Alayne Parson. A number of suggested improvements have been identified, aimed at reducing construction costs.

“Although cost savings figures have not yet been developed, every 1 percent savings represents approximately $1.25 million,” Shkurti said. “Reduced construction costs also reduce pressure on our bonding capacity and stretch state capital dollars.”

The potential for significant savings in the other target areas has been identified, but still need to be refined and verified, Shkurti said. He also said this process will be closely coordinated with reviews of administrative processes to be conducted under the auspices of the University Senate Fiscal Committee.