Ohio State capital projects take hit from state reductions

COLUMBUS – A 20 percent reduction by the state in the amount approved for capital projects at The Ohio State University Columbus campus is having far-reaching effects on ongoing construction.

Executive Vice President and Provost Barbara Snyder and Senior Vice President for Business and Finance William J. Shkurti presented a set of recommendations to the university’s Board of Trustees Friday (3/4) in response to the state\'s Capital Appropriations bill, passed by the General Assembly and signed by Gov. Bob Taft in early February, which provided Ohio State $89 million for construction and renovation projects – $14 million less than the university had sought.

The unprecedented delay in what had historically been a very stable and predictable state capital allocation process has presented a unique challenge to the university, Shkurti said. The recommendations presented to trustees provide a temporary solution to a longer-term problem, with those issues to be reviewed as part of the fiscal year 2007-08 planning process already underway, he said.

The recommendations call for delaying the start of construction for the renovation of the Thompson Library, currently under design, for one year. Three projects already under construction – the replacement of Robinson Lab, Larkins Hall and the Psychology Building – will continue uninterrupted, but the benefiting units will be asked to help share in identifying alternative funding sources.

“The Thompson Library Renovation was the only capital project specifically mentioned in the Academic Plan and is highest on the university\'s priority list,” Snyder said. “Weighing all the various considerations, we have reluctantly concluded that the best option is to complete design as planned, but delay the start of construction for one year, to fall 2006.”

While not an ideal solution, delaying construction offers the best chance to successfully complete the project while minimizing financial risk to the university and staying faithful to the remaining goals of the Academic Plan, she added.

Shkurti estimates that delaying the project by one year will increase construction costs by about $3.3 million, due to inflation, but said the increased amount will be added to a later capital allocation.

“The primary issue involving the library project is when to start construction, because once that process begins, stopping or modifying the project becomes very difficult,” Shkurti said. “Costs can mount at the rate of $2.5 million a month.”

Libraries Director Joseph Branin said that under the new timetable he expects work on the project to begin in the summer of 2006, with the renovation project to be completed and the Library reopened in September 2009.

“The renovation is the largest academic building project in Ohio State’s history and one of the largest university library projects in the United States,” Branin said. “This project has been moving forward since 1998 and the delay is a small setback in a decade long project. We understand the decision and will use the year productively for further fundraising activities and planning for the merger of the Office of Information Technology with University Libraries.”

In addition to $69 million in capital funds from the university and the state, a fundraising campaign is charged with raising an additional $30 million in private support for the renovation. To date, a total of $14.5 million has been pledged through individual and corporate gifts.

Shkurti said the funds that have already been raised would remain fully invested by the university in an interest earning account so that purchasing power will be preserved.

Other implications
Shkurti also recommended moving the $1.5 million not needed to complete Library design work to the Robinson Lab Replacement project in order to reduce the amount needed to complete the project from $4.8 million to $3.3 million. The College of Engineering will be asked to develop a plan to replace the $3.3 million over the next five years, as well as continue to work toward its $20 million development goal.

Additional projects well into construction – replacement facilities for Psychology and Larkins Hall – have to absorb $3.4 million and $1.6 million in state cuts, respectively. Shkurti said the sponsoring units would raise the money needed to offset those shortfalls.

Other projects affected by the reduction in state capital appropriation include the James Cancer Hospital expansion project. A $2.5 million request for state funds to initiate the planning process was reduced by $500,000, and the Medical Center is being asked to secure the funds elsewhere.

In addition, Smith Lab will be partially vacated by the Department of Physics when it begins moving into its new facility this month. The potential occupants – the Department of Anthropology, the Physics undergraduate instructional programs, the classroom pool and classroom support services – will be asked to provide the $700,000 needed to replace the lost state funds or to reduce the scope of the project.

Board hears report on operating budget recommendations
Shkurti also reported to the Fiscal Affairs Committee on the impact of Gov. Taft’s state operating budget recommendations. Shkurti said the proposal for the 2006-07 fiscal years calls for slight increases in higher education funding of approximately 1 percent during the first year and 2 percent during the second, and calls for no funding increases for most university-related line items.

Taft also proposed a 6 percent tuition cap, and no differential cap for Ohio State’s Columbus campus, but an option is included in the budget proposal to increase tuition an additional 3 percent, for a total of 9 percent, for use for need-based financial aid only. Shkurti said Ohio State will not make any recommendations on student tuition for next year until at least late spring.

“Although funding at the governor’s proposed levels would be a challenge to the university, financial progress towards the goals of the Academic Plan could continue and structural problems with the state budget would begin to be addressed,” Shkurti said. “For Ohio State’s Columbus campus, the combination of a 6 percent base tuition increase and slight growth in state support means the Academic Plan goals can continue to progress slowly, but a reallocation of $10 million to $20 million will be required, or an average of 1 percent to 3 percent.”

Shkurti also pointed out that the governor’s budget proposal will be reviewed and modified by the legislature to a degree that is not known at this time.