Trustees OK spending plan that reflects academic goals

COLUMBUS -- In presenting a fiscal year 2003 budget recommendation to the Board of Trustees Friday (7/12), Ohio State University officials noted that as a result of declining state support, the university is adopting fiscal practices that more and more closely resemble the characteristics of a private institution – especially the transition to a more distributed-revenue and cost-sensitive budget system and greater reliance on entrepreneurial efforts to generate revenues.

Trustees authorized a spending plan that reflects those characteristics: a restructured General Funds budgeting system more closely associated with academic goals rather than historic patterns of funding; a two-tiered undergraduate tuition program; targeted increases in other funding sources, such as private gifts and sponsored research; and state support that stands 4.4 percent lower than the level of support Ohio State received in fiscal year 2001. In addition, budget conditions last year and this year suggest that a trend has begun, this year marking the second time tuition and fees exceed state support as a percentage of the total General Funds budget.

Even so, Ohio State is poised to maintain momentum in identified strategic areas over the next year, offering quality educational programs and more competitive compensation while assessing below-state-average tuition for both continuing and new students, said Edward J. Ray, executive vice president and provost.

“Despite a very difficult budget picture associated with state budget cuts and continuing uncertainty about the state’s future financial health, we are directing every effort toward protecting our academic core while maintaining Ohio State’s affordability relative to other public institutions in the state,” Ray said. Strategic investments are focused on four critical initiatives of the university’s Academic Plan: competitive compensation for faculty and staff, enhancements to the undergraduate program, a major biomedical research initiative and creation of the Kirwan Institute for the Study of Race and Ethnicity in the Americas.

General Fund revenues and expenditures on the Columbus campus are expected to be $844.3 million in the fiscal year that began July 1, a net revenue increase of 4.2 percent over 2001-02 after corresponding student financial aid is deducted from the total revenues. When all General Fund income sources are combined, the projected increase stands at $47.8 million. The university will provide $14 million in student financial aid specifically to offset the increased tuition, ensuring that no qualified student will be turned away from Ohio State because of financial need.

The total university’s annual budget, including all sources of income and expenses at the University Medical Center and in other auxiliary units, as well as private fund raising and sponsored research, exceeds $2.5 billion.

Income projections are based in part on the tuition revenues that will result from an estimated enrollment of 49,094 on the Columbus campus, and reflect a flat state share of instruction of $305.4 million – taking into account the 6 percent budget cut made last fiscal year that carried over into this year. (The university received $320.3 million in state share of instruction in FY 2001.) Expenditures are projected to rise most substantially for faculty and staff retirement and health care benefits (13 percent), student financial aid (11.9 percent) and utility and insurance costs (3.2 percent).

In addition, the university is able to devote a total of $19.8 million, or a 4.7 percent average increase, to the pool for faculty and staff salaries and wages, using revenues from a combination of tuition income and internal budget reallocations. Administrators pledged a year ago to develop a strategy to provide above-market compensation packages for each of the next several years to make up for below-market increases in previous years.

“Making progress on our academic goals includes adhering to our plan to attract and retain outstanding faculty and staff through a compensation initiative that will increase our competitiveness nationally over the next several years,” Ray said.

Ohio State will commit almost $6.9 million in continuing funds to strategic investments, up from $5.8 million last year and about half of the $13 million available in FY 2001. Most of that – $4.9 million – will go to multiyear commitments that include academic enrichment and selective investment programs, shifts in units’ base budgets, graduate associate health insurance and enhanced recruiting activities. Another $15.6 million in one-time funds will primarily cover university-wide technology support needs, including final payment on an internal loan for the installation of new human resources and financial systems. A President’s Strategic Reserve, created two years ago, will provide seed money to support Academic Plan initiatives, including the medical informatics program, technology transfer activities, enhancements to the undergraduate experience, the P-12 outreach initiative and other outreach and engagement projects, and support for faculty hires.

As a result of the budget restructuring, which emphasizes performance-based funding and decentralizes revenue and expenditure decisions to the college level, colleges will see average General Fund budget increases of 7 percent this fiscal year. Support areas, other than research units, are more constrained this year, seeing, on average, no budget increases overall.

The internal reallocations that were part of the budgeting process leading into this fiscal year included the elimination of nearly 600 funded full-time equivalent positions across the university, of which 119 were filled positions at the time. The most visible strain resulting from the position reductions will be evident in academic support services such as the libraries, instructional technology areas and physical facilities, where the workload is distributed among fewer people, said William J. Shkurti, senior vice president for business and finance.

The budget reflects the following student fee increases, all previously approved by the trustees: 19 percent for new in-state undergraduates and 9 percent for continuing in-state undergraduates in Columbus; a 7.5 percent undergraduate nonresident surcharge; 5 percent for graduate in-state tuition; various differential instructional fees approved for students in the professional colleges and specific graduate programs; 5 percent for nonresident graduate and professional surcharges; 8.9 percent for lower-division regional campus students; 12.8 percent for upper-division regional campus students; and 9.9 percent for students attending the Agricultural Technical Institute. Regional campus and ATI student fees reflect an Access Challenge credit the state provides in an effort to make tuition more affordable for Ohioans attending regional campuses and two-year institutions.

“Even with these tuition increases, Ohio State’s instructional fees remain lower than any other of the state’s public competitive-admission universities,” Shkurti said. “And on the other hand, even with the above-market compensation increases this year, overall our faculty and staff salaries remain below market.

“Knowing that the next few years offer no guarantees with regard to the state budget picture, it’s clear that in the long run, sources other than state funds – such as private giving, cost savings, tuition and sponsored research – will continue to grow as a proportion of university resources. This is the most difficult budget environment we’ve faced in a decade. It’s hard to tell when conditions will improve, but regardless of the budget environment, we need to continue to advance our academic goals.”