The President’s Page
President Cullinan's All Campus Presentation
November 13, 2006
Achieving a Sustainable University
Thank you for coming to this meeting today. I know that it was short notice and that you have busy schedules.
Our University is facing a significant financial challenge, and I need your help. As I outlined for you in my speech on October 3, SOU’s fiscal situation has deteriorated. I believe we need to begin the collaborative process to meet this challenge and design a stronger, more sustainable Southern Oregon University.
I am confident we can come together and do the rethinking we need to do in the days, weeks, and months ahead. With all the great minds and energy we have on this campus, I know we can come to a collective determination about what this University does best for our students. We can reshape our academic enterprise so it is fiscally sound and sustainable.
In accepting the hard work ahead of us, we will be saying that we no longer are content with making opportunistic budget cuts. Rather, we are committed to a process of deciding what SOU can be for our region and our state. Each of you here today is a stakeholder in this process. We have the support of the Chancellor and the Oregon University System Board to proceed with a three-year plan to make our University financially viable and secure for the future. The Chancellor and Board also support our intent to involve our entire University community–including our auxiliaries–in a process that is open, honest, and fair-minded.
Last week I met with groups of faculty, staff and students in preliminary consultations regarding our financial situation. Some of you asked me, “Does this mean we are closing?” The answer is no. We are not closing. The solutions to our budget problems are in our grasp. This is not an insurmountable challenge. It is a very achievable goal: to rethink and resize so we can attain a fiscally sound University without raising tuition beyond the reach of our students.
The SOU-APSOU Collective Bargaining Agreement outlines the process that best serves the University community at this juncture. With the support of the Oregon University System, we believe we best serve all interests by following this process. Today, in accordance with Section D(1) of the SOU-APSOU Collective Bargaining Agreement (2005-07) Article 11, Retrenchment, I am announcing the need for a declaration of a condition requiring reduction and/or elimination of a program.
SLIDE 1 (APSOU Article 11 D and WEB ADDRESS)
This slide, taken directly from the APSOU contract, page 10, outlines the course of action I am initiating today. I call your attention to item #1:
“Before declaring a condition of financial exigency or a condition requiring reduction and/or elimination of a program, the President shall announce the need for a declaration and present an analysis of the financial condition of the University to the Association and such other persons, groups, or committees as the President deems appropriate.”
I will be referring to Section D again later during my presentation. For your convenience, I also offer the web address for the entire SOU-APSOU Agreement.
Let me frame our financial condition for you to give you a basic understanding of our situation. Simply put, our general fund budgeted operational expenses are out-pacing our revenues.
SLIDE 2 (General Fund Operations 1999-2006)
Between 1999 and 2006, our expenses increased 30%, with significant increases in benefits and utilities. During the same period, our revenues increased only 23% and our state support decreased 6%.
With the fall enrollment numbers recently finalized by OUS, we are now able to see the depth of our financial dilemma for 2007 and the future.
SLIDE 3 (SOU Enrollment from Table 2 OUS Fall 2006)
While our student count was actually up slightly this year, our FTE was down 2.4%. FTE, not headcount, is the basis for our enrollment revenues. We’ve been falling steadily for several years. In fall 1999, SOU actually had an FTE of 615 higher than in fall 2006.
We are not the only university in Oregon facing these problems. Enrollment is plateauing throughout the Oregon University system. FTE is down in 5 of the 7 OUS institutions (PSU and OSU are up 1% and 2% respectively). Most of the universities in the system have dipped into their fund balances in the face of lower revenues and state support.
As we face this reality, we have concluded that SOU can no longer hope to correct fiscal problems just through higher enrollment. Our financial reality is that for this fiscal year we face a substantial budget shortfall. We must adjust our expenses.
SLIDE 4 (FY 06 Actual and FY 07 budget up to deficit line)
To illustrate our situation, let’s walk through some basic financial statements. For those of you who want more detail, I will explain later in this speech a process for getting that detail.
As you see from this slide, we had an actual deficit of $3.36M in 2006 and for 2007 we expect a budget deficit of $2.96M.
SLIDE 4 (FY 06 Actual and FY 07 Budget through fund balance)
We took temporary budget reductions and dipped into our fund balance in FY 2006 to address the $3.36M deficit. This year, we are working to achieve $1,998,000 in temporary reductions and will still need to dip into our reserves to make up an additional $1 million shortfall. As a result, at the end of FY 2007, we project a 3.3 percent reserve—which is well below the 5-15% levels acceptable to the Oregon State Board of Higher Education.
SLIDE 4 (FY 08.09.10 budget projections)
If we consider the trend of our FTE and state revenue projections and continue our current expense practices, and if we do nothing to correct our budget problems, we continue to spend into our reserves to meet our deficit. You can see we will exhaust our ‘savings account’ by 2007-2008--FY 08.
We are already tackling the situation. Our Vice Presidents and deans are working on plans to achieve significant savings this year. For FY 2007, we have already taken measures to achieve considerable savings.
SLIDE 5 (Some Cost Savings Measures Already Implemented this Year)
We have cut $1.2 million from across many parts of the university; we have rolled over temporary cuts from last year into this year’s budget; we have frozen selected vacant positions and searches; and we have reduced faculty development allocations and transferred money from the self-support areas.
SLIDE 6 (Additional One Time and Opportunity Savings)
In addition, we will continue cost-cutting with the following measures campuswide: a hiring freeze for everything but the most crucial positions and a travel freeze except for the most crucial travel needs.
SLIDE 6 (Cost Savings Initiatives)
We are also asking the campus to save energy whenever possible—and will continue to seek your input on other ways to save. Whatever we save this year, the less we need to tap our reserves, and the less we will need to cut in future years.
Although the challenge is large, I see this situation as an opportunity. As I said to the campus in October, it’s an opportunity to employ hard work and creative thinking to build a sustainable SOU. A sustainable SOU is a University that is sized to its current enrollment—and that is right now fewer than 4,000 full-time enrolled students.
Just as we need to take a different approach in our budgeting, we also need to take a new look at our student recruitment and retention. This slide clearly shows what recruiting new students can mean for our institution.
SLIDE 7 (100 new students = $1M increase in revenue)
As Jonathan Eldridge, our Vice President for Student Affairs, says every day, “Recruitment and retention are everybody’s business.” We are all admissions counsellors—and we are all responsible for helping students be successful and stay at Southern once they’re here. There are many excellent initiatives going forward to help address recruitment and retention: I am particularly excited by the partnership with RCC in Medford and the Foundations of Excellence process underway to apply best practices to the first-year experience.
I am optimistic that we will have more students in fall 2007 than we have in fall 2006. But we can’t build our budget on hope alone: we need to look at the figures before us and use the projections for enrollment given us by the system office.
Getting back to the process I am initiating today, I want to reiterate that it will be both consultative and positive. Key groups on campus such as the University Planning Council will have central roles in the process. I ask that all of you work with me thoughtfully and productively. Each of you has ideas. Please share them. To do this process well, all of us need to have an institutional vision.
The timeline for the process we are embarking on is driven by the SOU-APSOU Agreement Article 11, Section D (1) and (2).
SLIDE 8 (APSOU Article 11 D)
“The President will set a time by which comments and recommendations will be due to the President, which will be at least 20 university calendar days following the announcement of the budget analysis unless the President states circumstances compelling an earlier time. The President or a designee will, at Association request, meet with representatives of the Association to hear and discuss the Association’s comments and recommendations.
“Having received such comments and recommendations as the Association chooses to provide within the specified time, the President may declare a state of financial exigency or a condition requiring reduction and/or elimination of a program.”
SLIDE 9 (Timeline for Need)
I am officially inviting you now to send me your comments and recommendations during this comment period, which will end December 15. Please email them to me at PresidentsOffice@sou.edu. I also welcome your questions regarding the budget.
Our circumstances and the upcoming Winter break require that I bring the comment period to a close on December 15. During this time, I will be available to meet with campus groups. In addition, anticipating your need for additional data, we are planning budget forums starting this week. And with the help of Institutional Research staff, we will create a web page to post responses to the most frequently asked questions and requests. Information about the web page and the budget forums will come out to the campus later today.
Following your input, I will consider the next steps. Should we need to move to the next stage - #3 in Section D, “the declaration” – I anticipate that step would happen soon after the start of Winter Term. Following the timelines for the next steps stipulated in the SOU-APSOU Agreement, the rethinking process would conclude around the end of Winter Term.
Unfortunately, we don’t have the luxury of prior strategic planning to guide us. So in a sense, we are embarking on crisis strategic planning that will enable us to find our identity. When people talk about SOU, we want our University to be known for its strong signature programs. We know that our individualized education and excellent teaching will always be the foundation of this University . But we need to shore up that foundation with critical thinking and planning so that our University continues to meet the needs of our students, is responsive to our region and our state, and is viable for the future.
In closing, I go back to a word I used earlier—opportunity. This is our opportunity to reshape SOU. Everything is on the table. All ideas are welcome. And everything will be openly discussed and reviewed.
In early December, I will report back to the Chancellor and the Board about the steps we are taking. I encourage all of you to focus on the positive aspects of our academic community because there are many. We are a wonderful university with a budget problem. It’s a problem we can fix. I believe we can solve this problem and emerge together as part of a stronger institution.
Thank you all for coming this afternoon. And thank you in advance for working on this process in a positive way.
We have a few minutes now for questions and comments.