June 29, 2001
Contact: ElizabethConlisk (614) 292-3040
Lean times ahead as OSU approves 2002 budget
COLUMBUS -- The Ohio State University will continue to make progress on its strategic goals – most significantly in the area of undergraduate education – while progress toward other goals will lag under a fiscal year 2002 spending plan authorized Friday (6/29) by the Board of Trustees.
The university is advancing a lean but balanced budget, and officials already are looking beyond next year to develop ways to increase Ohio State’s salary competitiveness nationally within the next few years.
“The limited increase in the state share of instructional funds reflected in this budget especially affects our faculty and staff salaries for the coming year,” Executive Vice President and Provost Edward J. Ray said. “Because we are increasingly at risk of falling behind our peer institutions in attracting and retaining the highest-quality faculty, we are committed to developing a strategy to provide above-market compensation packages for each of the next several years in order to provide faculty and staff with salaries near the midpoint of our benchmark peer institutions. We plan to outline details of the strategy by early October.”
General Fund revenues and expenditures are expected to be $793 million in the fiscal year beginning July 1, an increase of 4.7 percent over 2000-01. The total university’s annual budget, including income and expenses at the University Medical Center and in other auxiliary units, exceeds $2 billion.
Income projections are based in part on the tuition revenues that will result from an estimated enrollment of 47,827 on the Columbus campus, and reflect a projected 1.2 percent increase, to $342 million, in state support. Expenditures are projected to rise most substantially for faculty and staff health care benefits, student financial aid and utility costs.
Ohio State will be able to commit nearly $5.8 million to strategic investments – less than half of the $13 million available in FY 2001 – primarily to support enhancements to the undergraduate student experience, existing Selective Investment commitments and faculty recruitment. The university has been forced to scale back in several areas funded in past years under strategic investments, including academic enrichment, library acquisitions, service improvements and initiatives previously supported by Research Challenge and Success Challenge grants from the state – both of those programs were cut by the state legislature for the coming biennium.
“This has been the most difficult budget year since 1995, and reflects the smallest increase in state support in nine years,” said William J. Shkurti, senior vice president for business and finance. “That, combined with the largest increase in health care costs in a decade and the largest increase in energy costs in two decades, leaves us making only limited progress on many of our goals outlined in the Academic Plan.”
The budget reflects the 9.3 percent undergraduate tuition increase approved by trustees in early June, as well as the $395 flat increase to salaries for faculty and staff with satisfactory or better job performance. Shkurti explained to trustees how the university arrived at that salary increase, especially given the larger-than-usual increase in tuition made possible this year by the General Assembly’s decision to lift tuition caps at state-support institutions.
When all General Fund income sources are combined, the projected increase stands at $35.4 million – of which $28.3 million, or 80 percent, will come from increased tuition and fees. “Though that is a substantial amount of money, much of it was dedicated early in the budget process to specific items, especially planned enhancements to undergraduate education,” Shkurti said.
When the university announced last winter that it would seek a 9.3 percent undergraduate tuition increase, officials pledged that all revenues above the historic 6 percent cap (amounting to $4.6 million) would be committed to improvements in such items as technology, advising, classroom equipment, fewer closed courses and other instructional enhancements for students. The administration also promised to increase the student financial aid package to match the higher tuition costs. The cost of increasing financial aid, including undergraduate scholarships and graduate student fee authorizations, stands at $9.5 million. Another $3.2 million is earmarked to individual colleges with fee differentials by previous agreement.
With the university’s share of the cost of health care benefits increasing 32 percent this year, Ohio State is directing a total of $7.2 million to increased benefits costs. Another $4 million will be needed for increased utility costs ($2.5 million of which is required to offset fuel cost increases) and rent and other utility increases on university-occupied spaces.
These items, totaling $28.5 million, leave $6.9 million of the projected increase in income for everything else, Shkurti said. Of that, $4.9 million (71 percent) will go toward compensation: the $395 increase for faculty and staff, faculty promotion increases, graduate associate pay increases and General Fund collective bargaining increases. The remaining $2 million, or 3/10 of 1 percent of the entire budget, is set aside for strategic initiatives such as the existing Selective Investment commitments and recruiting.
As part of the budget, trustees approved tuition increases on the regional campuses. Last year, Access Challenge, a state program designed to make college more affordable for Ohioans attending regional campuses and two-year institutions, enabled Ohio State to decrease tuition at regional campuses by 5 percent for lower-division students and hold the tuition increase to 3 percent for upper-division students. This year, as a result of the legislature’s cut to Access Challenge funding, OSU will raise in-state regional tuition by 7.6 percent for lower-division students and 6.5 percent for upper-division students. Tuition at the Agricultural Technical Institute (ATI) in Wooster will increase 5.8 percent.
“This turn of events is particularly disappointing. We estimated that last year, 4,200 freshmen and sophomores at our regional campuses and ATI benefited from the reduced tuition. We will urge state legislators to restore this program in future years to enhance access to higher education for all of Ohio’s citizens,” Shkurti said.
Some budget details, including the final budget book detailing finances for the year, will not be submitted to the board until late August. Though the final revenue and spending plan won't be available until then, the board authorized expenditures within projected income levels.
University Treasurer James L. Nichols updated the board on the university’s endowment, which stood at $1.067 billion as of June 2. He said that there has been no change in proxy guidelines.
Nichols reported that the Battelle Technology Fund has been added to the university’s venture capital funds, with an investment commitment of $2.62 million.
Nichols told trustees that the latest report by the National Association of College and University Business Officers ranked Ohio State’s endowment fund as the 32nd largest in the country, and the eighth largest public fund. The report listed Ohio State’s five-year rate of return at 18.3 percent, compared to an average of 17.5 percent for other Big Ten schools. The report listed the average five-year return for peer universities at 16.2 percent, Nichols said, and the average for all universities at 15.4 percent.
Trustees approve supplemental retirement plans
The board authorized the establishment and amendment of several Ohio State supplemental retirement plans. The Ohio State University’s Aetna Deferred Compensation Plan, the Supplemental Qualified Retirement Plan and the Supplemental 415(m) Retirement Plan were established, and the Ohio State University VALIC Deferred Compensation Plan and the Ohio Public Employees Deferred Compensation Plan were amended.
The changes ensure normal retirement benefits to employees affected by Internal Revenue Code limitations.
The plans also now reflect recent amendments made by the state to the Ohio Public Employees Deferred Compensation Plan and allow for an additional Deferred Compensation plan vendor.
Individuals affected by these changes will be individually notified.
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