Financial Analysis of Oregon Tech in the Middle of the Coronavirus Pandemic Howard Bunsis Professor of Accounting, Eastern Michigan University Past Chair, AAUP Collective Bargaining Congress May 14, 2020 1
May 11 Notice on Furloughs from the President of Oregon Tech https://www.oit.edu/coronavirus • Because of expected state funding shortfalls, we estimate a $4.5 million gap in the 2020-21 budget. The pandemic has also impacted our current year’s revenue stream, particularly in auxiliaries such as housing and dining. It is important that we start implementing cost-saving measures right away to avoid taking the brunt of the budget gap entirely in the next academic year. • It is in that spirit, we are implementing a furlough program for classified and unclassified staff, to save approximately $2.0 million between now and the end of the calendar year • We will begin our furlough program on May 17 , and it will operate through December 31, 2020. We anticipate that nearly all of our classified and unclassified staff will participate in Work Share at a 20% furlough (1 day a week), with some employees up to 40% (2 days a week) • We most sincerely appreciate the engagement and collaborative leadership of our SEIU Local and our Administrative Council in developing this approach. After meeting over the past two weeks to discuss the Work Share program, among other options, the University and SEIU signed a Letter of Agreement last week 2
Furlough Summary Reported by the OIT Administration May 11, 2020 • This table is VERY misleading • The average reduction will be 6% of annual salary • The average hit will be over 9% of salary when considering the furloughs are being implemented from May 17 to December 31 • Details in a later slide 3
Oregon Tech 2019 Revenue Distribution Source: Audited Financial Statements Accrual Basis Cash Basis 40% 35% 35% 33% 30% 28% 26% 25% 20% 19% 15% 12% 9% 9% 10% 7% 6% 4% 4% 4% 5% 3% 2% 0% 0% State Appropr Tuition and Fees Cap Gifts/Grants Auxiliaries Financial Aid Other Grants/Contracts Investments Grants 4
Oregon Tech 2019 Revenue Distribution: Numbers and Percentages Source: Audited financial statements Accrual Accrual Basis Cash Basis Basis Cash Basis State Appropriations 29,401 29,268 28% 35% Tuition and Fees 27,382 27,687 26% 33% Capital Gifts/Grants 19,503 3,278 19% 4% Auxiliaries 9,591 9,565 9% 12% Financial Aid Grants 7,158 7,135 7% 9% Other 5,792 2,559 6% 3% Grants and Contracts 4,208 3,244 4% 4% Investments 1,636 0 2% 0% Total Revenues 104,671 82,736 100% 100% 5
Two Main Revenue Sources Over Time Source: Audited financial statements Tuition and Fees State Appropriation 31,000 29,000 27,000 25,000 23,000 21,000 19,000 17,000 15,000 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 In Thousands Tuition and Fees 21,488 21,933 23,947 24,673 25,717 27,352 State Appropriation 18,207 20,439 25,176 26,655 27,957 29,268 6
The Response to the Pandemic in the State of Oregon and Nationally 7
Oregon Colleges Face Uncertain Enrollment Despite Revamped Recruitment • The Register-Guard • May 3, 2020 • Colleges like the University of Oregon rely heavily on student enrollment to keep their budgets afloat. • “The impacts of all of this in admissions will be seen for years,” said Noah Buckley, admissions director at Oregon State University. • The University of Oregon extended its decision date to Sept. 1. • After seeing UO’s late deadline, OSU decided to also extend to Sept. 1 8
Oregon universities prepare for budget crisis By Elizabeth Miller Oregon Public Broadcasting Apr 28, 2020 • Both EOU and Portland State have told employees no jobs would be cut t his term. • Portland State’s Board of Trustees recently voted to use reserves to help cover some of the university’s losses related to COVID-19. The university said additional cost-saving measures will likely be announced later this spring. • Most universities have canceled travel. Some universities have implemented a hiring freeze or pay cuts for employees. Citing a projected loss of $25 million, University of Oregon announced layoffs for 282 employees. • Factoring in the $1.7 million SOU will directly receive from the CARES Act, the university still needs $2.8 million in the short term. But as the virus continues, long-term impacts to universities could be much worse. 9
President Naganathan Messages: 4/29; 5/1, 5/8 • https://www.oit.edu/coronavirus • Want in-person classes in fall; work with Governor and HECC • VP/CFO position no longer vacant; incumbent staying 6 months • President taking a 10% pay cut • Trimming travel • Partial hiring freeze • Program Reduction and Elimination Committee (PREC) is meeting later today to begin its recommendation process; analyzing whether we have departments or programs that can be eliminated—or perhaps consolidated—to realize additional cost savings through increased efficiencies. • HECC has estimated a 17% decrease in funding for our next fiscal year budget, running from July 1, 2020 to June 30, 2021 – this is not reported on the HECC website 10
Advice on Committees to Eliminate Programs • The admin wants faculty cover to make changes • Program eliminations do not yield significant changes • Admins like to show these changes to legislators, saying they are serious about belt-tightening and standing up to faculty • Advice: Don’t do it o Do not even sit on these committees; o If the faculty will not leave the committee, and if most really believe the admin wants to do the right thing, then . . . • They are going to make the cuts no matter what faculty say, and hopefully your union contract will protect faculty from cuts 11
National Response • 20% Enrollment Decline for Fall 2020 Is Now Part of the Landscape Inside Higher Education, April 29, 2020 o Projection comes from SimpsonScarborough a higher education research and marketing company. o All their clients are administrations • The Coronavirus Enrollment Crash o Chronicle of Higher Education, May 7, 2020 o From the article: What do colleges and dinosaurs have in common? The risk of extinction. 12
Inside Higher Education Update, 5/10/2020 • West Virginia University furloughs o The Pittsburgh Post-Gazette reported that the approximately 875 employees being furloughed include groundskeepers, custodial workers, clerical workers, as well as “various campus service workers.” o WVU has about 6,000 full-time employees. • Furlough, Job Cut Plan Approved for University System of Georgia. o The system is working with its 26 colleges and universities to develop a new spending plan for the 2021 that would feature a 14 percent reduction from the current fiscal year. Georgia's tax revenues dropped by roughly $1 billion in April. o Most faculty and staff members would be required to take either 4 or 8 furlough days under the plan, depending on their salary. Those with the largest base salaries will be required to take 16 furlough days, the equivalent of a 6.2 percent pay cut. o The system chancellor and all presidents will take a 10 percent pay cut , which includes 26 furlough days. 13
Public Regional Colleges Were Already Struggling. Covid-19 May Push Some to the Brink (Nevada State College) • Chronicle of Higher Education • MAY 11, 2020 • “Regional colleges are disproportionately dependent on aid from the state government, and they have limited availability of alternative revenue sources. They do not have significant endowments, or wealthy donors to turn to,” said Thomas L. Harnisch, vice president for government relations at the State Higher Education Executive Officers Association, commonly known as Sheeo. • “They serve disproportionate shares of low-income students, first- generation students, and students from historically underserved communities.” 14
Fall 2020? • American College Health Association Issues Guidelines for Reopening; May 7, 2020 • The guidelines say colleges “can anticipate restrictions and limitations in activities will be in place for the next 12-18 months, if not longer” and that “resumption of activities will be gradual and phased based on local public health conditions as well as institutional capacity.” • The guidelines also say “meticulous adherence to public health practices, including hand hygiene, physical distancing, proper cough/sneeze etiquette, frequent disinfection of common and high traffic areas, symptom assessment, temperature checks and face covering” is “the new normal” for campuses. • OSU is “planning for” in-person classes • UO is “aiming for” in-person classes 15
More Fall 2020 Plans • Purdue University is forging ahead with plans to reopen for face-to-face instruction come fall, despite faculty concerns about that timeline o Give faculty a choice on how to teach o Move larger classes to spring term o Hybrid classes • President Trump , in a Fox News virtual town hall on May 4, said he wants K-12 schools and universities to reopen in September. • California State U. System Will Conduct Most Fall Classes Online o May 12, 2020 o Chancellor Timothy P. White told California State trustees that it would be irresponsible to bring the system’s nearly 500,000 students back to its 23 campuses in the fall. o Even if fall classes started in person, White said, they would very likely have to be scaled back in the event of a second wave. He said planning for online instruction now “preserves as many options for as many students as possible.” 16
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