Open Letter to the PSU Community Updated Jan 17, 2014
Why the PSU American Association of University Professors is Skeptical of the Case for a “Structural Deficit” in PSU’s Budget,
and the Call for Destructive Cuts to the Academic Budget
We are resorting to a provocative ad in the Vanguard because we haven’t been able to obtain answers to our questions about the apparently flawed case for a structural deficit in PSU’s budget, despite weeks of asking in multiple forums.
President Wiewel has been calling for big academic cuts for Fall 2014, asserting a structural deficit of $15 million, including recently at the City Club on Dec. 13th.
The case presented for a structural deficit is questionable, based on
* Unaudited numbers, available only on the PSU campus, which differ from the audited figures published by OUS.
* A budget that fails to prioritize academics, spending too much on administration and “auxiliaries.”
Administration presentations state that:
* growth in tuition and fee revenues plus state contributions have not kept up with salaries and benefits over the past 5 years, and
* PSU has cash flow problems, particularly in December.
Key slides from these presentations are available on PSU’s website here: www.pdx.edu/fadm/sites/www.pdx.edu.fadm/files/PSUbudgetslides2013.pdf
However
1. PSU’s books are not audited. PSU numbers are NOT reviewed and confirmed by a third party. PSU’s Numbers
As, the Administration has told the AAUP in a January 14 response to an information request:
Because PSU is part of the Oregon University System, we do not have a separate financial statement, and thus, there has never been an audit of PSU's financial statement. The audited financial statements for the Oregon University System represent financial data compiled at the system level.
2. PSU’s case for the structural deficit is based on numbers that do not agree with the audited figures reported by OUS.
PSU’s net tuition and fee revenues have grown $5 million more than claimed, according to the State Board figures.
In Fall 2009 PSU apparently reported $142.5 m in net tuition and fee revenue to the Oregon State Board for the ‘08/’09 fiscal year, not the $147.4 m shown in campus presentations, suggesting that growth in net tuition and fees over the last 5 years has been $5m higher than claimed.(1)
3. The state is paying $1.3 million more than shown in campus presentations, again according to State Board figures.
OUS Board materials show a state contribution of $58 m to PSU this year, including the initial legislative appropriation, as well as both the 1st and 2nd tuition “buydowns,” not $56.7m. (2) That figure was recently confirmed by an Administration response to an AAUP information request, showing also that $62 million would be forthcoming in 2014/15.
4. Salaries of full-time tenure-line and fixed term faculty NOT paid by external funding amount to only $53.7m, or 34%, of PSU salaries quoted at $156.7 m. That’s less than 10% of PSU’s overall budget of $549m.
Academic Professional salaries account for only another $11.3 million, or a further 7%. (3)
If salaries are excessive, it’s because combined Administration salaries expanded $5m in the past 2 years alone, to $43.6m. The number of Exec Admin positions with titles including the words President, Provost or Dean increased 65% between 2002 and 2012, and salaries for these positions skyrocketed. (4)
5. PERS costs are temporarily higher while compensating for losses due to the financial crisis of 2008. PERS is once again earning high returns, so problems are not “structural.” (5)
6. PEBB costs, for health care, did not increase from the previous academic year to this academic year, according to PEBB presentations in Spring 2013.
7. Cash flow issues are not a “structural deficit.” Many US households spend more than they earn in December, by spending less than they earn in other months. Faculty members earning 9-month salaries to cover 12 months of expenses are experts in managing cash flow issues!
8. Tuition, fees, and the state contribution subsidize a rapidly growing administration as well as a range of “auxiliary” activities that should be self-supporting, including poorly performing real estate, athletics and business start-ups. (6)
VP Rimai’s presentation in June 2013 to the PSU Faculty Senate indicated that Education & General Funds (tuition, fees, state contribution and a few other revenue sources), as well as Parking and one-time funds, were being used to subsidize “Auxiliaries,” including poorly performing real estate ventures such as the purchase of University Place Hotel, at a rate of $6.8 million a year.
9. Facing faculty opposition to the demand to identify 8% of academic budgets for possible cuts, President Wiewel has managed to reduce the structural hole by half, to $7.5 million. (7) The fact that President Wiewel pushed first to cut academic budgets raises questions about PSU’s priorities.
10. The measure of fiscal health used by the OUS is the ending fund balance, or the amount of reserves relative to operating expenses of each university.
This figure is now falling for PSU, in large part because some reserves are no longer reported in the ending fund balance.
The OUS system has a new policy of requiring a separate reserve for bad student debt, much of which is likely to be paid. Also, PSU has created separate reserves for different purposes, such as the $5 million sinking fund to deal with the ongoing losses associated with University Place Hotel.
11. The cost of Instruction and Department Research accounts for only 27% of PSU’s All Funds Expenses, while Tuition and Fees make up 45% of All Funds Revenues. (8)
The PSU-AAUP believes that enough could be cut from budgets for secondary activities to fund a substantial investment in academic capacity and quality at PSU in 2014 – see Appendix.
With students going into serious debt to obtain an education, it’s imperative that PSU budgets prioritize academics.
Appendix:
PSU FADM Budget Slides 2013 “Net Structural Problem” <$14.5 m>
Revise the Under-Statement of the FY14 State Contribution, and
consequent over-statement of the decline in the State Contribution +1.3 m
Revise the Overstatement of FY09 Net Tuition and Fees, and
consequent understatement of FY09 to FY14 growth in net tuition & fees +5.0 m
Adjust for the Amount of Salaries & Wages Paid by External Funding, est. +8.0 m
Reverse the Growth in Combined Administrative Salaries,
between FY11 and FY13. (Associated Benefits would increase
this figure by about one-third. +5.0 m
Adjust for President Wiewel’s Fall Term Budget Updates
reducing the shortfall, given actual enrollment, etc. +7.5 m
End subsidies to Auxiliaries draining the budget of $6.8 m last year
alone, by increasing reliance on Self-Support, Donations or, if
necessary, sale of real estate like University Place. Subtract
President Wiewel’s Dec 5th announcement of shift of $800k of football
subsidy to self-support from $6.8 m= $6m + 6.0 m
Revised Balance 18.3 m
These actions bring the estimated Net Structural Problem of <$14.5> million to a positive balance of $18.3 million, without considering
- The future of PEBB & PERS, both of which look positive,
- Shifting Exec Admin positions added since 2002 to senior faculty positions,
- Other issues identified above and elsewhere, including lower energy costs, rising income levels likely to increase state capacity or growing values of financial portfolios likely to encourage donations.
Sources
- http://www.ous.edu/sites/default/files/state_board/meeting/dockets/ddoc091106FA.pdf materials for Nov. 6, 2009, page 7
- http://www.ous.edu/sites/default/files/state_board/meeting/dockets/ddoc131115.pdf Table 4
- Faculty and Academic Professional Salaries as Costed by PSU Administration for bargaining purposes, shared with PSU-AAUP on Dec. 18, 2013.
- Center for Labor Research and Studies, FIU, " How PSU Prioritizes its Money," available at https://psuaaup.net/assets/docs/images/blog/entry/dramatic-differences-in-growth-of-psu-administrators-and-faculty-positions based on publicly available data provided by PSU's HR Dept. to the PSU Library
- http://www.oregon.gov/treasury/Divisions/Investment/Pages/Oregon-Public-Employees-Retirement-Fund.aspx, e.g. Report for November 2013
- See VP Rimai’s June 3, 2013 presentation to the Faculty Senate
- http://www.pdx.edu/news/node/23356
- See VP Rimai's Oct. 7, 2013 "Budget Basics" presentation to the Faculty Senate Budget Committee