Financial Challenges FAQs

Colleagues,

Below we have posted some frequently asked questions about the economy and the university’s financial situation. Go to the LINKS page to see messages, blogs, and other information we’ve posted about the economy and the UO budget. If you have additional thoughts or questions, do not hesitate to write to me at provost@uoregon.edu.

--Jim Bean

Senior Vice President and Provost

What started the global financial crisis?

The U.S. recession and global downturn resulted from cascading problems beginning with housing and mortgages which spread to the economy and the financial markets. No one knows how deep it will be or how long it will last. 

How is Oregon faring in relation to other states?

Proportionate to population, Oregon is better off than our neighbors right now.  However, the full impacts on our state may be slower to surface because our tax system differs from that of other states. Meanwhile, our sister institutions have already seen significant impacts.  Some of the country’s most prestigious private universities have announced budget cuts of between $50 million and $80 million, some even as high as $90 million because of losses in endowments.  The Seattle Times recently reported that the University of Washington is facing a twenty percent or $167 million budget cut in state funds.  California schools have faced significant cutbacks and are reducing enrollment for next year. Recent estimates of state budget deficits are $11 billion in California and $5 billion in Washington, but thus far we have only seen a $1 billion shortfall in Oregon.

Why have California and Washington been hit harder than Oregon so far? 

California and Washington rely on sales tax for a large portion of revenue. When the nation’s economy seized in October, both states’ revenues dropped precipitously and instantly because consumers stopped buying. By contrast, Oregon’s tax system is based on income tax, so we won’t know the full impact until revenues arrive in the spring.

What are the impacts at the University of Oregon?

Thus far, there are three general impacts on the University of Oregon.

1. Endowment Earnings Down:  The financial markets have fallen in value between thirty and forty percent. Because of excellent management by the UO Foundation, our endowment is down only eighteen percent, a small amount compared to other institutions across the country. This fiscal year there will be little impact from this reduction. However, next year’s payouts will be calculated on what is likely to be a smaller base amount.  Units funded by endowment earnings may see a proportional reduction in fiscal year 2010.

1. Non-Resident Tuition Up: The difficulties of universities in California and Washington, including planned enrollment reductions, have heightened prospective students’ interest in the UO.  In the fall of 2008, enrollment swelled to record levels, and applications for fall 2009 are running well ahead of 2008, putting us in the enviable position of selecting the top students from a larger pool. A continued influx of out-of-state students will, in large part, contribute to healthy tuition revenue.

1. Mixed News on State Appropriation: The Governor’s Recommended Budget for the 2009-11 biennium protects higher education, but that’s just a starting point for the Legislature’s budget deliberations when it convenes in January.  We will be working hard to urge support of the Governor’s budget.  However, the state will likely face more revenue shortfalls during the next biennium and we must plan for the very likely scenario of rescinded funding (i.e., reductions in funds already approved) and budget cuts.

What have cuts in the state budget meant to the University of Oregon thus far?

State officials recently informed us of a small rescission of our FY2009 funds that is expected to be between $1.8 million and $2.2 million. The good news is that we were out in front of this when we mandated small cuts for the schools, colleges and administrative units in October.  Any further impact on UO schools and colleges will be relatively small.

Are future cuts or rescissions planned?

A further rescission is possible.  This would be necessary if the tax revenue forecasts continue to decline. Since we do not know if, when, or how much such a cut might be, we cannot speculate on its potential impact yet.

In addition, a third wave of cuts to the budget for the next two fiscal years is highly probable. It’s unclear to what degree the Legislature might change the Governor’s proposed budget.

How will the University of Oregon approach potential cuts? 

Although we do not yet know the extent of future budget cuts, reductions are likely enough that it behooves us to begin a discussion now of how we might make them. Some initial thoughts on prioritization include the following:

1. We should protect the academic core – make as few cuts as possible that have direct impact on teaching and research.
2. We should cut strategically and in keeping with the academic plan.
3. We should protect excellence, meaning relatively few cuts to units that are renowned for their tremendous quality,
4. We should protect people.  Layoffs hurt real people.

All of these are important. The order of their importance depends on your perspective. I’m also interested in other factors we might consider. This is an ideal time to hear what you are thinking.  We are not facing significant cuts and not under great time pressure.  Let’s make sure we are prepared by starting this discussion right now.

What resources are there for me and my family if we are facing financial difficulty? Information about the Employee Assistance Program is available from the UO’s Employment page at hr.uoregon.edu/benefits/summary.html.

Employee Assistance Program www.cascadecenter.com
The University of Oregon contracts with Cascade Centers, Inc. to provide a comprehensive employee assistance program for eligible employees, their dependents and eligible household members. The services are available at no cost. More information about the program is available from Human Resources, 346-3159. Call Cascade directly at 1-800-433-2320 to schedule an appointment.