University’s share in cost-cutting might amount to $4.2 million by July

By KYLE ODEGARD
Gazette-Times reporter

The state’s economic forecasts have plummeted, and that means deep cuts for Oregon State University.

The report issued Wednesday had a projected $142 million General Fund deficit for this biennium. Gov. Ted Kulongoski responded by ordering state agencies to trim budgets by 1.2 percent.

For OSU, the governor’s direction means an estimated $4.2 million in cuts by July 1, said university President Ed Ray. That includes about $2.75 million from the main campus, $1.35 million from statewide programs such as the OSU Extension Service and $100,000 from the Cascades Campus in Bend.

“For the rest of this year, we are going to be looking at deferring expenditures,” including not hiring for some vacant positions, Ray said. Deans and directors will meet this week and decide the best steps to take beyond that, for this year and the coming years.

“It’s not like this is a surprise. We’ve been saying it’s going to be bad,” said Jock Mills, OSU director of government relations. “We’ll figure out how to get through the current biennium. It’s what to do about the future biennium, given the significant problem.”

Ray said the state, if it continues services at the current level, faces an estimated shortfall of $1.3 billion for 2009-2011, or a reduction of 7.5 percent, given the newest predictions.

In the May 2007 forecast, used to build the state’s biennial budget, there was a surplus of about $184 million. By August this year, the ending balance had dropped to $24 million. With the latest report, with the $142 million deficit, there’s been a shift of $326 million in less than two years.

OSU already lost $2.4 million when the Legislature’s Emergency Board, pointing to poor economic forecasts, released only 80 percent of a $126 million state salary pool in June.

“This recession demands tough decisions and requires shared sacrifice — and today’s action is the first of many difficult decisions that lie ahead,” Kulongoski said in a statement.

Because the cuts come with only five months left in the fiscal year, it will be closer to 5 percent of what each agency has to spend. The governor has asked agencies to keep those reductions going into the next biennium.

The governor’s budget for 2009-2011 will be released Dec. 1, and it will need to deal with the continuing fallout of the financial crisis.

Mills said unless there are significant changes in the May economic forecast, or the state taps into its rainy day fund or its education stability fund, there could be tax increases or more severe reductions for next biennium.

While the current situation is drawing comparisons with the Great Depression, the report notes that governments throughout the world are supporting the financial system during this crisis.

“Most people are at least thinking the economy will start showing signs of turning around toward the end of calendar year 2009. We’re going to be challenged the remainder of this academic year, and well into next academic year,” Ray said.

The true scope of OSU’s cuts this fiscal year might not be known yet, however.

The Oregon University System faces $10.2 million in cuts, said spokeswoman Di Saunders. While the $1.4 million to statewide services out of OSU appears firm, the remaining $8.8 million still must be determined, she said.

Kyle Odegard covers Oregon State University. He can be contacted at kyle.odegard@lee.net or 758-9523.