Next Steps

Coverage by Corvallis Gazette Times, Ray:  OSU to slow growth, raise faculty pay


Coverage by The Daily Barometer, Ray says OSU looking to curb growth in future


Edward J. Ray, President
Oregon State University
October 13, 2011


I appreciate the invitation of the President and the members of the Senate to come before you today to discuss the state of the university, the challenges we face in the coming year and the initiatives we must pursue over the next several years if we are to realize our aspirations for Oregon State University, our colleagues, students, graduates, and the people of Oregon and this nation.


There are three major points I ask you to take away from my remarks. First, through our own constructive efforts and strategy of self-sufficiency over a number of years we are financially strong and positioned to build on our strengths. Second, we face substantial uncertainty in our external environment but we are taking actions to influence the outcomes there. Finally, we have a clear agenda for the important next steps to take.


There is a role for each of us in realizing success. I will discuss each of these points in turn.


Financial Self-sufficiency 


Last year I indicated that the financial state of the university was sound, and I am pleased that the same can be said for this year and for the next several years. Let me summarize the negative and positive factors we are managing now and for the next several years and provide you with a bottom-line measure of our financial vitality.


On the negative side of the ledger, we have absorbed a 14.4% cut in the state general fund, and state funding for our statewide public service programs was reduced by $8 million. The Governor’s recommended budget helped us to avoid greater cuts in state funding and an extraordinary coalition of supporters throughout the state helped us avoid a proposed $20 million reduction in funding for the statewide public services. We anticipate a further 3-5% cut in state funding this biennium as the economy recovers more slowly than expected as recently as last May.


The positive side of the ledger has several key components. For the last several years we have managed our enrollment to increase our out of state and international enrollment substantially, while maintaining moderate growth in resident enrollment to significantly increase tuition revenue. We have continued to realize remarkable success in our Campaign for OSU. Our research grants and contracts and licensing fees and royalties continued to set new records and increase our overall revenue. And, recent media contracts provide the promise of eliminating the need for general fund support for our athletics programs. Together these factors are helping us to withstand the actual and anticipated reductions in state funding indicated and still expand our investments on many fronts going forward. Let me be specific about each of these revenue sources.  


Overall enrollment growth was close to 8% for the second year in a row last year and is expected to be close to 5% this year, with more than 2/3 of that growth from non-resident populations. The increase in enrollment on this campus to 25,000, including 2,200 students studying exclusively online via E-campus, is helping us absorb state funding cuts without requiring double digit resident tuition increases. Another 765 students are enrolled at OSU-Cascades, representing growth of 10 percent. Going forward, we plan to moderate enrollment growth on this campus to 2-3% each year.  While that change will moderate future growth in tuition revenue, for which we have budgeted, it will serve two other important objectives. First, recent enrollment growth has created demand pressure for more and larger classes that has been born by you and other faculty and staff that is not sustainable over the long term and in recognition of that fact we will continue to increase the number of tenure track faculty and academic and business support staff on campus. Second, while remaining an important access institution for Oregonians, we are shifting our focus to recruiting greater numbers of resident and non-resident high achieving students and raising the quality of all that we do at Oregon State University.


The Campaign for OSU continues to be an extraordinary success. Last autumn we increased the goal of the campaign from the original $625 million to $850 million by 2013. This past year we actually raised $112 million, which represents the second most successful fundraising year in the history of the university, and the campaign total reached $738 million by the original campaign closing date of June 30, 2011. Notably, a total of 3,190 current and former faculty and staff of OSU have now contributed $23 million to the Campaign for OSU.  At present the campaign total exceeds $750 million.


Our remarkable record of faculty success in garnering research grants and contracts has continued. We reached a record for externally sponsored contracts and awards in FY10 of $275 million and expected to see a decline associated with the end of the 10% Recovery Act funding for research. Our research grants and contract awards for FY11 actually totaled $262 million, representing a decline of less than 5%, and our industry sponsorship reached a new record of $5.4 million. We also saw a 60% increase in licensing and royalty revenue, at over $4 million. Last month we set a record with almost $42 million in research grants and contracts.


In our drive for financial self-sufficiency, we recently negotiated new media contracts through the Pac-12 with ESPN/Fox and separately we are developing seven Pac-12 networks in collaboration with cable partners. These two initiatives to be launched in August 2012 will move athletics to financial self-sufficiency and eliminate debts to the university and OSU Foundation in the coming years. In fact, the media contracts will provide additional funding for central initiatives to invest in academic excellence. Provost Randhawa has already begun discussions with his counterparts in our conference to develop academic programming for the new Pac-12.  


So, how do the pluses and minuses add up for budgets over the next four years? The State Board of Higher Education has set guidelines for universities for financial viability. We are expected to keep end-of-year fund balances above 5% and below 15% with an average value around 10%. Including all of the targeted investments we are implementing, we project our fund balance at the end of the next 4 years could exceed 10%.


Validation of our success both academically and financially through the worst economic period since the Great Depression need not rely on our own testimonials. Last spring we completed our accreditation review with the Northwest Commission on Colleges and Universities, NWCCU. The review affirmed the steps we have taken to ensure financial stability of the university and our focused strategic growth process. The Commission letter notifying us of continuing accreditation status, observed: “The Commission commends the University for successfully strengthening its relationships with constituencies in the central Oregon community, developing new sources of financial support, and expanding its academic offerings and facilities at the Cascades campus. In addition, the Commission finds laudable the robust assessment practices within the division of Student Affairs and the mutually beneficial working relationship between Academic and Student Affairs which serves to facilitate embedded assessment practices in the dialogue, culture, and thinking of the division, and subsequently, to result in students’ understanding and appreciation of learning outside the classroom. Moreover, the Commission applauds the University for exceeding its original campaign goal and its continuing progress toward the revised 2013 goal, as well as exceeding its extramural research funding goal thereby providing substantial fiscal resources to enable the University to continue fulfilling its mission. Lastly, the Commission commends the University for effectively linking strategic planning to the institution’s core themes.”


Investing in Excellence   


Our continuing financial success is fueling our drive for academic excellence. We upgraded 50 more classrooms last summer. We are in the process of re-opening a renovated Furman Hall for our College of Education. The Linus Pauling Science Center, the International Living and Learning Center, and the Hallie Ford Center have opened, and work will continue on the Student Success Center, and the four cultural centers, beginning with the Native American Cultural Center, for which we broke ground last May. We have secured state lottery bond funds to complete the funding for our new College of Business building, Austin Hall. We continue to upgrade our IT infrastructure for academic instruction, academic support services, and business activities.


Last year the provost provided funding for 30 new tenure track positions and $2.5 million to add new sections of bottleneck courses to the schedule to speed up student progress toward graduation. Even as we welcome 80 new tenure track faculty colleagues to campus this year, the provost will soon announce plans to hire 35-40 new faculty across the signature areas and an additional 15-17 faculty to provide stable teaching and research capacity in high demand areas. An additional $3 million will be directed to add new sections of bottleneck courses to support increased student enrollments and to implement the Faculty Senate recommendations from the last academic year to guarantee that students are enrolled in key foundational courses during their first year at the university.  In FY12 we will start a spousal/partner hire program, a gap that emerged during our hiring process last year. Finally, the Provost’s Faculty Match Program started in FY11 was a great success, leveraging $1 million in E&G investment with more than $21 million in private donations. The provost will announce plans to extend the program through FY12.


During the state budget debates last spring, I told legislators that the statewide public service programs are part of OSU’s DNA. We are pleased that with the help of a broad coalition of supporters we turned back $12 million in targeted cuts for the statewide public services. Nevertheless, those programs were cut by $8 million. The provost is working with the deans to insure appropriate funding for those elements of the statewide public service programs that are an integral part of all we do at the university.


As noted earlier, while we have benefitted from enrollment growth, it has created strained working conditions for all of our colleagues in recent years. Some of the initiatives just cited should help to address these problems and we are taking several additional steps. We have created an ombudsperson position, for which a search is in progress and should be completed in a few weeks. We have appointed Angelo Gomez as interim executive director for Equity and Inclusion with a charge to engage the campus in developing a more integrated agenda for diversity and community development initiatives, and the PCOSW is developing recommendations to help us promote greater civility on campus. In addition, Scott Greenwood, the new associate vice president and executive director of the Alumni Association; Steve Clark, our new vice president for university relations and marketing; Brenda McComb, the new dean of the graduate school; Sunil Khanna, the new associate provost for international programs; and Larry Flick, the new dean of the college of education, each brings to those key positions a reputation for working in a supportive, caring, and collaborative way with others. We are also working with the City of Corvallis leadership to address the opportunities and concerns associated with the future growth of OSU and the Corvallis community.


Managing Economic and Governance Uncertainties


Of course, even with our decisive actions in managing and directing resources we are not immune to uncertainty in state and national economic conditions. Expectations are that the overall national economy will continue to expand modestly in the 2-2.5% range for the next two years or so and that the national unemployment rate will not drop much below 9%. Oregon tends to follow the rest of the nation in recovery, and so there is little likelihood of rapid state economic growth during the current biennium. Therefore, the state may experience budget cuts when the Legislature convenes next February. At the federal level, there will be little growth in research dollars, Pell grants and student loans. We do not control these forces, and they may reduce our state funding, federal grants and contracts, and our enrollment growth, even at the modest rates I noted earlier.


With the passage of SB242, the OUS has gained the status of a state system rather than a state agency, effective January 1, 2012. Operationally, that means that we can no longer be made subject to expenditure limits or have our fund balances swept by the Legislature, and we will retain the interest earnings on our tuition balances. These changes will provide us with greater financial operating certainty and flexibility and enhance our already proven ability to generate and manage resources effectively.


I am announcing today that we will implement a 4% raise package in January 2012 and we expect to implement a similar raise package in January 2013. We must begin immediately to move forward toward appropriate compensation of all of our colleagues. Furthermore, SB242 creates the opportunity for the Board of Higher Education to propose a benefits program other than PEBB in the next few years and we will be engaged in that discussion. We continue working diligently with the chancellor and the Board of Higher Education to gain further degrees of freedom in our operations, and we will participate in discussions at the highest levels in the state to advance our views.


The passage of SB909 created an education investment board for all of P-20 and leaves the question of the governance structure for OUS and all of education in the state uncertain going forward. We should get some clarity on both of these matters during the course of this academic year. Again we are participating in these conversations and working to insure that the governance structure for higher education accords with our sense of state needs.


Furthermore, the Legislature passed a bill requiring the public system to achieve the 40-40-20 goal by 2025. In effect, by 2025, 40% of the adult workforce should have a college degree or more, 40% should have a certificate or associates degree or more, and 20% should have a high school degree. While this is an enviable goal, there are many details to be worked out, and we intend to be in the forefront in shaping the full implementation of this plan.


Next Steps


Let me turn now to our collective “to-do” list, which begins with pursuing initiatives that were not addressed in the recent legislative session. As noted earlier we succeeded in securing state lottery bond funds to complete funding for the new Austin Hall for our College of Business. Our Cascades campus, with financial support from the Legislature, hopes to purchase a building in downtown Bend to provide an immediate home for graduate programs and space for growth of the Cascades Campus for the next few years.


However, we also sought approval for three capital projects that require no state dollars, and we were unsuccessful. One request was for XI-F bonds to build the new Student Experience Center, for which students voted to increase their own Student Incidental Fees in May 2010. The second project request was for XI-F bonds for an all-purpose instructional building, with the debt service funded by growth in tuition dollars from expanding out-of-state and international student enrollments. That proposal had the support of the ASOSU leadership. However, the proposed source of funding for the new classroom building has never been presented to the Legislature before. Our third project is a new residence hall, which is badly needed to keep up with the growing housing demand by students. We will go back to the Legislature in February and present our case more clearly and effectively.


As noted earlier, we intend to moderate our enrollment growth to an annual increase of 2-3% per year beginning next year. The adoption of 40-40-20 by the Legislature will require enrollment growth throughout OUS and could require faster enrollment growth for OSU than we would choose. I have already called this potential contradiction to the attention of the OUS Board and I will carry our case forward.


Beyond those immediate next steps, how do we proceed over the next few years? First, I believe that uncertain times call for clarity of purpose. We need a short list of major priorities, and we need to stay focused. Last year, I listed three broad areas that we must attend to for the next few years:



  • Increased recruitment and retention of the brightest and most diverse faculty and students and access and retention for all sub-groups of students through to a common and much higher six-year graduation rate

  • Increased university-industry partnering through sponsored research, new business development,  and commercialization of research

  • Exceeding the Campaign for OSU goals and maintaining fundraising momentum

The first priority is self-evident. Our graduates are our most important contribution to the future, and there are no great universities without great faculty. The need to diversify our research portfolio and particularly to expand and deepen university-industry partnerships was identified in the 2025 profile. The recent completion of OSU’s first-ever Research Agenda provides a strong foundation to define how we will expand and diversify this portfolio. Finally, we must bring this first fundraising campaign to a successful conclusion and transition to the next campaign over the next few years.


To focus on these priorities, I have sketched out, with the help of colleagues, some of the strengths and weaknesses we have in achieving each of these goals along with opportunities and threats to our likelihood of success. That summary will be appended to this speech when it is posted, and we have copies here for you to review as you leave today’s meeting. In each of these areas our strengths begin with our extraordinary faculty and staff and with the remarkable capabilities of our graduates. Weaknesses include the lack of faculty rewards, understaffing in key areas, need for more effective external communications and the need to build a diverse and inclusive community more quickly. Opportunities include strategic investments in faculty, staff, and students, more effective partnering with the alumni association and the OSU Foundation, and better administrative management at every level of the university. The threats include the economic uncertainty discussed earlier at the state and federal level. I urge each of you to review the summary statement of priorities and determine where you can contribute to success in these three areas.


I know we can realize extraordinary achievement in each of these areas. There is ample evidence of what this community can accomplish when we come together; doubling our research portfolio in 10 years; launching a first university-wide fundraising campaign in the worst economic environment since the Great Depression and setting a standard for first campaigns; almost doubling international student enrollment in five years; increasing the diversity of our community every year; re-organizing our business structure; re-inventing our academic offerings; and, creating a regional campus destined for greatness in its own right. While we build upon the remarkable efforts of those who came before us to create this very special place, I know our very best efforts will prove exceptional.


UNIVERSITY PRIORITIES FOR THE NEXT 1-3+ YEARS



  1. Increased recruitment and retention of the brightest and most diverse faculty and students and access and retention for all sub-groups of students through to a common and much higher six-year graduation rate

  2. Increased university-industry partnering through sponsored research, new business development, and commercialization of research

  3. Exceeding The Campaign for OSU goals and maintaining fundraising momentum

Priority 1:  Increased recruitment and retention of the brightest and most diverse faculty and students and access and retention for all sub-groups of students through to a common and much higher six-year graduation rate


Strengths:



  1. Incredibly dedicated, accomplished, and creative faculty and staff

  2. Revenue growth from non-resident enrollment expansion, donor support, research funding

  3. Recruitment of additional tenure track faculty and academic support staff

  4. New instructional and support facilities and information systems

  5. Successful fundraising for scholarships and faculty positions  

Weaknesses:



  1. Declining state funding and competitiveness of compensation

  2. Declining state and federal funding of SWPS

  3. Lack of community equity and inclusion and effective community dialogue on campus

  4. Lack of growth in Native American and African American enrollment and retention

  5. High student/faculty, student/advisor, and student/support staff ratios

  6. Lack of market position and funding to attract high ability and diverse faculty and students

  7. Lack of data driven long term enrollment planning for all demographic groups

  8. Lack of funding for deferred maintenance for existing learning, research, and office space

Opportunities:



  1. Continued improvement in outcomes assessment at all levels

  2. Strengthening the baccalaureate core

  3. Targeting funding for high demand areas and bottleneck courses

  4. Targeted funding for diversity and spousal faculty hires

  5. Strategic recruitment of women and historically under-represented tenure track faculty, staff, and students

  6. Recruitment of graduate students, including use of INTO marketing network

  7. Alumni Association engagement in targeted student recruitment efforts

  8. Focused improvement in equity and inclusion

  9. Improving enrollment management planning

  10. Strategic communications and integrated market planning and a Portland area strategy

  11. Use of technology to strengthen student services

  12. Continued streamlining of business activities and academic administrative costs

  13. Expansion in the use of alternative course delivery systems

  14. Emerging university-community agenda around quality of life issues

  15. Improved university-community planning for support of student and faculty diversity

Threats:



  1. Slow progress in addressing climate issues on campus

  2. Federal cuts in Pell Grants and campus based financial aid programs

  3. State cuts in education and capital funding and in Oregon Opportunity Grants

  4. Uncertainty in state management of public higher education

Priority 2: Increased university-industry partnering through sponsored research, new business development, and commercialization of research


Strengths:



  1. Extraordinarily creative, productive, and engaged faculty

  2. Creation of Office of Commercialization and Corporate Development

  3. Professionalism of the Office of Research, college initiatives and OSU Foundation advice

  4. OSU Foundation staffing to build university-business relationships

  5. Significant presence of alumni in business leadership positions

Weaknesses:



  1. Lack of a point person within OSU with primary responsibility in this area

  2. Underinvestment by OSU in university-industry collaboration

  3. Lack of faculty rewards for engagement

  4. Lack of seed money and research equipment for faculty initiatives

  5. Narrowness of central research office experience in engagement with corporations

  6. Lack of effective internal and external communications regarding possible corporate collaborations

  7. Insufficient market positioning with the business community, and non-profits to build our commercial portfolio

Opportunities:



  1. Cutting edge research of tenure track faculty who seek corporate partners

  2. Institutional, college, and local program experience with corporate partners  

  3. Increased reliance of corporations on university research

  4. Continued improvement of research administration and tech transfer processes

  5. Increased alumni association engagement with businesses through career networks

Threats:



  1. Lack of institutional knowledge of best practices

  2. Adverse federal deficit impact on federal funding of research

  3. Redirection of historic federal and state targeted appropriations from statewide public services

  4. Uncertainty in corporate profitability

Priority 3:  Exceeding The Campaign for OSU goals and maintaining fundraising momentum


Strengths:



  1. Exceptional talent, accomplishments and reputation of faculty, staff, and students

  2. The campaign has great momentum

  3. The structure of the campaign, staffing, and support of friends and alumni

  4. Leadership of provost, deans, directors and colleagues

  5. Leadership of the campaign steering committee and the trustees

  6. Clarity and focus of the strategic plan

Weaknesses:



  1. Risk of campaign fatigue after a long campaign

  2. Insufficient cultivation of new potential lead donors for 8 figure gifts

  3. Lack of signature long-term major projects or themes

  4. Lack of a plan for the transition period before the next campaign

Opportunities:



  1. Expansion of potential donor discovery effort and cultivation of new major potential donors 

  2. Increase trust and estate solicitations

  3. Build more robust alumni relations and programs

  4. Continued growth of corporate and OSU Foundation relationships

  5. Emerging partnerships with major foundations

Threats:



  1. Continued slow growth or deteriorating economic conditions in the state and nation

  2. Unplanned for leadership transitions at the university and OSU Foundation