Remember last winter term when the University of Oregon’s Board of Trustees approved a whopping 10.6 percent tuition increase? And then, when lawmakers ponied up extra funds, it reduced UO’s total increase to 6.56 percent? Heads up, because it’s time for UO to balance its coffers again — setting next year’s tuition rate.
There’s little chance that tuition will remain flat. That hasn’t happened since 2001.
Total resident tuition and fees have risen by 87.6 percent in the last ten years. At the same time, UO’s state funding dropped, hitting a low in 2012. Since then it’s increased some each year, but hasn’t fully recovered. Funding for UO is still around over $13 million less than in 2008, according to funding records.
Meanwhile, university expenses have piled on each year, including personnel and retirement “cost drivers.”
Next year, UO must digest an estimated $16.7 million cost increase. That’s a lot less compared to this year’s $25 million that caused the 6.5 percent tuition uptick. While cost increases fluctuate year-to-year, the increases are recurring, and the university has to plan ahead. UO administrators are expecting a $20.5 million annual cost hike in the next eight years — and that’s a conservative estimate, says UO’s Chief Financial Officer Jamie Moffitt.
Moffitt said the cost drivers have gone up dramatically — last year retirement costs went up about 18 percent.
An outsider might look at the university and see an institution ripe with cash. From new buildings to a brimming athletics department, UO is expanding its assets. Tuition Fee and Advisory Board member and professor Chris Murray said it’s a question that comes up often.
“Everyone thinks we’re rich, and I’m running around at dinner parties saying we get nothing,” he said at Friday’s TFAB meeting.
UO’s Tuition and Fees Advisory board — made up of 16 different administrators, deans, educators and student representatives — will spend the next month discussing and hearing tuition proposals. At the beginning of February, they’ll send a recommendation to UO Provost Jayanth Banavar and President Michael Schill.
About a month later, after allowing time for public comment and the provost to examine the numbers, Schill will present the Board of Trustees with his request. The board will then vote on next year’s tuition rates in March. If the rate increase exceeds 5 percent, the proposal will be sent to a state committee for review — the Higher Education Coordinating Committee.
In total, the university has about a $1 billion budget to work with.
“That’s a billion dollars of revenue and a billion dollars of expenses,” said Moffitt. “So even though it’s large, that doesn’t necessarily mean that there’s a lot of wiggle room.”
Let’s take a look at the numbers.
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So what’s in a budget? Students are paying for most of it.
Each year the budgeting process is roughly the same. An intricate series of number-crunching cost projections and tuition simulations run through the business office and land in the laps of UO’s TFAB members.
UO actually has two separate budgets. Administration says these two streams of funding and revenue are separate — and cannot be crossed. Each budget is around half of the university’s billion-dollar pie. One of those budgets will have to absorb the $16 million cost increase — and that’s the half funded mostly by tuition.
This separate “fund accounting” budgeting method has confused a lot of people. Some ASUO leaders, students and even faculty are asking for alternative solutions to the ever-growing budget issue, and want to know why the streams cannot be crossed.
The fund that’s covered mostly by tuition is the Education and General fund, or ENG. It covers basic university operations — school, college and administration budgets, debts and operational costs. It’s the fund TFAB is most concerned with — the half that must absorb the cost increase.
The other fund includes federal grants and contracts, restricted donor gifts (like the $500 million to build the Knight Campus) and auxiliary revenue streams such as housing, athletics and the EMU.
Auxiliaries like UO Athletics are supposed to be financially self-sufficient. The university charges them a small amount of overhead for using services like the human resources department, and this small amount of money makes it back into the ENG stream.
This fund’s donor gifts, such as scholarships, are given out through a separate nonprofit entity, UO Foundations, which manages and invests UO’s endowments. Currently, most of its financial records are no longer available to the public.
Almost all of this fund’s spending is restricted, whether it be legally or practically, said Moffitt.
“Money comes in for a particular purpose and it’s spent on that purpose,” she said.
Conversely, the ENG fund depends on tuition — and the tuition rate depends largely on UO’s operating and personnel costs, and how much funding the state decides to shell out each year. In 2017, tuition revenue made up over 80 percent of the total funds in this pot — student dollars are funding the majority of the educational costs. State funding was at 13.9 percent.
So what, exactly, is driving up tuition costs?
Cost drivers: It comes down to PERS
UO’s educational cost is 80 percent people — that means classified and unclassified faculty, staff, graduate employees and everything that comes with them — salaries, retirement and health insurance. These costs are recurring — and each year they increase by millions. They are what make up the $16.7 million cost increase in next year’s budget.
Retirement costs are a large chunk of this, and they’re the fastest growing. Every other year the university must pay into the Public Education Retirement System (PERS). This grows by an estimated extra $7.1 million every other year. This cost hit last year, explaining why this year’s cost increase is smaller. This cost is more volatile than others and will likely grow beyond the estimate, and it will keep piling on for at least the next 8 years, said Moffitt.
To run tuition projections, Moffitt estimates that annual cost drivers will pile on an annual $20.5 million each year.
What can the university do?
“It’s a really hard topic because none of us want to raise tuition,” said Moffitt. “I’m now going into my seventh year doing this, and it’s just incredibly challenging.”
Moffitt, ASUO leaders and other members of TFAB are searching for ways to avoid huge tuition increases in the face of an ever-growing, dire financial situation. Several options were brought up at the recent TFAB meeting. Here’s what was discussed:
- Expanding the campus — Moffitt says this is the most viable option. More students equals more tuition dollars, and administrators are considering expanding campus by 3,000 students over the next 8 years to help cover the PERS costs. Their projection includes a 3 percent increase in tuition each year. This eventually requires a new dorm, new teaching building and faculty — but the university hopes to avoid these investments in the first several years. ASUO leaders expressed reservations with this as the only solution.
- Cutting budgets — The university has already done this. It cut $4.5 million from the 2018 budget — meaning staff and faculty — and it may seek more cuts.
- Lowering salaries — This was brought up by ASUO leaders and a faculty member at the TFAB meeting. Moffitt said renegotiating union wages is not something the university is considering.
- Dipping into the other fund — ASUO President Amy Schenk wants to see this option explored, rather than cutting jobs or raising tuition. Though administration says each budget much remain more or less separate, proposals have been brought before the advisory board in the past.
- More state funding — ASUO leaders said they will lobby for increased state funding.
These points and more will be up for discussion on Tuesday, Jan. 16, at the Tuition and Fees Advisory Board’s student forum. The roundtable meeting, aimed at discussing tuition and the school’s budget, is at 5 p.m. in the EMU Ballroom. Check back at dailyemerald.com for coverage of the forum.
Meanwhile, university leaders are assessing their options.
“I wish we weren’t facing cost increases every year, and the cost increases we’re facing mean that we have to make unbelievably tough decisions,” Moffit said. “Sometimes those are decisions to raise tuition more than we like, and sometimes those are decisions to make cuts that end up impacting people’s jobs and their lives — there are no easy answers.”
