By Nathan Robinson Gregory Washington, left, associate professor of mechanical engineering, and junior Cullen Buie discuss Buie's "smart actuator design using shape memory alloy," the subject of a presentation to the Ohio Board of Regents on the Columbus campus June 21.

Lean budget authorized for 2002

Ohio State will continue to make progress on its strategic goals -- most significantly in the area of undergraduate education -- while progress toward other goals will lag under a fiscal year 2002 spending plan authorized June 29 by the Board of Trustees.

The University is advancing a lean but balanced budget, and officials already are looking beyond next year to develop ways to increase Ohio State's salary competitiveness nationally within the next few years.

"The limited increase in the state share of instructional funds reflected in this budget especially affects our faculty and staff salaries for the coming year," Executive Vice President and Provost Edward J. Ray said. "Because we are increasingly at risk of falling behind our peer institutions in attracting and retaining the highest-quality faculty, we are committed to developing a strategy to provide above-market compensation packages for each of the next several years in order to provide faculty and staff with salaries near the midpoint of our benchmark peer institutions." (See related message, this page.)

General Fund revenues and expenditures are expected to be $793 million this fiscal year, an increase of 4.7 percent over 2000-01. The total University's annual budget, including income and expenses at the University Medical Center and in other auxiliary units, exceeds $2 billion.

Income projections are based in part on the tuition revenues that will result from an estimated enrollment of 47,827 on the Columbus campus, and reflect a projected 1.2 percent increase, to $342 million, in state support. Expenditures are projected to rise most substantially for faculty and staff health care benefits, student financial aid and utility costs.

Ohio State will be able to commit nearly $5.8 million to strategic investments -- less than half of the $13 million available in FY 2001 -- primarily to support enhancements to the undergraduate student experience, existing Selective Investment commitments and faculty recruitment. The University has been forced to scale back in several areas funded in past years under strategic investments, including academic enrichment, library acquisitions, service improvements, and initiatives previously supported by Research Challenge and Success Challenge grants from the state -- both of those programs were cut by the state Legislature in this biennium.

"This has been the most difficult budget year since 1995, and reflects the smallest increase in state support in nine years," said William J. Shkurti, senior vice president for business and finance. "That, combined with the largest increase in health care costs in a decade and the largest increase in energy costs in two decades, leaves us making only limited progress on many of our goals outlined in the Academic Plan."

The budget reflects the 9.3 percent undergraduate tuition increase approved by trustees in early June, as well as the $395 flat increase to salaries for faculty and staff with satisfactory or better job performance. Shkurti explained to trustees how the University arrived at that salary increase, especially given the larger-than-usual increase in tuition made possible this year by the General Assembly's decision to lift tuition caps at state-support institutions.

When all General Fund income sources are combined, the projected increase stands at $35.4 million -- of which $28.3 million, or 80 percent, will come from increased tuition and fees. "Though that is a substantial amount of money, much of it was dedicated early in the budget process to specific items, especially planned enhancements to undergraduate education," Shkurti said.

When the University announced last winter that it would seek a 9.3 percent undergraduate tuition increase, officials pledged that all revenues above the historic 6 percent cap (amounting to $4.6 million) would be committed to improvements in such items as technology, advising, classroom equipment, fewer closed courses and other instructional enhancements for students. The administration also promised to increase the student financial aid package to match the higher tuition costs. The cost of increasing financial aid, including undergraduate scholarships and graduate student fee authorizations, stands at $9.5 million. Another $3.2 million is earmarked to individual colleges with fee differentials by previous agreement.

With the University's share of the cost of health care benefits increasing 32 percent this year, Ohio State is directing a total of $7.2 million to increased benefits costs. Another $4 million will be needed for increased utility costs ($2.5 million of which is required to offset fuel cost increases) and rent and other utility increases on University-occupied spaces.

These items, totaling $28.5 million, leave $6.9 million of the projected increase in income for everything else, Shkurti said. Of that, $4.9 million (71 percent) will go toward compensation: the $395 increase for faculty and staff, faculty promotion increases, graduate associate pay increases and General Fund collective bargaining increases. The remaining $2 million, or 3/10 of 1 percent of the entire budget, is set aside for strategic initiatives such as the existing Selective Investment commitments and recruiting.

As part of the budget, trustees approved tuition increases on the regional campuses. Last year, Access Challenge, a state program designed to make college more affordable for Ohioans attending regional campuses and two-year institutions, enabled Ohio State to decrease tuition at regional campuses by 5 percent for lower-division students and hold the tuition increase to 3 percent for upper-division students. This year, as a result of the Legislature's cut to Access Challenge funding, OSU will raise in-state regional tuition by 7.6 percent for lower-division students and 6.5 percent for upper-division students. Tuition at the Agricultural Technical Institute (ATI) in Wooster will increase 5.8 percent.

"This turn of events is particularly disappointing. We estimated that last year, 4,200 freshmen and sophomores at our regional campuses and ATI benefited from the reduced tuition. We will urge state legislators to restore this program in future years to enhance access to higher education for all of Ohio's citizens," Shkurti said.

A message from President Kirwan

The following memorandum was sent via e-mail to University leaders in late June and to all employees in early July.

As you are well aware, the University faces an enormous challenge in providing faculty and staff with competitive compensation. The results of this year's budget process are a disappointment to all of us and have greatly exacerbated our compensation challenges.

The overriding concern facing the University is the decline in compensation at Ohio State relative to benchmark peers. This decline threatens not only our aspirations, but also the present quality of our University. We must take extraordinary steps to address this situation.

In late June, I appointed a Competitive Compensation Oversight Group to advise Ed Ray and Bill Shkurti as they develop a plan to raise faculty and staff compensation to the mean of benchmark peers within three or four years (see accompanying list).

The schedule calls for the basic strategy of the plan to be developed by early October, at which time it will be presented to the Board of Trustees. The detailed plan will be completed by Jan. 31, 2002, with implementation no later than July 1, 2002. The intent is to make a multiyear commitment of significant salary increases.

For the coming biennium, the state will not provide appropriate and meaningful increases to our budget. Obviously, we will press the state to make higher education a top priority in subsequent biennia. However, given the current circumstances, most of the initial funding for the plan will have to come from internal resources, including substantial contributions from the colleges and divisions. We face a formidable challenge that will require all of us to make difficult choices if we are to address our compensation needs. In particular, even though the temporary hiring freeze expired June 30, you are urged to fill vacancies only on a highly selective basis, since significant reallocations will be necessary to meet our compensation goals.

I have asked Ed and Bill to keep you well informed throughout the summer as the shape and requirements of our compensation plan begin to unfold. You can expect periodic communication from them.

Even as recently as six months ago, none of us anticipated that we would be placed in the situation we now face. While we certainly have a challenge before us, I am convinced that we have the talent to develop a substantial compensation plan and the will to carry out its implementation. This University has faced even greater resource challenges in the past and has always emerged as a stronger institution. I am confident that will be the case in the present circumstances.

Finally, I ask that you convey to all of your colleagues that although this year's salary increases are woefully inadequate, the University is committed to a much better situation in the near future.

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