Statehouse debates budget

Funding cuts add stress to University's current, future financial challenges

By David Bhaerman, University Relations

A disappointing economic recovery in the state -- deemed by many in government to be the worst state budget financial situation in nearly two decades -- has University officials concerned about the near-term financial future for Ohio State, already suffering from cuts during this and the last fiscal years.

Faced with an estimated $720 million deficit for the fiscal year that ends this June -- and a looming shortfall that some say will reach $4 billion during the next biennium -- in January Gov. Bob Taft ordered state agencies to return an additional 2.5 percent of their annual budget allocations.

Although Taft proposed that higher education's instructional subsidy and public school funding be exempted from this first round of cuts, nearly $3 million in University line items in the state budget are on the chopping block. And the governor has made clear that if his plan for balancing this year's budget is not approved by the General Assembly by the end of February -- a plan which includes so-called "sin taxes" on cigarettes and alcohol as well as a package of various new sales taxes -- higher education's student share of instruction and other primary and secondary school funding will be reduced by $175 million yet this year.

Looming cuts for the remainder of the year

For Ohio State, such a cut would mean the loss of an additional $7.7 million in state subsidies by the end of this academic year. The instructional subsidy makes up the lion's share of state support to the University -- about $305.4 million for the current year -- and a cut of $7.7 million would be significant, said William J. Shkurti, senior vice president for business and finance.

Illustrative of the size of the cuts, $7.7 million is the equivalent of 153 positions paying $50,000 in average salaries and benefits; or 1,697 class sections at $100 per seat and 45 students per class; or 1,407 full-ride undergraduate scholarships; or a 1.3 percent across the-board departmental reallocation. "We would never create revenue by making cuts in any one area like that, but it does help show the magnitude of what we are facing," Shkurti said.

At a January press conference hosted by Taft to announce his plan to solve the current year's deficit, President Karen Holbrook expressed her strong support of the governor and appreciation that the subsidy is not part of the proposed budget fix.

"The governor and General Assembly have our support as they put forth solutions to increase revenues to offset the very difficult budgetary problems that currently face us," Holbrook said. "We are grateful that the core funding for higher education -- the student share of instruction -- has been protected from cuts in the most recent efforts to balance the current state budget. We know that this reflects a true understanding of the importance of higher education in advancing our economy and enhancing our state's competitiveness."

Already under the knife

While Taft's executive order in late January that mandated 2.5 percent cuts exempted higher education's state share of instruction, the budget line items that fund many University programs did not fare as well.

Chief among these specially funded programs are Ohio State's Cooperative Extension, clinical teaching, Sea Grants, dental and veterinary medicine, the Supercomputer Center, OARNET, John Glenn Institute, and the BioMEMS program.

Also losing money are the state's Research Challenge and Success Challenge programs. The Office of Research uses its share of that money to support such things as interdisciplinary research, shared research facilities, equipment matching for federal grants, and faculty start-up costs -- and much of those funds have already been committed, said C. Bradley Moore, vice president for research.

The Success Challenge funds reward the University for its special efforts to graduate students who come from economically disadvantaged backgrounds and for programming to help students graduate in four years, said Martha M. Garland, vice provost and dean of undergraduate studies. Despite the cuts, "we will continue to make those efforts be-cause they are so important," she said.

But with only half a year remaining in the current budget cycle in which to make cuts, the cuts have the effect of a 5 percent reduction and mean that the programs are now searching for ways to trim a combined $2.8 million by June 30.

Proposal for next biennium budget

On Feb. 3, Taft introduced a budget for fiscal years 2004 and 2005 that calls for increases in higher education's state share of instruction of 3 percent, or $49.7 million, to $2.52 billion in the first year and 4 percent, or $71.6 million, to $2.59 billion in the second. The total increase in funding for the Board of Regents, the agency that coordinates public colleges and universities, is 2 percent in fiscal year 2004 and 2.8 percent in 2005. As a general rule, Ohio State's share of the state instructional subsidy usually equals roughly 20 percent of the total amount available, Shkurti said.

Unfortunately, these proposed subsidy increases are smaller than the percentages indicate because they are built on a base that was reduced by tens of millions -- including nearly $30 million at Ohio State -- at the beginning of the current fiscal year. Absorbing those cuts, which are permanent and continuing, required the University to eliminate nearly 600 positions last year.

"It is reassuring that the governor recognizes that as Ohio faces this challenging time, higher education must not be treated as a balancing account for the state government," said Executive Vice President and Provost Edward J. Ray, who also is an economist. "At the governor's proposed levels of funding, the University as a whole still will be able to make progress on its strategic goals, albeit at a much slower pace. The most visible strain will continue to be on our academic and academic support services, which already are doing more work with fewer people."

Faring not as well as the subsidy budget are the same line items that already this month are being cut 2.5 percent. The governor has proposed that many of those budgets -- Extension, OARDC, John Glenn Institute and Sea Grants, for example -- be cut by another 5 percent. And the Regents' Challenge grants -- like Research Challenge and Success Challenge, which are cutting this year's budgets by 2.5 percent -- are slated to receive no new funding in either of the next two years.

Only OARNET would receive a large increase under Taft's plan -- 11.4 percent next year and 4 percent the following -- to support Internet services, distance learning opportunities, and access to library networks. The governor said the additional funds are required to provide necessary infrastructure for his Third Frontier project, a $1.6 billion plan to enhance Ohio's standing in the knowledge economy. Taft has asked the General Assembly to place a 10-year, $500 million bond issue on November's ballot to allow universities to recruit scholars in fields that are vital to the economy, attract more research dollars, and move new ideas from the laboratory into the marketplace.

"We deeply appreciate that the governor proposed an increase for colleges and universities overall as well as in the instructional subsidy -- especially while most other state agencies are faced with budget reductions, flat levels of funding, and, in some cases, even elimination," said William J. Napier, acting vice president for government relations and the University's chief lobbyist.

Napier said the University will focus its lobbying efforts at the Statehouse, urging the House and Senate to maintain the proposed levels of student share of instruction and enhance, if possible, the subsidy and other performance funding opportunities.

"Although funding outcomes don't always look very promising at the beginning of the legislative process, we will make our case for our priorities just as strongly as we would when revenues are more favorable," Napier said.

Hearings and votes on the budget will take place in the House and Senate until June, and then a joint committee will work out differences between each chamber's version. The budget is to take effect at the beginning of the fiscal year on July 1, and if one is not passed by the end of June, an interim budget must be enacted, Napier said.

Call for tuition cap returns

A proposal for tuition caps -- stripped from the last state budget two years ago in an effort to allow colleges and universities to raise required revenue after the General Assembly was unable to find additional funding to support higher education -- is back on the table in the governor's new budget proposal.

Taft is urging a limit on increases in resident undergraduate tuition and fees of 6 percent, but has made an exception for Ohio State's Columbus campus, which would be allowed a 9 percent increase. Ohio State's tuition already is the ninth lowest among the 13 public colleges and universities, and many other state institutions enacted midyear tuition hikes during the last budget crisis while Ohio State did not. Four-year universities, including Ohio State, that have tuitions below the state average would also be allowed to apply a surcharge on freshman and transfer students of up to $300 a year. Under Taft's proposal, a new student entering Ohio State in the fall would pay $6,474, while an upperclassman would pay $5,658.

Medical Center in black, on track

Sanfilippo shares status in annual State of the Medical Center address

By Emily Caldwell, Medical Center Communications

In outlining the rationale behind goals recently solidified for the University Medical Center, Senior Vice President for Health Sciences Fred Sanfilippo likes to use a football analogy.

"Our own thinking that we are No. 1 or 2 or in the top 10 really doesn't matter when the BCS comes along," he reasons. Though the people behind Ohio State's Medical Center are well aware of its strengths, he continues, the metrics used to gauge national prominence strongly influence public and peer opinion and must come into play in pursuit of even greater excellence.

Senior Vice President for Health Sciences Fred Sanfilippo

With that in mind, the Medical Center's leadership has set two principal goals: to be among the top quartile of academic medical centers by 2008 as measured using nationally accepted metrics such as magazine and research funding rankings, and to generate a $50 million annual investment fund for mission development -- which will assist in achievement of the first goal, Sanfilippo said.

A look back at progress made in 2002 suggests the Medical Center is on the right track, said Sanfilippo, also dean of the College of Medicine and Public Health, delivering his annual State of the Medical Center address in Meiling Hall on Jan. 28. The past year was marked by growth across the Medical Center, particularly in revenues, bringing biomedical research funding to record highs and erasing an operating deficit in the Health System. Other achievements included favorable quality ratings for the Health System, recruitment of several high-profile medical experts and the addition of a number of new educational programs.

"The financial turnaround in the Health System has really been spectacular," Sanfilippo said, adding that the current budget for the Medical Center's patient-care areas -- hospitals and family practice centers that make up the Health System -- continues to be stable. In addition, Ohio State's hospitals are ahead of some highly ranked systems -- Johns Hopkins and the Mayo Clinic, for example -- in adopting safety practices recommended by Leapfrog, a national consortium of health benefits providers working to improve patient safety.

Biomedical research funding has demonstrated some of the most dramatic growth across the Medical Center, which has seen a 75 percent increase in National Institutes of Health funding over the past two years. With design of the Biomedical Research Tower completed, officials are projecting that the new building -- scheduled to open in 2006 -- will triple grant support, double research space and bring in 500 new scientists and staff. Looking at its impact through 2012, Sanfilippo said activity associated with the tower is expected to result in the creation of 16,700 new jobs and $3.7 billion in additional spending in the community.

Sanfilippo said a strategy of continued growth achieved by leveraging existing assets and developing a high-performance culture will characterize the coming year.

Key Medical Center initiatives for 2003 will include: continuing to recruit top researchers and clinicians; retaining the strong faculty and physicians currently here; enhancing technological infrastructures; increasing research commercialization opportunities; finalizing the unification of the physician practice plan; and developing more interdisciplinary educational and research programs.

"Obviously, the focus has to remain on the people," Sanfilippo said. "The many accomplishments of the past year are a testament to the hard work of a number of people, and I thank the many, many, many people who have made all this possible."

Space renovation and construction will be among the most visible activities, especially as the Ross Heart Hospital takes shape in the center of the Medical Center complex. Construction of the hospital and an adjoining parking garage is slated for completion in 2004.

"I think the past year at the Ohio State University Medical Center has shown that teamwork makes all things possible," Sanfilippo said. "And frankly, I'm looking forward to an even more exciting year this coming year."