Higher ed reorganization won't forestall budget axe

Before the Oregon Legislature adjourns early next week, lawmakers say it's a lock that they will pass a bill making Oregon higher education a quasi-autonomous organization, with new powers to control its own revenues, spending, insurance and legal issues.

Senate Bill 242 passed the Senate 28-2 and, if passed by the House, would become law at the first of next year.

It's an option the Oregon University System desperately sought — but it won't lighten the blow of an 11 percent cut to the university system passed by the Legislature Tuesday, says Rep. Peter Buckley, D-Ashland, co-chairman of the Ways and Means Committee. Another 3.5 percent reduction is scheduled in the biennium's second year.

The impact of cuts to each university won't be announced by OUS until September, but "there will be layoffs of staff and even some faculty at universities ... it's going to be a tough biennium," said Diane Saunders, spokeswoman for OUS in Eugene.

The 11 percent cut does not mean Southern Oregon University will suffer a corresponding decrease, she adds, noting that cuts to individual schools are based on enrollment and other factors.

The cutback is "not a tsunami" compared to some of the higher education budget reductions of the past decade, Buckley said Thursday, noting recent projections from SOU show that, with tuition increases and state allocations, "the system is fairly stable for the next five years."

The appropriation for a capital construction package includes $12 million for renovation of SOU's aging Science Building.

The reorganization bill merges state universities and community colleges under an Education Coordinating Commission, with members appointed by the governor. Importantly, it wouild remove the tag of "state agency" from the university system, meaning the system's budget would not be lumped in with all other state agencies in the general fund. The current agency status resulted in a higher education savings fund being "swept" into the general fund in 2010 when the state ran low on revenues.

The change would allow schools to keep millions in interest earnings from tuition — and they'll buy their own health and risk insurance.

Higher education officials are happy about getting out of the state risk pool because university workers tend to be younger and healthier and, says Buckley, "they're highly educated people and take better care of themselves" so they're able to find cheaper health insurance.

However, Ways and Means Committee co-chairman Rep. Dennis Richardson, R-Central Point, complained that the new system will mean the state worker pool will be older and will cost more to insure.

Richardson supports the change, but said it was a "tough call." He dinged OUS for being "not very transparent" during a recent audit by the Secretary of State's office, and said the bill "would give them even greater independence."

Although the new independent higher education system comes with pledges of significant savings and full accountability to legislators — and is the model followed by most states — Richardson said he does not expect it to result in lower tuition.

"Talk is cheap," said Richardson, "and when it comes to giving up hard dollars (from belt-tightening), I will be pleasantly surprised if it goes toward lower tuition."

The new system is not intended as a means of tuition reduction, said Saunders, noting that savings achieved by OUS has usually been met by corresponding drops in state support.

"Right out of the gate, we'll save several million from health insurance," said Saunders, "instead of being in a pool of all state agencies. ... It will control costs and revenues, but I wouldn't want to say it will control tuition."

Each university has always "captured" and held tuition money in its own pot, but under the new system schools will hold onto interest earnings, said Craig Morris, vice-president of finance and administration for SOU.

SOU, he adds, has a year to get risk and health insurance or become self-insuring — and will "rewrite purchasing structures, invest money through our own internal bank" and control legal representation, instead of having to use the state attorney general's office.

"It's our hope to control some costs more efficiently, being out from under the umbrella of the state," said Morris. "It will take two or three years to accomplish."

Richardson said there is "no question" the bill will pass, and Buckley agreed. Buckley said the Legislature will adjourn a few days late, about Monday or Tuesday, because of a partisan squabble over fixing a $21 million hole in the Corrections budget.

John Darling is a freelance writer living in Ashland. Email him at jdarling@jeffnet.org.

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