SEEING THE LANDSCAPE
Edward J. Ray
Oregon State University
October 11, 2012
I thank the President and the members of the Senate for the invitation to come before you today to discuss the state of the university. The financial state of the university remains strong for the foreseeable future despite facing unrelenting financial challenges with regard to state funding for higher education and federal funding for research, student financial aid and statewide public services. Likewise, while governance issues within public higher education and across the pre-K-20 continuum are not yet resolved, at OSU we have a clear sense of direction to follow for ourselves and in partnership with the state.
I hope you will take away three points from my presentation today. First, through our own efforts, we are in a sound financial position to chart our course forward. Second, we have developed greater clarity regarding enrollment targets and the excellence we seek for this wonderful university in our service to others. Finally, we have implemented actions to address the three priorities I cited in last year’s address: We have successfully recruited and retained diverse and excellent faculty and students, we have increased university-industry partnerships; and we have exceeded our Campaign fundraising goals, while maintaining forward momentum.
As anticipated this year’s legislative session did not reinstate the 3.5% in state funding that the legislature held back at the start of the biennium. And, while we did not experience any further reductions in state funding, enrollment growth among non-resident students last year cushioned the financial impact of the reduction in state funding.
The Campaign for OSU raised $106 million last year; and research funding, including industry support for research cooperatives, testing and licensing/royalty income, rose from $276 million in FY11 to $281 million in FY12. Consequently, we were able to implement a salary increase of 5.25% last January. We brought in 80 tenure track faculty, including 35 new faculty positions that were centrally funded. We also transferred $2 million in continuing funding to colleges closely aligned with the statewide public service programs to recognize the contributions to the university’s teaching mission made by faculty on SWPS funds. In addition, we provided $1 million to the College of Engineering to address significant growth in enrollment in engineering, and computer science, a key priority for the OUS Board and the State of Oregon. Even with all of these investments, we closed the fiscal year with a fund balance above 11%.
Going forward, this is what we believe the numbers will look like over the next two biennia:
- We anticipate flat or moderately declining funding from the state and uncertain funding for the statewide public services from the state and federal governments. Beyond the decrease in state funds, we anticipate continued erosion in our financial position due to unfunded increases in the costs of employee retirement and health care benefits.
- Federal research funding is expected to continue to remain flat or decline slightly. Industry related research funding has grown quickly in the last two years, and we expect that trend to continue. We are monitoring the threat of federal budget sequestration and its potential impact on federal funding.
- Enrollment growth is expected to be around 3.5%-4.5% this year, largely due to higher retention rates; and we anticipate enrollment growth of 2-3% for each of the next several years, with perhaps 1-2% of that growth associated with continuing improvements in retention toward graduation at the undergraduate level.
- We have a fundraising target for the Campaign of $90 million this year which we hope to exceed, and we anticipate the Campaign total to easily surpass $900 million this year on our way to the new Campaign target for 2014 of $1 billion. The Campaign total at the end of September stood at $855 million. The total for scholarships and fellowships stood at $144 million toward our new target of $180 million.
- Similarly, the Pac-12 media contracts are now in place and we expect funding from ESPN/FOX and our cable partners to more than triple our media funding for athletics in the next several years. In time, we will realize net transfers from athletics to the broader university community for academic and support purposes.
Combined, these factors support our intention to implement a number of targeted salary increases in January to begin to address the problem of salary compression. These increases will be followed by increases for all faculty members in July of 2013 of at least 2.5%. Still, the overall state of university budgets, even assuming salary and other new expenditures going forward, should be compatible with fund balances comfortably within the 5%-15% range established by the OUS board for the next few years. Although we continue to struggle to meet the needs of the people of Oregon in the area of statewide public services, the financial state of the university is strong for the coming biennium.
Implementing Next Steps
Last year, I said we need a short list of top priorities for the university to address over the next 3-5 years; and I provided a SWOT (strengths-weaknesses-opportunities- and threats) analysis for each of those three priorities. Success over time requires each of us to contribute to moving the university ahead in one or more of these areas. The three areas are:
- 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, and
- Exceeding the Campaign for OSU goals and maintaining fundraising momentum
A key building block to address our first objective is a comprehensive enrollment management plan for the university, and I want to focus on that matter next.
In Search of 40-40-20
When I addressed the Faculty Senate in 2008, I anticipated changes in our updated strategic plan drafted later that academic year. I ended by observing:
In effect, I have defined much of our agenda for this year with reference to the next step in strategic planning. That’s because the two items – the annual agenda and the strategic plan – are inextricably tied together. The agenda defines the path we must travel over the next year to get to where the strategic plan is leading us. Strategic plans are not fixed blueprints, but rather surface maps across time. We must adapt our plans as we discover new possibilities and essential course corrections, while we keep our eye on the prize. Nothing in my … years here dissuades me from a sense that we are on an excellent adventure together.
While the adventure has been less than excellent in the last few years and we have not made quality gains we hoped to achieve, we have done remarkably well given the broader circumstances within which we operate. As we experience each year guided by the strategic plan, we are able to see further across the horizon. We know more in this fourth year of implementation of the updated strategic plan than we did at the outset. We have encountered wonderful opportunities and unexpected challenges. Since we know more, we are also wise enough to adapt to the new realities we face.
When I sketched out a possible profile for 2025 to attain top 10 Land-grant-university standing over the course of the next 20-30 years, I projected sufficient enrollment growth to attain the size and scope of academic programs required to compete with the leading comprehensive international research universities in the nation. Those enrollment projections mirrored the size of our aspirational peers.
Last year, we convened an enrollment management group to develop a plan to determine the optimal size and composition of enrollment for the Corvallis campus consistent with both becoming a top 10 land grant institution and retaining the quality of life in the community. At the same time, we were told to plan to maintain our current share of OUS enrollment in order to meet the state goal of 40-40-20 in 2025. Our challenge is to reconcile multiple objectives – attaining top 10 land grant standing, attracting more high achieving students, preserving the quality of life in Corvallis, and sustaining our share of 40-40-20.
Let me begin by speaking to the capacity of our community to accommodate the enrollment demands of 40-40-20. Using OUS enrollment projections between now and 2025, system enrollment would have to expand from 100,400 last year to 138,000+. Maintaining our current share of OUS enrollment just below 26% would require OSU enrollment to reach about 35,500. Clearly, the Corvallis and Benton County communities cannot accommodate that level of enrollment for the foreseeable future.
Currently, Corvallis Mayor Julie Manning and I chair a three year project to address concerns with respect to parking and traffic problems, residential crowding and quality of life issues that already produce stress in our broader community, especially in the near campus neighborhoods. Oregon State University, Good Samaritan Hospitals, the Corvallis Clinic, Hewlett Packard and other employers are key contributors to Corvallis’ recovery from the Great Recession and future economic vitality, but there are consequences to our recent and continuing growth that we must and are beginning to address.
Separately, the enrollment management committee estimates that, for reasons I will return to below, the optimal level of enrollment for the Corvallis campus is about 28,000, 7,500 students below the 35,500 figure just cited. So, we need a strategy for closing this enrollment gap, attaining our optimal enrollment level in Corvallis and still doing our part to achieve the 40-40-20 goal. Given the recent growth in online programs, it is reasonable to assume we could double our on-line enrollment from 2,200 in the fall of last year to something like 4,500 by fall 2025. Still, there would be a gap of 3,000 or more in student enrollment at OSU needed to maintain our 26% share of system enrollments to meet the 40-40-20 goal.
Looking to the west, a recent review of the Hatfield Marine Science Center sponsored by OSUs Research Office has recommended the development and delivery of a cohesive marine science-based curriculum using infrastructure and faculties based at HMSC and at the main campus. Working with the Oregon Coast Community College it may be possible to develop a 2+2 program with a marine focus. Perhaps we can develop programs to sustain a student population of around 500 at HMSC in the long run. Substantial investments in residence halls, classroom and laboratory buildings, faculty, staff, and other resources would be needed in Newport to accommodate that expansion. This effort must begin with a detailed assessment of our opportunities, needs, and costs.
And looking to the east, we have begun to work with the local community in Bend, the state board of higher education, the Governor’s office and the legislature to seek approval in the 2013 session of a stand-alone four year branch campus in Bend with a target enrollment of 3,000-5,000 by 2025. To ensure that we do not lose the advantages of our current collaboration with the Central Oregon Community College, COCC, I challenge us to utilize our degree partnership program, improvements in articulation and transfer mechanisms and other means to double or triple the number of students who begin their higher education studies at COCC and complete their four year degrees at our Cascades Campus. We need the full four-year programs at the Cascades Campus to accommodate students who want to remain in Central Oregon and attend a four year college, and to provide out of state and international students with an alternative to Corvallis for completion of their Oregon State University degrees. Four year programs will enhance the ability of OSU Cascades to attract students from around the nation and the world as a destination of choice in its own right.
The OUS board has endorsed the development of four year programs in established degree areas at the Cascades Campus by 2015, and the board has endorsed our request for up to $16 million in state XI-G and Lottery Bonds, in conjunction with private gifts and Cascades Campus revenues to fund increased physical capacity at our Cascades Campus. More space will let us sustain our current pace of double digit growth in enrollment at the branch campus from the current figure of 1,000 to 3,000-5,000 students by 2025. The OUS system as a whole needs to expand enrollment capacity dramatically to meet the goals for 2025, and I know of no Oregon location that has greater current assets and potential for job growth in areas requiring four year degrees than Central Oregon.
Becky Johnson at the Cascades Campus and Jim Middleton at the Central Oregon Community College, who are outstanding leaders of their institutions, are the right people to make this effort successful. Central Oregon has heard the challenge and responded. In a six week period in June and July, 59 donors pledged $1.8 million to support the development of a four year branch campus in Bend. Furthermore, the Tykeson Family Charitable Trust recently made the first $1 million gift to the Cascades Campus to support expansion. I am fairly certain that if we work together and hit all of our marks, people in Central Oregon will someday be talking about how that guy Ray was low-balling it when he predicted 3,000-5,000 students for OSU Cascades in 2025. Clearly, we have a lot of hurdles to jump, challenges to address, and heavy lifting to do if we are to realize that kind of success. The university senate will have a central role in managing enrollment growth and program developments in Corvallis, Newport and Bend.
After adopting the updated strategic plan in 2009, we began a remarkable transformation at Oregon State University that positions us for success unanticipated three years ago. Given the unprecedented academic changes you and colleagues have made, I believe that the economies of scale and scope needed for Oregon State University to move to the front ranks of international and comprehensive research land-grant universities in America requires enrollment levels well below those of our peers. Here is why.
Asked to reinvent our academic programs and leverage our remarkable culture of academic collaboration, the faculty proposed academic program realignments to reduce the number of colleges, schools, departments and programs at OSU from 62 to as few as 38. We expect this process to be completed this year, with the number of academic administrative units already reduced to 43. That transformation follows from our focus on three signature areas built upon a solid foundation in the arts and sciences: advancing the science of sustainable Earth ecosystems, human health and wellness, and economic development and innovation. I know of no other university in America with our focus and streamlined academic administrative structure. Given our academic and business administrative efficiencies, academic and research focus and drive toward excellence and diversity in the students and faculty we recruit, I believe that we can attain the top ten standing we seek with 28,000 students on the main campus.
It is important to remember that our aspirations for excellence never included being big for the sake of being big. And, our goal of excellence is not based on some abstract principle. Rather, we understand that the more extraordinarily capable we are at everything we do, the more profound and positive our impact will be on the lives of the people of Oregon, this nation and the world. OSU was created to serve others. At Oregon State University we seek excellence to serve others in profoundly beneficial ways. For that reason, we intend to climb the quality ladder in every dimension in which we operate.
So, with respect to enrollment in Corvallis we anticipate average increases of 2-3% per year over the next 5 years or so, while we continue to ramp up our overall enrollment at the Cascades Campus, through E-Campus, and in Newport. Currently, our enrollment of Oregon students stands at about 75% and, given our land-grant role in the state, I believe we should not let that share fall below 67% for undergraduate students.
OSU already attracts more Oregon high school valedictorians and salutatorians than any other university. We are well along in our effort to double enrollment in our Honors College. Enrollment growth in international students through our INTO OSU partnership has exceeded our expectations. And, with our plans to direct some of the funds generated through our INTO-OSU joint venture to international exchange agreements and program support for our domestic students, we anticipate even greater success in that regard. Clearly, with modest enrollment growth in Corvallis, we should be able to increase our advantage in attracting the brightest and most diverse students possible.
Last year, we provided central funding for 35 new tenure track faculty and this year we have centrally funded another 55 tenure track faculty. Additionally, we have added another 25 new support positions in critical areas such as advising and disability services over the past couple of years. We expect to have continued growth in the number of colleagues in each of those areas over the next few years, while moderating our enrollment growth will lessen the pace at which we must add additional tenure track faculty and academic support staff to our ranks.
Faculty members are the heart and soul of this university, and we cannot achieve excellence without recruiting and retaining outstanding and diverse faculty. Those faculty and our exceptional programs attract extraordinary students from diverse backgrounds, who in turn attract diverse and exceptional faculty. Last year, after an extended period of wage freezes, we provided a salary package for faculty of 5.25% to move toward more appropriate compensation rates at all ranks. However, this year we must address salary compression associated with internal salary freezes and rising market salaries for new faculty. We will distribute $3 million in annual continuing funds centrally this year to address the salary compression issue for tenured/tenure track faculty ranks. Furthermore, we expect to provide at least a 2.5% salary package for faculty raises effective July 2013, once the funding situation we face in Salem and Washington D.C. is clearer.
We are in the process of completing a job category and compensation project for professional faculty with the goal to recruit and retain professional talent through a compensation program that is externally competitive, internally equitable, regularly updated, easily understood, and financially responsible. The completion of this project may necessitate equity adjustments in some of the professional faculty salaries in July 2013. We intend to address salary compression issues for all of our colleagues by the end of calendar 2013.
With regard to facilities, we opened the Linus Pauling Science Center, Hallie Ford Center, the International Living Learning Center, a renovated Furman Hall and the Graduate Studies Center at the Cascades Campus last year. This year, we open the Student Success Center, The Native American Cultural Center, our new track and a practice facility for our basketball programs. In the next few years we will build a new residence hall, Austin Hall for our College of Business, three additional new cultural centers, the Student Experience Center; and hopefully, we will gain approval for another major science center and an all-purpose classroom building here on campus, as well as funding for an expanded Cascades Campus during the 2013 legislative session.
Research and our Economic Impact
As noted on earlier occasions, we more than doubled our annual funding through research grants and contracts over the last decade. We generated $281 million in research support in FY12 compared to $276 million in FY11 and $288 million in our record year, 2010. Last year, the decline in federal funding for research and federal and state funding reductions for the statewide public services, extension, the agricultural experiment station, and the forest research lab, reduced our overall funding total by about $7 million. The fall off in research funding from traditional sources was more than offset by the increase in industry based research from $25 million to $35 million in FY12. Part of this gain was associated with an increase in total licensing revenues from $2.7 million in FY10 to $4.3 million in FY12. In FY12, OSU signed 108 new licenses, a 277% annual increase, with businesses in biotechnology, agriculture, forest products, health and manufacturing. These gains are a direct result of diversifying our sources of research funding through our new office of commercialization and corporate development headed by Ron Adams and Brian Wall. Our goal in locating this new function within the office of research was to diversify and grow our funded research portfolio and to speed up the process for bringing ideas and inventions to market to create jobs for existing and new businesses here in Oregon. Clearly, we are off to an excellent start.
More broadly, I hope that each of you has seen the economic report produced last year, Impact 2012 that documented our annual economic footprint to be $2.06 billion for 2011. This represents an increase of $500 million over our earlier estimate based on 2006 data. While we must mitigate problems associated with economic expansion, there can be little doubt that OSU contributes greatly to the Oregon economy. Our annual economic impact within the mid-Willamette Valley was $950 million in 2011 and contributed 18,000 jobs beyond the direct employment at the university.
Our impact across the state was even more profound. Most businesses and universities have the greatest economic impact where they are principally located. But, because we are the land-grant university and we have a presence in every community and county in Oregon, our economic impact elsewhere in the state was actually higher, $980 million.
Families and students worry greatly about the earning potential and career opportunities associated with degrees. In this regard, it is worth noting the finding that at mid-career the average income of OSU graduates is $86,900 almost $6,000 more than the next highest public university in the state. In addition, at mid-career 71% of our graduates are working in areas related to their degrees. In fact, the 2013 edition of the Fiske Guide to College included Oregon State University among its 41 best buys nationally and one of only two in the Pacific Northwest.
The Campaign for OSU
We can all agree that the success of the Campaign for OSU has exceeded all reasonable expectations. When we launched the campaign in February 2007, the goal of $625 million seemed doable but a challenge. Before we reached the 2011 close of the campaign, we realized we would pass this goal well in advance; and we raised the goal to $850 million by 2013. By early 2012, we realized we would reach that goal before 2013; and we raised the goal a second time to $1 billion by 2014. This includes $180 million for scholarships and fellowships, compared to our initial goal of $100 million for scholarships and fellowships. As noted earlier, at the end of September, the campaign total reached $ 855 million, including $ 144 million for scholarships and fellowships.
Perhaps even more impressive is our performance over time. In the pre-campaign period we looked at a group of peer universities and found that during the years 1994 to 2004, OSU lost considerable fundraising ground on an annual basis even though we were already behind in 1994. Comparing OSU with the same group of peer universities today, we find that our fundraising performance has improved at an annual rate of 10.1% over the last decade, while the peer universities have improved only 3.2% per year.
Our Campaign and alumni association outreach efforts are now expanding throughout the world, particularly the Pacific Rim, including China/Hong Kong, Indonesia, Korea, Taiwan and Thailand. OSU currently has more than 3,000 alumni throughout Asia and we are ranked one of the top 150 universities in the world in one of the major international rankings of universities. Provost Randhawa is overseeing this coordinated effort, which should yield increased learning and research opportunities for students and faculty colleagues in collaboration with their counterparts abroad.
Mike Goodwin, Shawn Scoville, their colleagues at the Foundation, the members of the Foundation board and our wonderfully generous donors deserve special praise and thanks for making the campaign such a remarkable success. But, people give their time, talent and financial resources to programs and people they believe are good investments for the future. You, our faculty and staff colleagues, and our wonderful students and graduates are the primary source of success in this campaign. I know that I have been something of a broken record declaring that the best is yet to come for Oregon State University and those we serve. I assure you, we are at the beginning and not the end of an extraordinary chapter in the history of this amazing place. I hope that some of you who had doubts in the past are beginning to see the possibilities.