Shaping Change and Addressing Challenges
Edward J. Ray
The state of Oregon State University is very strong.
Given our strong enrollment growth in the last six years, we are near or above our degree goals for 2018. Our SP3.0 goals for Corvallis campus bachelor’s degrees awarded, OSU-Cascades degrees and Ecampus degree-seeking students are 6,000, 360 and 3,000, respectively. The latest results for 2016–17 are 6,758, 329 and 4,085, respectively. The 273 Ph.D. degrees awarded this past year exceeded our 2018 goal of 255.
The percentage of all domestically underrepresented students attending Oregon State is 23.7%, which is close to SP3.0’s goal of 25% for 2018. At the same time, to match our peers, we would have to raise our percentage of historically underrepresented students from 10.4% to 12.9% and the percentage of historically underrepresented tenured/tenure-track faculty from 7.6% to 8.1%.
The percentage of international students in Corvallis is 13.6%, which is close to the average for our aspirational peers of 15.2% and our SP3.0 goal of 15%. The percentage of high-achieving Oregon high school graduates in this fall’s freshman class preliminarily stands at 47% and exceeds our goal for 2018.
With regard to overall research funding, the performance by you and colleagues has continued to be extraordinary. You may recall that during the 2016 fiscal year we received research grants and awards totaling $336 million, which broke the record of the year before of $309 million. In fiscal year 2017, which ended on June 30, our total research grant and contract awards reached $441 million making us the leading university for research awards in Oregon. The university is within striking distance of our SP3.0 goal for R&D expenditures of $270 million with a current figure of $254.4 million. Industry-funded research as a percentage of total R&D was 3.3% this year, which is close to our FY18 target of 3.6%.
I have noted on other occasions that our extraordinary success in attracting donor support is a direct product of the excellence of our faculty, students and academic programs.
This year was a time of great achievement at Oregon State. While I could offer a long list of impressive assessments, let me mention just a few. An international survey recently ranked our forestry program No. 2 in the world and our ocean studies program No. 3 in the world. Our college of agricultural sciences overall ranks among the top 10 in the country. U.S. News and World Report ranks our online undergraduate education programs No. 8 in the country and they are regularly among the top 10. Our online liberal arts undergraduate degree offerings were recently ranked No.1 in the country and our robotics program ranks No. 4 in the U.S.
Given these and other examples, it is not surprising that private donor support received this year by the OSU Foundation in current gifts and pledges totaled a record $132.17 million, which substantially exceeded the SP3.0 goal of $110 million. In the last three years since the Campaign for OSU successfully concluded, we have raised $383 million in donor support. Some of you may recall that in the year before I came here, our FY03 fundraising total was $29.3 million.
In my State of the University Address in February 2017, I announced that we joined with the OSU Foundation to raise $150 million in support of the Student Success Initiative. By the end of August, we had raised $66 million toward this goal, and events associated with the celebration of the university’s 150th anniversary in 2018 should provide an extra boost for our fundraising campaign for the Student Success Initiative.
Because of donor support, financial aid programs at the university and modest tuition increases, 43% of our students graduated with no debt this year and students with debt had a median debt of $24,776, which are both much better than the national averages.
While we have concern regarding the continued expansion of OSU-Cascades, which I will address shortly, we have had a lot to celebrate this past year in Central Oregon. We increased the Bend campus footprint from 10.4 acres to over 56 acres with an option to buy another 70 acres of contiguous land. The campus’ first academic building Tykeson Hall opened in September 2016 and a dining hall/classroom building and 300-bed residence hall opened in January 2017.
We continue to work strategically and aggressively to improve state support for higher education writ large.
Oregon’s seven public universities asked the state to meet current service level needs and increase its investment by $100 million for the 2017-19 biennium – an increase from $665 million to $765 million. The large increase in current service level costs stems from a continuing understating of our CSL by the Department of Administrative Services and the Legislative Fiscal Office -- and substantial increases in employee medical benefits and pension costs associated with state programs in which we are obligated to participate. It is important to understand that OSU’s personnel costs account for roughly 69% of the university’s operating costs. Quite unfortunately, underfunding by DAS and LFO have served to shift some of our personnel costs on to the backs of students and their families. University calculations of CSL sought to mitigate this impact.
Ultimately, the universities received a $70 million increase in operating funds from the state to a total of $735 million. We expect OSU’s share of that funding increase to amount to about $19 million for the biennium. Those funds along with our 4% increase in resident undergraduate tuition rate, one quarter of which will go to financial aid, and a 2% increase for other tuition rates, will require us to reduce planned expenses and defer planned investments by $20 million in FY18. However, no additional adjustments are anticipated for FY19. Nevertheless, we will invest resources in student success initiatives, strategic faculty and staff hires, renovations in research space, improved service quality and competitive raises for faculty and staff.
The university’s current ending fund balance increased slightly from 13.3% in FY16 to 15.5% in FY17. We anticipate that fund balances will remain near 15% by the end of FY18, which will match the expectations of the OSU Board of Trustees. We appreciate the importance of maintaining a healthy overall fund balance and we will continue to work toward that end. Third-party rating agencies have recognized our strong financial management position. We received a rating of AA3 from Moody’s Rating Service in spring 2015 and again in summer 2016.
In addition to these and many other collective and individual accomplishments, we have added exceptional colleagues to leadership positions at the university. Our new leaders include Roberta Marinelli, dean of the College of Earth, Ocean and Atmospheric Sciences and Javier Nieto, dean of the College of Public Health and Human Sciences. Ed Feser is our new provost and executive vice president. Scott Barnes has joined us as vice president and director of Athletics. Charlene Alexander is our first vice president and chief diversity officer. Kim Kirkland has joined us as executive director for the Office of Equal Opportunity and Access. Toni Doolen, who continues to provide excellent leadership for the Honors College, has assumed the role of dean of the College of Education, and Roy Haggerty was named dean of the College of Science. Mike Green is our vice president for finance and administration.
I am sure that these observations provide you with a sense of pride in all that we have accomplished together and the incredible forward momentum that we have as a community. Yet, in every content area I have discussed, there remain significant challenges for us to address this year and in the future as we drive our agenda for FY18.
At my State of the University Address in February 2016, I issued a challenge to all supporters of OSU to help us raise by 2020 our undergraduate six-year graduation rate to 70% and the first-year retention rate to 90% for all groups of students. At 83.4% and 63.3%, the overall first-year undergraduate retention rate and six-year graduation rate remain well below those targets and our SP3.0 goals. Furthermore, our junior year transfer four-year graduation rate is only 56.9% (63% for those starting in Corvallis) despite a goal of 72% for all junior level transfers. With regard to achievement gaps, the first-year retention rate gap is 6.6% and the six-year graduation gap is 11.4%
To reach the average performance level among our top 10 land-grant universities, we must raise our first-year retention rate from 83.4% to 94%; our four-year graduation rate from 32.9% to 60.7%; and our six-year graduation rate from 63.3% to 84.1%. Achieving these goals will serve OSU’s academic mission and student success in many ways.
Moreover, the most effective way we can reduce the tuition and debt burden on our students and their families will be to increase our four-year graduation rate. On average, resident and non-resident students could respectively save $26,000 and $44,700 by graduating in four-years rather than six-years. As we advance our university assessment practices, we will continue to explore and report on measures that focus on the quality of student learning and outcomes.
Raising retention and graduation rates, closing achievement gaps and reducing time to graduation cannot advance quickly without addressing the fundamental issues that continue to slow our progress to achieve what Dr. Martin Luther King Jr. referred to as the “Beloved Community.” OSU students from under-represented backgrounds still report experiencing a chilly climate, bias, and unwelcoming comments with far too much frequency, thereby undercutting the effectiveness of the learning experience on multiple levels. Faculty and staff colleagues report similar negative experiences that undermine their creativity and productivity – not to mention their sense of value and shared purpose within our community. Getting our community where it needs to be in terms of inclusive excellence and social justice is fundamental to student, staff and faculty success.
We have work to do in other areas, as well.
While our overall research funding growth has been extraordinary, we are substantially below our target for invention disclosures (68 versus a goal of 120 by FY18). Although licensing revenue reached $10.3 million in FY15, in FY17 it stood at $4.1 million versus an SP3.0 goal of $10.9 million by FY18. Our top 10 peer institutions average $19.11 million in licensing revenue per year.
Our research expenditures per tenured/tenure track faculty FTE of $273,539, while well above the average for the Association of Public and Land-grant Universities, is well below an average of $421,496 in research expenditures by our aspirational peers. In fairness, many of our peer comparators have academic medical centers, which often account for half of all research grants and contracts.
We have continued work to do in Salem.
In the recently completed legislative session, we supported $284 million in capital requests agreed upon by the state’s seven public university presidents. In addition, we called on the legislature to fund $69.5 million to allow us to proceed with infrastructure and site preparation of the recently acquired 46-acre OSU-Cascades site along with construction of a second classroom building and a student success center and renovation of professional college space in Bend. Unfortunately, the legislature set funding for capital projects for Oregon’s seven public universities at $264 million, and in doing so, apportioned capital funding for Portland State University, the University of Oregon and OSU at roughly equal amounts. As a result, it provided only $9 million for site preparation at OSU-Cascades. We will redouble our efforts to fund the growth in capacity needed in Bend during the short legislative session in 2018.
The effort to secure full funding of our capital request for the OSU-Cascades campus from community leaders in Central Oregon was extraordinary. This remains the second fastest population growth area in Oregon and one of the fastest growing areas in the western United States. Central Oregon has the largest population base in the country without access to a comprehensive university campus. The vision for four-year and advanced higher education in Central Oregon remains an unrealized promise by the state. OSU-Cascades has always had its own operating budget from the state and it needs its own capital budget. The failure of the legislature to address the overall state budget problem and the late addition of other capital requests during the session were substantial obstacles to our efforts. In a post-session call, Governor Brown encouraged me to return to the short-session in February with a capital request for OSU-Cascades.
With these and other accomplishments and challenges in mind, let me outline the university agenda for FY18.
The University Agenda for the Current Academic Year
Given the pluses and minuses of our institutional performance during FY17, the university agenda for the current academic year is as follows:
Continued Implementation of SP3.0 and Creation of SP4.0
Expansion of OSU-Cascades and the Marine Studies Campus in Newport
Revenue Growth, Cost Containment and Financial Sustainability
Continued Implementation of SP3.0 and Creation of SP4.0
We began conversations with constituent groups in spring 2017 regarding elements of SP4.0. In parallel, we asked participants to help us create a vision of what Oregon State University will be in 2030. The vision statement will serve as a preamble for SP4.0 and provide the university with a sense of destination to guide our journey forward within SP4.0 and later within SP5.0 and SP6.0. The draft work for the vision statement and SP4.0 continued through the summer and into the fall and completion and roll out is scheduled by the end of this academic year. I expect the new strategic plan to highlight emerging and potential areas of academic excellence and to place equity, inclusion and success for all students, staff and faculty as essential to all we do at the university.
Even as we create SP4.0, we have much work to do this year in striving to reach the remaining goals for 2018 in SP3.0. We must increase the presence and improve the experience of historically underrepresented student groups and faculty. We must continue to raise the first-year retention rate and six-year graduation rate of all undergraduate student groups closer to 90% and 70%, respectively. It is imperative that we raise our four-year graduation rate and close achievement gaps. Furthermore, we must expand the number and size of our graduate program offerings and the number of doctoral students in our programs and Ph.D. degrees awarded. With regard to research activity, we must increase our licensing, patent and start-up activity. Across the university, we must manage our operations more efficiently, and identify and expand our sources of revenue. Despite the budget challenges we face, we have committed $3 million for investments in academic support services for students this year.
Expansion of OSU-Cascades and the Marine Studies Campus in Newport
The fact that the legislature cut the allocation of capital funds for the OSU-Cascades campus from the $20 million recommended by the governor to $9.5 million — compared with our request for $69.5 million — indicates that we have our work cut out in gaining the funding necessary to serve 3,000 to 5,000 students by 2025. We will approach the short session of the legislature in February 2018 with the goal of securing the rest of the funds we requested in the recently concluded session.
We continue to work on the design and engineering for the Marine Studies Building. Constructionwill likely begin in spring 2018, and we hope to occupy the building by fall 2019. Furthermore, we are also making plans to construct residence halls for students and perhaps faculty working at the Hatfield Marine Science Center campus in Newport on higher ground. One unique feature of the Marine Studies Building is that it will provide a vertical evacuation site large enough to accommodate all of those working and studying at Hatfield. There are no such facilities there now, although there is an impressive horizontal evacuation site at Safe Haven Hill. In the event of a major 9.0 earthquake and an anticipated associated tsunami, people working and studying at HMSC will be safer after the construction of the building is complete than they are today.
Revenue Growth, Cost Containment and Financial Sustainability
State funding for the university has declined substantially on a per student FTE basis for more than 20 years and the inability of elected state officials to restructure taxes or the state pension system are unlikely to alter that pattern. In the last 12 years, the university has managed to pursue excellence primarily because of our revenue growth associated with substantial enrollment growth on the Corvallis campus, especially among non-resident and international students; the success of the Campaign for OSU and the momentum that it has created; modest tuition increases; and dramatic growth in our online enrollments.
Going forward we do not envision a similar pattern of significant enrollment growth in Corvallis. We will launch a second Campaign for OSU in the next two or three years and it will be designed to exceed the success of the first campaign. We believe that competition from other institutions is beginning to affect the growth of Ecampus enrollment. Unless we are able to reach new groups of learners, Ecampus enrollment is not likely to continue to grow at the double-digit annual rates of the last decade.
This year, we will establish new programs to reach new groups of online students. We will develop new locations to offer hybrid courses. We are also exploring working with major employers in the region to provide on-site online education services. We will create staging areas for university-industry research collaboration. For example, we recently agreed to collaborate with Peet’s Coffee to provide online learning opportunities for Peet’s employees throughout the nation.
While our research grants and awards continue to increase dramatically over time, we have serious capital renewal needs with respect to research laboratories and space that could hinder future research growth. We obtained state capital funds for the renewal of Fairbanks, Gilkey and Cordley halls to begin to address very serious obstacles to maintaining our funded research trajectory.
Last year, we began the implementation of a new eProcurement system, which will go live this fall. We also audited the operations of our Human Resources division and Athletics to seek efficiencies and improvements in service. We have developed a budget plan for Athletics to reach a steady state of balanced budgets, including a fixed level of university support of $8 million per year – an amount that closely approximates the value of out-of- state tuition revenue that Athletics brings to the university. We will take the lessons learned from these cost cutting and service improvement efforts and bring them to bear on other aspects of university operations.
We will continue to update our 10-year business forecast and capital renewal and construction plan as circumstances necessitate, which should help us maintain balanced budgets with appropriate levels of fund balance and to meet targets for other financial indicators.
Despite the need to reduce spending, university-wide, we have committed $5 million in the coming year toward building a $45 million revolving fund to invest in infrastructure. Based on the recent work of Sightlines, a facility-consulting firm, we estimate the university has deferred maintenance needs totaling $650 million and seismic retrofit needs totaling $350 million.
Over the past three years, it has become clear that we can never achieve our aspirations for this great university if we do not create a community in which all of our students, faculty and staff can realize their full potential. We have created a new Office of Institutional Diversity and a new Office of Equal Opportunity and Access to distinguish our university-wide effort to promote community and separate it from the management of Title IX and other legal matters. Kim Kirkland is already changing the effectiveness of the Office of Equal Opportunity and Access. Charlene Alexander is assessing the strengths and weaknesses of our community, so that she can help orchestrate how we each of us can contribute to a common effort to provide all members of our community with the support they need and deserve to be successful. Allison Davis-White Eyes is our new liaison with local and statewide constituent groups and diverse communities. She will help us expand the boundaries and lower the barriers of our community. Furthermore, our provost and executive vice president, Ed Feser, will implement accountability measures for the evaluation of faculty, chairs, directors, deans and other administrative leaders with regard to community building. OSU is now a partner Institution with the Hispanic Association of Colleges and Universities. Among other benefits, this partnership provides access to a national internship program, which places over 600 students each year in federal and corporate paid internships across the country. OSU is also now an institutional member of the Southern Regional Education Board Doctoral Scholars Program, which provides access to more than 1,000 doctoral scholars interested in higher education careers.
The march by white supremacists in Charlottesville, Va. in August was shameful and shocking. Yet, across the country, this tragedy galvanized long overdue discussions about racial discrimination, bigotry and hate of all kinds. I am confident we all agree that there is no place for such hateful behavior at Oregon State University.
These events have re-enforced our commitment to examine the names of university buildings whose namesakes may have held or espoused racist or otherwise exclusionary views. The names we attach to buildings and places are declarative statements about our values: a steadfast commitment to create an inclusive, equitable community committed to social justice. This mission demands that we learn from our history and reconcile difficult parts of our past. Last spring, we began a process to determine, which, if any building names should be considered for renaming. This evaluation continues this fall and will involve the greater OSU community, as well as the analysis of noted scholars and historians. Decisions regarding these four buildings will be announced by the end of fall term.
We must also remain unwavering in our commitment to students and employees with DACA, undocumented students and students from mixed-immigration status families despite the announcement by the U.S. Department of Justice that it will rescind the Deferred Action for Childhood Arrivals policy.
As we face this, and other yet unknown challenges, please join with me to do everything in our power to ensure that OSU is an inclusive and safe community that supports equal opportunity for education and the opportunity for all to succeed.
I look forward to working with all members of our university community this year to achieve the remaining goals of SP3.0.
I also look forward to celebrating OSU150 with all members of our community and sharing in the creation of Vision 2030 and SP4.0 to guide Oregon State University’s mission and success as a land grant university for the 21st century.
Appendix - President Review Metrics - July 2017 (PDF)