FY21 Budget Planning Update

To: OSU faculty and staff

From: Edward Feser, Provost and Executive Vice President

June 9, 2020

Dear Colleagues,

We are writing to provide further information about the university’s Fiscal Year 2021 budget plan, and specifically to explain steps we have taken to prepare for a possible temporary pay reduction program and provide for additional employment provisions across unclassified positions in selected self-support funded units. These contingency plans are necessitated by the significant financial uncertainty OSU faces under various COVID-19 pandemic scenarios.

On May 29, the Board of Trustees approved a FY21 budget that projects a $49 million (or 7.7%) gap between Corvallis Education and General (E&G) revenues and projected expenses and a $1.8 million (or 9.5%) gap at OSU-Cascades. E&G funding is primarily comprised of state funding and tuition and fees. Including all sources of funds, OSU is anticipating a total FY21 shortfall of approximately $124 million.

In his May 26 message to the OSU community, President Ray noted several actions the university will take to close this gap, including tapping fund balances; reducing capital renewal spending, services and supplies spending, and staffing in selected areas where less work is needed; holding vacancies unfilled; and reducing pay temporarily. The university also considered implementing furloughs in lieu of a pay reduction. However, furloughs have become increasingly complex and costly to administer under state and federal law, limiting their capacity to offset budgetary shortfalls, especially in positions where workload reduction is not expected.

The temporary pay reduction program will be applied beginning Aug. 1 at the earliest, and will be implemented if updated projections indicate that E&G revenues are falling short of expenses by at least $35 million for Corvallis E&G funds. While additional details are available here, the following is the plan in outline:

  • Unclassified employees (academic and professional faculty) with a base salary rate of at least $50,000 annually would receive a pay reduction.
  • Overall reductions range from 1.7% for employees with base salaries between $50,000 and $70,000, to 9.2% for employees with base salaries between $260,000 and $280,000, to a maximum reduction of 13.8% for OSU’s highest-compensated senior executives, including the university’s president.
  • Athletic coaches are employed under multi-year contract arrangements. Like OSU’s senior executives, all head coaches and some assistant coaches have committed to making voluntary leadership philanthropic gifts to the OSU Foundation, and compensation reductions are being negotiated between the Director of Athletics and individual coaches.
  • The program will cease if revised projections—produced several times over the course of the fiscal year—indicate the FY21 Corvallis E&G shortfall will be less than $35 million. Factors that could reduce the shortfall include higher than expected enrollment, higher than expected state support, federal emergency funding to higher education and OSU, or higher than expected savings from cost reduction efforts.
  • For OSU’s senior executives—including the president, provost, vice presidents, general counsel, deans, vice provosts and others—the reduction program will be implemented beginning July 1 and is anticipated to be in effect for a minimum of six months.

In total, the pay reduction will save the university approximately $12 million. This will help OSU support more faculty, staff and graduate assistant positions than it could otherwise.

Note that the pay reduction plan is a component of the collective bargaining agreement tentatively agreed to with United Academics of OSU (UAOSU), the academic faculty union. Therefore, the plan as outlined above is contingent for the represented population on ratification of the inaugural contract by UAOSU members. Ratification is ongoing and concludes June 12. Also, reference to the possibility of temporary pay reductions is being added to the FY21 renewal and initial offer letters of all unclassified employees.

We also want to inform you of an additional action to mitigate risk associated with potential severe financial losses in units that are primarily funded by self-support funds: Athletics, self-support units in Student Affairs, Transportation Services, Conference Services, the LaSells Stewart Center, Printing and Mailing Services, and the self-support activities at OSU-Cascades (Housing and Dining, Student, Conference, and Parking Services). These units face tremendous uncertainty in the coming academic year because their revenues depend heavily on the level of face-to-face activity at OSU. If we are forced to operate primarily in remote-only mode in AY2020-21, and/or are unable to hold athletic events, the financial losses in these units could be very high. The university’s capacity to backstop such losses from other sources is limited.

Therefore, the university is adding additional language to the FY21 renewal and offer letters of unclassified fixed-term employees in these units. This language states that if financial conditions in the given unit worsen substantially, the FTE or duration of the employee’s contract could be reduced, with advance notice. Such a change in FTE or appointment period could only occur if OSU’s President validates a state of financial emergency in the given unit.

We regret the uncertainty and worry this action may introduce for affected employees. We want to stress that our full intent is that all fixed-term employees in these self-support units are able to serve their appointments in full in the coming year. However, given the magnitude of the potential financial losses to these units under some COVID-19 scenarios, the units need the ability to adjust employment levels if their financial circumstances become particularly dire.

Thank you for your understanding as we work through the current and future possible implications of the COVID-19 pandemic for OSU’s budget. The University is seeking to address the financial challenge through a balanced approach that involves shared sacrifice and minimizes the negative impacts on our employees and mission.

Please let us know if you have any questions.


Edward Feser
Provost and Executive Vice President