OU budget cuts will force down city revenues

When Ohio University makes budget cuts, the city of Athens has to plan on its own resulting budget reductions. City Auditor Kathy Hecht told members of City Council Monday night what current budget proposals at OU could mean to the city.

She said that for every $1 million that OU cuts from its budget, the city of Athens loses roughly $16,500 in revenue for its general fund, which the city uses to pay police, fire and streets department expenses mainly.

With OU currently discussing budget proposals that would have a $15 to $16 million reduction for this coming budget year (and more the following year), Hecht estimated this could mean a $100,000 to $150,000 loss in income tax revenue to the city.

Hecht explained that these numbers are related to cuts to payroll at OU, including salary reductions and layoffs. Where OU will make these cuts, however, she said she doesn't know.

"My guestimate is that maybe 75 percent "“ I'd say at least 50 percent "“ would be in salaries, because that is a major part of any budget," Hecht said. "I have no idea what their plans are. All I know is what I read in the paper, and they're just saying budget cuts are $15 million. Common sense would tell me that there's got to be some salaries in there."

OU Faculty Senate chair Joe McLaughlin stressed that currently OU administrators are trying to come up with a plan, and that the talks of $15 million to $16 million in cuts stem from a proposal from the university's Budget Planning Council.

Nonetheless, OU is still anticipating raises for employees next fiscal year.

"Right now, that (budget) proposal includes a 2 percent raise for all employees, not just faculty," McLaughlin said. "And then [the proposal includes], additionally, another $750,000 for faculty raises if the university hits its enrollment target for next fall."

He said that the 2 percent raise across the board does not depend on the enrollment target.

"We know we're getting $10.5 million less from the state next year," McLaughlin said. "That's the only thing we know."

He said the deficit goes down when the university takes into account a tuition increase, but goes back up with increased health-care, utility and other costs.

Hecht said that her goal was to give Council an idea of what it would mean to the city if there were payroll cuts. She said that payroll cuts could mean anything from salary changes to layoffs.

"Certain people, if you want to keep them, you have to give raises," Hecht said. "But then that means that if you have to cut, you have to go back down to the lower levels and lay off."

She said that this is a scenario that the city might also have to face at some point.

"Basically, we've tried to do it through attrition, without laying people off," she said. "If a position becomes vacant, we just don't fill it. And they might have to do some of that, too."

Hecht said that the city's general fund would be the hardest hit if the city loses income-tax revenue. The general fund, she said, gets 74 percent of the city's income-tax revenue.

The Police and Fire departments make up half of the general fund budget, Hecht said. The streets department, she said, accounts for about 19 percent of income-tax revenue.

"If you look at making major cuts to the general fund, then you start looking at police and fire personnel, which is what nobody wants, of course," she said.

OU Provost and Executive Vice President Pam Benoit signed a Faculty Senate resolution on budget priorities last week, agreeing with Senate that academics should remain the priority amid the major budget cuts planned for the upcoming fiscal year.

In December, OU's Budget Planning Council laid out a set of budget assumptions for the upcoming year that includes plans for $750,000 in faculty raises and 3.5 percent tuition and general fee increases.

If these assumptions are approved, the university will be looking at a $15.7 million funding gap that must be resolved through budget reductions and/or revenue enhancements, according to Rebecca Vazquez-Skillings, OU's assistant vice president for budget planning and analysis.

As for university revenue, the submitted budget assumptions plan for no enrollment increase for fall 2010, a 3.5 percent tuition and fee increase, no change to graduate instructional fee or non-resident surcharge, a loss of $9.5 million in federal stimulus money, and a loss of $10.4 million in state share of instruction, Vazquez-Skillings has said.

On the expenditure side, BPC planned for $750,000 in additional Vision Ohio investments in faculty salaries contingent upon meeting the fall 2010 enrollment estimates. The body also projected up to $1.2 million to support additional faculty lines based on instructional capacity needs caused by enrollment growth, Vazquez-Skillings has said. This year, OU's Athens campus enrollment grew by 681 students.