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OUDAILY
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BUDGET CRISIS
How OU’s handling a $20 million budget hole, and what it means for students
$10 MILLION: Retirement incentive program If 20 percent of eligible faculty and staff retire in exchange for a lump sum of 75 percent of their salary, the university will save roughly $8.6 million through reductions in salary, accrued paid leave and payroll taxes. OU expects to save an extra $1.2 million by no longer needing to contribute to retirees’ retirement plans, bringing annual savings to just under $10 million.
$10 MILLION: Department cuts The other half of the budget cut will come from restricting hiring and cutting budgets. While OU is currently in a hiring freeze, OU President David Boren said these budget cuts will mark the start of a harsher hiring freeze, requiring a two-step process before a new person is hired or a vacant position is filled.
Retirement plan could affect students Retirement incentives may impact courses JESSE POUND @jesserpound
OU needs dozens of faculty and staff members to retire to make up a budget deficit, raising questions about the quality and availability of classes offered to students in coming years. The Board of Regents approved a plan on Jan. 28 that OU hopes will alleviate $20 million from the university’s budget through a combination of incentivized retirements, hiring restrictions and other departmental cuts. There are 397 employees available for the early retirement program, including 206 faculty members, according to information from OU Administration and Finance. The university expects about 20 percent of eligible employees to retire, which could have a serious impact on classes, said Craig Russell, a human resources professor. “What’s that mean for student graduation rates?” Russell asked. “Are we not going to be able to offer all the sections we need to get everyone graduated in the (time frame) they’re anticipating?”
OU’S NOT ALONE OU is not the first school to implement a retirement incentive plan to alleviate budget pressure. Here are some of the schools OU looked at as it designed the plan: • Indiana University • University of Arizona • Northern Michigan University • University of Utah • Vanderbilt University Source: OU Administration and Finance
WHO’S ELIGIBLE? Full time employees 62 and older who also met OU’s retirement requirements by the end of 2015 are eligible for the program. Source: Board of Regents meeting agenda
“This is just an accountant’s view of cost cutting,” Russell said. According to the Board of Regents meeting agenda, faculty members could conceivably retire and still come back to teach next academic year, but they would have to be part-time employees and make 25 percent or less of their current salaries. Academic units would have to look at hiring adjunct faculty and increasing teaching loads of existing faculty, said Nick Hathaway, the university’s vice president for administration and finance. However, Hathaway said existing faculty won’t be able to take on large amounts of extra work. “I’m not suggesting there’s a lot of ability to do that,” Hathaway said. The university has been hiring adjunct faculty for years, and there may not be enough candidates out there to fill the voids left by retirees, Russell said. “What if they aren’t available?” Russell asked. Following the Board of Regents meeting, OU President David Boren said the university will move some professors around to different departments to fill the gaps. “We might have someone teaching Native American studies that came from history,” Boren
said. The retirements are expected to save about $10 million a year, with the other half of the savings coming from restricting hiring and cutting budgets. “We are taking another $10 million just out of the hide of the departments,” Boren said.
“What’s that mean for student graduation rates? Are we not going to be able to offer all the sections we need to get everyone graduated in the (time frame) they’re anticipating?” CRAIG RUSSELL, HUMAN RESOURCES PROFESSOR
Boren said hiring will be much more difficult. He also said the previously existing hiring freeze may not even have deserved to be called a freeze. The university’s administration now gets control over the money freed up when someone leaves a job, making it harder to hire a replacement. In order to hire new people, departments will have to demonstrate that the job is a critical one, Boren said. “They will need a much higher
justification this time,” Boren said. “We’ll only give it if they can afford it and if they absolutely need it, like the building is going to burn down if you don’t get it. It’ll be a hard freeze.” Even if a replacement hire is approved, a new professor may not be able to step in right away. “The hiring of faculty is not something that happens immediately,” Hathaway said. Funding for higher education has been diminishing in Oklahoma and across the country in recent years. Additionally, the state is facing a budget crisis amid plummeting oil prices, which dipped under $30 a barrel last month after hitting $110 a barrel in 2014. “What happens if we’re exactly at this point next year?” Russell asked. Other colleges faced with budget crises, including Oklahoma State University in the 1980s, resorted to vertical cuts, eliminating entire departments or colleges to make the numbers work, Russell said. “At some point, we can’t do this anymore,” Russell said. Anna Mayer contributed to this story. Jesse Pound
RETIREMENT INCENTIVE PLAN by the numbers
397
employees are eligible for the plan: 206 faculty members and 191 staff members
20
percent: the number of eligible employees expected to take the incentivized retirement
75
percent: employees who accept the plan will receive a lump sum payment equal to 75 percent of their salary or the equivalent pay for 1,560 hours of work if they are paid by the hour. The lump sum payment cannot exceed $100,000. Sources: Board of Regents agenda and information from OU Administration and Finance.
jesserpound@gmail.com
Incentives may not attract most faculty Staff members are more likely to retire JESSE POUND @jesserpound
An OU official said he expects more staff members than faculty to take advantage of the university’s new incentivized retirement plan because of other job opportunities in the local economy. Nick Hathaway, the university’s vice president for administration and finance, said it would be harder for some professors to find other jobs than it would be for other staff members, because it would be easier to get another job in the private sector than in academia. “I suspect we might see elevated staff participation, above that of faculty,” Hathaway said.
Hathaway said employees who have previously announced their intentions to retire but have not yet done so will be eligible for the incentivized retirement program. Craig Russell, a human resources professor, said the plan is much less aggressive than similar plans in the private sector. OU’s plan is similar to plans implemented at other universities, Hathaway said. “I don’t think there’s anything that we saw in higher ed that was way more aggressive,” Hathaway said. The plan, which includes a lump sum payment equal to 75 percent of base salary or 1,560 hours of compensation, is not expected to attract most of the eligible employees. Hathaway said the expectation is that around 20 percent of those eligible will accept. “It’s only three-quarters of your
salary. It’s not like they’re offering you lots of money, so I don’t think it’s going to convince anybody to retire except those that have already been thinking about it,” said Robert Griswold, a history professor. Russell said he would not accept the offer even if he was a year older and therefore eligible for the program. “This is not enough of an incentive to make me want to (retire),” Russell said. OU also plans to severely restrict hiring, meaning that those who retire may not necessarily be replaced. Existing searches for faculty members will not be canceled, Hathaway said. OU President David Boren said the university will replace leaving faculty and staff members only in critical roles. “It’s a much kinder way not to
fill vacant lines than have to hire people and then have to fire them because we have no money to pay them,” Boren said. “It’s a much more humane way of dealing with it.” Anna Mayer and Noor Jaffery contributed to this story. Jesse Pound
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TIMEFRAME
Feb. 15: Eligible employees will receive retirement information. March 30: Employees must decide whether to participate. June 30-Dec. 23: Retirements are expected to go into effect Source: Board of Regents meeting agenda