OHSU PLANS FOR CUTS AS STATE REDUCES ITS SUPPORT FOR EDUCATION AND SERVICE PROGRAMS

Legislature reduces allocation used to purchase services from OHSU

Q. Are all OHSU programs and activities affected by the cut in state support?
A. No, only those programs that receive support from state dollars will be affected. Those activities that do not receive state support but are supported by other revenue sources will not be scaled back. Grants and contracts, including those for construction and research, are allocated for specific projects. OHSU may not use such funds for purposes other than those allowed by the granting organization. Gifts and contributions to the foundations also are limited by law to the specific uses designated by the donor.

Q. Which OHSU programs receive state support?
A. The university receives about 5 percent of its budget from state dollars to partially fund specific educational and clinical service programs. OHSU's research enterprises are not supported by these state dollars, and only 2.4 percent of its two hospitals' operating budgets come from the state.

The $10 million in combined cost reductions and revenue enhancements is spread over the programs that receive state support: the Schools of Dentistry, Medicine and Nursing; Allied Health Program; Area Health Education Centers Program; Child Development and Rehabilitation Center; and OHSU's hospitals and clinics.

Q. When do the reductions take effect?
A. They begin in the 2002 fiscal year (July 1, 2001, through June 30, 2002) and will be fully implemented by mid-2003. Students already accepted into affected programs will be able to proceed on a normal schedule to finish their degrees.

Q. Can OHSU use excess hospital funds or other reserve funds to help with this $10 million cut?
A. No. OHSU's survival depends on creating and maintaining a reserve fund. Without adequate reserves, the institution cannot stay in business. It must have a standard percentage of its operating budget in a reserve fund to borrow money at favorable interest rates and to sell revenue bonds to raise capital for such things as equipment, and facility repair and improvement. The university's reserves are already below this percentage.

In addition, OHSU cannot survive unanticipated financial challenges without adequate reserves, nor can it respond to changes in the marketplace.

Q. What does the continual decline in state support mean to OHSU's bottom line?
A. OHSU's dependence on state funds has dropped each year. In 1975, state support was 42 percent of OHSU's budget; in 1995, when OHSU became a public corporation independent of the Oregon State System of Higher Education, state support was 12 percent of OHSU's budget. Currently it is about 5 percent. Cuts in state support mean that, more than ever OHSU's survival depends on its ability to function efficiently as a business, competing in the marketplace.

Even with the significant change to the revenue picture, OHSU maintained programs and its public mission over the last several years by reducing costs and improving efficiencies. The university has self-funded inflationary increases and continued both to improve and to expand its educational offerings to address major changes in the field of health and medicine. The further $10 million cut over the next two years forces the university to reduce the quantity and scope of its programs in order to maintain quality.

Q. Can we use some of the new money the Oregon Legislature approved for specific purposes to help out with these budget cuts?
A. No, these designated funds, which come from the tobacco settlement, are a one-time investment specifically designated for research expansion. They may not be used to cover ongoing operating costs of education and other service programs, and they do not help with the ongoing budget shortfall.

During the last session, the Oregon Legislature approved several actions that benefit OHSU, including the merger with the Oregon Graduate Institute and passage of The Oregon Opportunity bill to expand the university's research program to reflect a broader view of science and technology. The Oregon Opportunity bill will allow OHSU to borrow as much as $200 million at favorable interest rates specifically to build research capacity for biotechnology growth.

Q. Are the cuts in each program proportional to state funding?
A. The cuts are not across the board. They have been allocated based on a detailed analysis of the options. They are based upon four principles:

• OHSU will honor its commitment to allow students already admitted to complete their degrees.
• OHSU will maintain and continue to build the quality and excellence of its core educational and clinical programs, focusing on graduate professional education and nursing education.
• To the extent made possible by the level of state support, OHSU will educate the future health professionals needed by the citizens of Oregon.
• Program reductions will be implemented so as to minimize, to the extent possible, negative impacts on OHSU employees.

Q. Will there be layoffs?
A. OHSU will strive to minimize the impact through attrition and by transferring employees where possible.

Q. Will the cuts be restored?
A. While we hope for the best, we have to plan for the worst. Certainly OHSU will continue to work with the governor and the Legislature to explain the importance of these programs to Oregonians. But we have to act responsibly, bearing in mind the current economic situation. That means building a budget within our current means.

Q. Is the new OGI School of Science and Engineering affected by the cut?
A. No, OGI does not receive general state support. OGI did receive a targeted appropriation as part of a statewide consortium supporting engineering education.

Q. Will my health care be affected?
A. No, there should be no change.