Fiscal Year 2008 Budget Report Oakland University Senate November 15, 2007

Michigan’s Budgetary Morass 7 years of spending cuts FY2007 General Fund revenues lower than in FY1996 School Aid fund annual growth since 2000: 1.4% $8 billion in one-time resources used Reserves exhausted Weakened connection between revenue structure and the economy Spending pressures growing faster than revenues Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

Spending Pressures Analysis covers nine major areas: School Aid Higher education Medical care Corrections Human services Mental health Revenue sharing with local governments Employee compensation and benefits Transportation Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

Population in 2017 Major Changes in Demographic Composition Ahead Total Population - Down 41,000 (0.4%) School Age (5-17) - Down 257,000 (14%) Higher Education (18-24) - Down 84,000 (9%) Labor Force (16-64) - Down 262,000 (4%) Seniors (65+) - Up 413,000 (31%) Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

-14.3% -8.5% -3.9% +31.5% Michigan’s Changing Population Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

Reasons for Sluggish Revenue Growth Increasing Senior Citizen Population - Retirement Income not taxed and spend less on goods Consumption taxes goods oriented - economic growth is in service sector Slow or no growth revenues drag down overall growth (e.g. tobacco, gambling, alcohol) Flat rate income tax Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

The Future Projections seldom made beyond the current budget year Failure to estimate the future consequences of current actions leads to unpleasant surprises Knowing where we are headed helps justify actions to change the future Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

Higher Education Enrollments at all-time high Increased participation needed to make Michigan competitive State support has lagged behind costs placing pressure on tuition Increased state support required to produce more college graduates Revenues will not grow fast enough to maintain state share of costs without cuts elsewhere Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

Making the Case in Lansing Despite progress made to restructure Michigan’s revenue base and spending priorities through tax collections, reforms and budget cuts, the well-respected Citizens Research Council projects that the state will fall $350 million short in FY2009 and $1 billion in FY2010. Aggressive and divisive initiatives to separate the state’s largest universities (MSU, UM-AA and WSU) from the other 12 by proposing and supporting two separate higher education budget bills, has the potential to greatly diminish the value and importance of the latter to Michigan’s future. The good news is these efforts have been thwarted for two consecutive years. The bad news is such efforts are expected to continue in future years.

Making the Case in Lansing The recently announced partnership between OU and Beaumont Hospitals to create the state’s first private medical school sent a powerful message to state elected and appointed officials regarding the breadth and depth of the university’s academic and research capabilities. The state’s ongoing budget crisis was cited in December 2006 when the governor vetoed capital outlay projects for state universities and community colleges, including OU’s Engineering and Human Health Buildings. This rationale took on a new twist when approval was granted this year for a new Michigan State Police headquarters in Lansing.

Making the Case in Lansing The increasingly competitive, demanding and divisive environment in Lansing requires the university to move forward with additional staff support for the Office of Government Relations.

Comparison of State Appropriation Average Percentage Increase Versus OU Percentage Source: Per original enacted state appropriation bills

Appropriation per FYES 1998 Oakland University’s FY 2008 appropriation per FYES is budgeted to be $1,018 per FYES less than the FY 1998 level Budgeted

Since 1992, Oakland University’s relative reliance on tuition and fees in the General Fund has grown from 41% to a budgeted 72% in Comparison of General Fund Revenue Sources FY 1992, FY 2002 and FY 2008 Budget Budgeted

Category Base One-Time Budget Reductions $ 6,412,400$ 6,096,000 Cost Containment9,809,7573,295,138 Total Reductions/Containment$16,222,157$9,391,138 Financial Stewardship Budget Reductions and Cost Containment Cumulative FY 2003 – 2008

Academic Affairs – FY 2008 Incremental Budget Allocations Does not include FY 2008 compensation adjustments

Oakland University Fall Full-Time Faculty Headcount

FY 2008 New & Replacement Faculty Positions College of Arts and Sciences31 School of Business Administration 4 School of Education and Human Services 8 School of Engineering and Computer Science 4 School of Health Sciences 2 Kresge Library 1 School of Nursing18 Total68 Note: 44 positions were originally approved. Includes visiting faculty.

Academic Affairs – FY 2007 One-Time Budget Allocations

Oakland University Grant and Contract Activity Fiscal Years

Capital Campaign Dollars to Units October 2007 College of Arts and Sciences$8,121,793 School of Business Administration 5,014,498 School of Education and Human Services 6,226,914 School of Engineering and Computer Science25,959,992 School of Health Sciences 251,163 School of Nursing 5,660,103 Academic Affairs - other10,534,985 Athletics 1,206,314 Student Affairs 647,543 Office of the President 1,434,111 Auxiliaries 8,399,768 Other 8,400,517 Total $81,857,701