The COVID-19 pandemic has caused disruption on so many levels – locally, nationally, and globally. No individual, community, business, or institution has escaped untouched. Through it all, we have collectively accomplished so much to enable our students to continue with progress toward their degrees and for the educational work of the institution to proceed.
The University is facing budget uncertainty.
Like all institutions of higher education across the nation, the University of Oregon faces unprecedented financial issues and enrollment uncertainties that will continue to present tough decisions. As we navigate financial uncertainty, our focus will be to keep as whole as possible our university community while continuing to deliver excellent education and life-changing research. We are committed to creatively addressing our financial realities with flexibility and compassion while positioning the university for success in the decades to come.
We are committed to being transparent and collaborative as we continue to work through financials issues that come our way.
We are very supportive of the important COVID-19 safety measures and regulations implemented at the state, local, and university levels, and hope and believe our students and staff are safe. However, the adjustments we have made starting in the spring term led to a sharp decline in the number of students on campus making financial uncertainty a reality.
Steps have already been taken.
In response to the real and potential budgetary impacts from COVID-19, the university took several actions to mitigate financial loss. The actions we have already taken include: hiring and pay freezes, travel freezes, implementation of the Extended Benefits Program and voluntary and mandatory Work Share programs, department reorganizations, salary cuts and FTE and personnel reductions. While our actions thus far provide important and necessary savings, we must prepare for the prospect of future financial loss. The UO Education & General (E&G) fund will be significantly impacted if there are losses in the university’s two biggest sources of revenue: state appropriations and tuition.
A Progressive Pay Reduction plan would reduce expenses and protect jobs.
We are discussing with each of our employee groups and unions contingencies for responding to the COVID-19 crisis that would further allow the university to reduce operating expenses and protect as many jobs as possible should that become necessary. It is very possible that we will face an enrollment decline in the fall and/or a cut in state funding, and we will need flexibility to preserve the institution’s long-term viability.
The progressive pay reduction (PPR) plan is a contingency plan for progressive pay reductions on employee salaries lasting 12 months if there are losses in the university’s E&G funds. The plan is intended to address actual losses from state appropriations, enrollment, or both. To trigger PPR, the losses to E&G funds would have to be between $15 million and $35 million.
The university recognizes that activating the program will have real financial impact for those who experience reduced pay, which is not taken lightly. At the same time having a plan for salary reductions in place as an option provides an interim solution as we seek greater financial security and stability as we carry forward towards our long-term mission as a university.
We are proud of the work the entire university community is doing to avoid the need for these reductions as we plan for the support, retention, and recruitment of our students.
Keep in mind the following when planning and preparing for the activation of the pay reduction plan:
- The progressive pay reduction plan applies to faculty and officers of administration.
- Faculty appointments in the research assistant, research associate, research professor, research scientist, research engineer, principal research scientist, and postdoctoral scholar categories are excluded.
- Faculty with joint appointments will not have their appointment FTE included in the above categories as part of the PPR.
- The university is continuing to talk through how the PPR plan will account for current COVID impacts in certain units.
- All salaries will remain at their current levels until the progressive pay reduction is triggered by specific financial losses.
- All salaries will be returned to their previous levels at the end of the twelve-month period.
- The plan may only be triggered once.
- The plan will only be activated under pre-specified financial circumstances outlined below.
Progressive Pay Reduction Schedule
If the plan is triggered, impacted employees (faculty and officers of administration) are responsible for their pro rata share as represented by the agreed upon model. In a scenario where losses are calculated at $35M dollars and a plan is triggered to save $20M, individual salaries will be reduced accoriding to the following schedule:
- Base salaries below $45,000 – no reduction
- Base salaries between $45,000 and $150,000 – reduced by a percentage that grows linearly from 0% to 12%
- Base salaries between $150,000 and $200,000 – reduced by a percentage that grows linearly from 12% to 18%
- Base salaries above $200,000 – reduced by 18%
If actual losses are calculated at $25M and a plan is triggered to save $10M, rates are reduced proportionally, in other words they would be exactly half of those in the table above. Again, this is a linear model approach and does not use a “tax bracket” approach.
|Base Salary||Effective Reduction ($20M)|
The PPR Calculator can be used to determine individual pay reduction according to the reduction schedule.
The PPR plan can be triggered by one of two things (or both): enrollment and state appropriations. Below are the approximate dates of when these triggers could occur.
First Trigger – November 15, 2020
The university will review its academic year (AY) 2020-2021 tuition revenue compared to the prior year. The difference will be calculated based on the numbers of in-state and out-of-state undergraduate students in the accounts receivables system as of that date as compared to the numbers of in-state and out-of-state undergraduate students for faIl term AY 19-20, which was 10,517 in-state undergraduate students and 8,473 out of-state students (includes international students) for a total of 18,990 total undergraduate students. Those numbers will be compared using the AY 20-21 tuition rates for resident and non-resident students. Any loss in state funding, as reported by the HECC or other state government agency, that occurs between the formalization of this agreement and November 15, 2020 will be combined with any decrease in tuition revenue as calculated above. If reductions in tuition revenue and state funding losses exceed $15 million, the PPR plan described below may be triggered.
Second Trigger – Summer 2021
If the pay reduction plan is not activated in November 2020, then the plan can be activated in summer 2021 (or directly after the legislature completes the Spring 2021 legislative session and determines the Public University Support Fund (PUSF) funding level). If the PPR plan is not triggered until after the Spring 2021 legislative session, the following things will be combined to determine the total E&G fund loss:
- Tuition losses calculated in November of 2020
- State cuts calculated in November of 2020
- Additional state cuts announced by the end of the Spring 2021 legislative session. The impact of these state cuts will be calculated by comparing the funding that the university is projected to receive for the E&G fund in FY22 to currently projected state appropriation of $84.5 million (FY20 E&G state funding of $79.3 million plus expected $3.2 million increase in FY21 plus expected $2.0 million increase in FY22).
- Note that this figure will be adjusted for actual FY20 HECC anti-up calculation (completed in Fall 2020 for FY20).
Duration of Reductions
The soonest the plan could impact employee salaries is after the November 15th trigger date. However, it may not happen until Summer of 2021, and it is possible it will not happen at all. The university will announce when the plan has been triggered and the level of cuts under the plan. The plan can only be triggered one time for one twelve-month period. The level of cuts cannot exceed the levels set forth above.
Salary reductions as part of the PPR will run for 12 months beginning the first day of the month after the calculation of the loss that triggered the salary reduction plan and the university has announced that the PPR will be triggered or on a date mutually agreed to by the parties.
Once the PPR is triggered, the University will run a regular accounting to track the amount of funds saved under the plan. If based on the accounting, the plan is projected to save more E&G funds than agreed to over the course of twelve months, the salary reduction program will end at an earlier date that aligns with the agreed upon savings amount.
At the end of the 12-month salary reduction period, salaries will be restored to their previous amount, plus any raises the faculty member has earned or been granted while the PPR was in effect.
Limits of PPR
PPR is designed to buy the university time to plan for long-term budget impacts. It does not rule out other cost-saving measures, such as layoffs, FTE reductions, and unit closures. Its aims are to ensure the university makes prudent decisions in light of new budget realities.
Expiration of PPR
At the end of the PPR period (up to 12 months from when it is triggered), salaries will return to pre-PPR levels.