OU faces nearly $1B in debt, inadequate operating cash
The University of Oklahoma is losing $36 million a year as expenses continue to outpace revenues, the incoming president said Tuesday.
“Total debt is almost $1 billion at our Norman campus,” said Jim Gallogly, who becomes OU’s 14th president July 1. Debt service costs are almost $70 million a year, he said.
“Our debt has more than doubled in the last 10 years as we’ve been on a building campaign,” Gallogly said. “As a result of that, we have a beautiful campus and a lot to be proud of, but during that period of time, we spent approximately $730 million.”
Some projects that haven’t been completed will have to conserve cash to ensure they can be completed, he said.
Gallogly made the comments during a meeting of the OU Board of Regents at the Health Sciences Center campus in Oklahoma City.
Each May, the regents approves the university’s annual budget and tuition rates for the coming academic year.
They approved a $2.12 billion fiscal year 2019 budget — $1.02 billion for the Norman campus and $1.10 billion for the Health Sciences Center campus — with the understanding Gallogy will rework it.
Without the revision, OU would have another year of operating losses projected to be $14.5 million, Gallogly said.
“While I propose it today as a temporary budget, we will be working on July 1 to fix it and to make sure we’re soundly managing our Norman campus,” he said.
Gallogly said the Health Science Center is “better managed and in much better shape.”
Despite the revenue issue, the budget does not increase tuition.
“Our inefficiencies on the Norman campus and our overspending on the Norman campus should not fall on the shoulders of our students,” Gallogly said, “so we will not do that.”
Net tuition and fees have gone up 34.4 percent over the past five years, he said.
Operating cash is about $175 million — down 26 percent from five years ago — “not an adequate cash cushion for an institution of our size and scope,” Gallogly said. “We must begin to rebuild that cash.”
‘Hard, important work’
Gallogly said the focus will be on efficiencies and “putting money into the right places,” like faculty raises. Some dedicated younger faculty members haven’t received a raise in years, he said.
Other goals Gallogly noted are doubling research efforts at all three campuses, expanding OU’s presence in Tulsa and making OU medical facilities the provider of choice in the state.
“I firmly believe that we can do all of these things at the same time — stem our losses, increase our efficiency, build cash while paying down debt, and launching our effort to make the University of Oklahoma one of the finest research institutions in our nation and a growth engine for the state of Oklahoma.
“We will get our house in order. This will be hard but important work,” Gallogly said.
The Board of Regents selected Gallogly to lead the university in March. As CEO of LyondellBasell in Houston from 2009-15, he took over a company that was $24 billion in debt and turned it around.
“He has the right skill set for this point in time,” Chairman Clay Bennett said in March. “He’s a gifted manager. He understands how to put pieces together to be successful.”
Bennett said Tuesday he is “thrilled” to have Gallogly on board.
“Today is an exciting time in the history of the university,” he said. “We’ve got a lot to do and we’re excited to get it started.”