Gallogly well suited to address OU finances

JIM Gallogly knows a little something about turning around companies facing crises. In his role as University of Oklahoma president, Gallogly will need to use those skills to place OU’s Norman campus on a better path.

At the OU Board of Regents meeting Tuesday, Gallogly, who takes over July 1, disclosed that the campus is nearly $1 billion in debt, primarily due to building projects in the past decade that have cost about $730 million.

During that time, the university’s debt has more than doubled, Gallogly said. Debt service costs alone are roughly $70 million per year.

OU President David Boren notes that bonds have been used to pay for facilities for the school’s core mission, and that private gifts have covered much of the cost of the projects. He also points out that OU’s debt is similar to Oklahoma State University and other similarly rated public universities.

“OU’s required annual debt service payments represent only approximately 6 percent of its total operating revenue,” Boren noted. “Neither its total debt outstanding nor its underlying funding sources are unusual.”

Gallogly told the regents that since his selection in March, he has worked on OU’s books and “that has not been an easy task.” He says he considers himself a financial expert, “and it has taken me days and weeks and months to sort it all out. … And frankly, I’m not pleased with what I have found.”

This included operating revenues in the past five years that were up 18.8 percent, largely due to increases in tuition, while operating expenses were up 23.3 percent. Expenses are outpacing revenues by about $36 million per year.

The good news for OU students is that Gallogly intends to right the ship without increasing tuition. He plans to increase efficiencies and build up the university’s operating cash, which at about $175 million is “not an adequate cushion.” He would like to see research efforts doubled at OU’s three campuses — Norman, Tulsa and the OU Health Sciences Center in Oklahoma City. He wants to enhance OU’s medical facilities.

His overarching goal, he has said many times, is to make OU an even better university than it is today. Tackling this financial challenge is paramount, and Gallogly is well suited to do so, something regents Chairman Clay Bennett alluded to Tuesday when he said he was “thrilled” to have Gallogly in the position.

Gallogly spent 29 years at what is now Conoco/Phillips and was part of the leadership team that guided Phillips Petroleum Co. through its merger with Conoco, helping ensure the long-term futures of both companies. He left in 2009 to become CEO of Houston-based LyondellBasell, a plastics and refining company that was in bankruptcy and a staggering $24 billion in debt.

One year later, the company was out of bankruptcy. Within four years of Gallogly’s arrival, LyondellBasell’s stock price had risen from $17 per share to $115 per share.

Both situations, he told our editorial board in May, required bold, visionary plans and strong leadership. The same is needed now at OU. Getting the university’s finances in order, Gallogly said, “will be hard but important work.” We have every confidence it will end in success.