University president, leadership team in ‘ongoing’ talks with governor’s staff; At ‘Campus Conversation,’ Bailey takes responsibility for ‘lack of awareness’ of cash flow issues
Update, 2:55 and 5:35 p.m. Thursday, Feb. 12:
Oregon Gov. Tina Kotek responded to Southern Oregon University’s need for state funding to stay afloat in an emailed statement directly to Ashland.news on Thursday, Feb. 12.
The university faces a $4 million shortfall by July and SOU President Rick Bailey told students, staff and faculty on Feb. 6 that the university is in discussions with Gov. Kotek and the Higher Education Coordinating Commission regarding a potential one-time ask of $15 million, an amount subject to change. SOU students and staff are in Salem to advocate for the university this week following a Campus Conversation last week.
“My office is aware that Southern Oregon University is facing serious financial challenges driven primarily by enrollment shifts and rising costs,” Kotek said in the statement. “SOU is an important, independent academic institution, and I appreciate their leadership’s transparency and focus on responsible financial management.
“SOU is vital to the southern Oregon economy and a key driver of opportunity and workforce development,” Kotek added via the written statement,” the statement continued. “My office is monitoring the situation and working closely with SOU to chart a path forward. My focus will be on serving students and the broader community for the best interests of the state.”
SOU reposted Kotek’s statement, which was also posted to Facebook, on its Facebook page, commenting, “Thank you, Governor Kotek, for your continued support of Southern Oregon University and the students and communities we serve. We are grateful for your partnership and commitment to strengthening higher education across Oregon.”
Ashland.news has reached out for additional comments from Gov. Kotek and is awaiting a response.
Original story below:
By Holly Dillemuth, Ashland.news
During a wide-ranging campus conversation on Friday, Feb. 6, Southern Oregon University President Rick Bailey said he planned to have discussions with the Governor’s Office, including about the possibility of asking for a one-time, estimated $15 million payment from the state of Oregon to SOU to help “bridge” the campus financially to the summer of 2027.
“Right now, our estimate (for a request) is $15 million — That basically covers us cash flow-wise through next year,” Bailey told dozens in attendance at the Campus Conversation and many more watching online on Friday. “It would take us to summer of 2027 and I think that gives us time to really, as a state, ask the question and start having the dialogue about what the future of higher education looks like.”
“It’s a bridge,” he added.
On Wednesday, SOU spokesperson Joe Mosley declined to confirm the estimated $15 million as the exact number to be requested of the state, despite Bailey’s use of it during the public presentation. As it is an estimate, the potential $15 million amount is subject to change amid a potentially evolving situation.
“There is much work being done to determine what is needed at SOU for the current biennium, and there are at least some discussions about what higher ed may need in the years beyond that,” Mosley said in an email to Ashland.news. “President Bailey and the leadership team are focused this week on looking at things we may be able to do on our end (nothing settled upon yet), and on those discussions with the governor’s office and legislative leaders.”
“We’re not tied to any specific number,” Mosley said in the email, “pending the work that’s underway to identify potential, additional savings and/or revenue.”
Bailey on Friday that, from what he’s heard during his talks with state leaders and lawmakers, that there is a “genuine understanding” of the importance and value of SOU.
“There is an awareness in Salem that the structure is broken and something needs to change,” Bailey said.
“I do think that what we are facing there are institutions in our state right now where there’s going to be a reckoning about what this state wants from higher education in the future.”
Watch the Campus Conversation
To watch a video of Friday’s Campus Conversation, click here
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Bailey said the university generates $282 million in economic activity each year.
“For every dollar the state gives to (the Public University Support Fund) … we’re generating $9 in economic activity,” Bailey said. “The reason why we have so many businesses and elected officials and others who are really coming out to support us is because they understand that we are an economic and workforce engine for the region and the state.”
Bailey emphasized that during his week in Salem, he did not speak with the heads of institutions about mergers, a topic that originated from a Feb. 3 board of Trustees meeting regarding only “discussions of a merger” if no other solutions are found.
“I did not and have not talked to any other institutions or institution’s leaders … about mergers,” Bailey told attendees.
“It’s really premature to do so and two, it’s not my job,” he added. “If we ever go down that road, that’s a conversation between the Governor and boards of trustees and institutions.”
But Bailey stopped short of not entertaining it as a possibility if needed, stating “everything is on the table” in terms of finding solutions.
During the bulk of the Campus Conversation on Friday about the university’s finances, Bailey shared a mea culpa with faculty, staff, students, and those tuning in to watch online that the university’s cash flow has not been one of his top priorities in the last six months due to a “lack of awareness” on his part and, up until now, an incomplete financial team.
Come July, Bailey said the university will be short $4 million in cash flow due to an overall financial “perfect storm” that threatens the university. Among numerous factors involved, Bailey said the transition for the university from outdated programming to what’s known as Workday. Underscoring these issues, Bailey also said that the university’s use of an income statement versus one that would go side-by-side with a balance sheet is also a key factor that led to the shortfall.
“I want to own that in front of all of you,” Bailey told attendees in the Rogue River room. “In my opinion, cash flow is one of those things that easily could have been a better early warning for us. The reason we’re not having this discussion six months ago is on me.”
Bailey explained that the university’s fiscal management largely uses an income statement without a balance sheet side-by-side.
“A lot of our fiscal management was really based on an income statement,” Bailey said.
The income statement looks at a specific period of time versus a balance sheet that would provide a “snapshot” of the cash on hand and bills coming due, according to Bailey.
“Because we are working with an income statement type model, we’ve been using that as our idea of what revenue is,” Bailey said.
“We didn’t have the team in place to do it,” he added.
“All of these things created this perfect storm so that we didn’t have these things (income statement and balance sheet) side-by-side. We do now and we’re getting better at it,” Bailey said. “By the way, this isn’t just during my time. I don’t know that we’ve ever done that. So we are now in a place where we are able to make better fiscal management decisions.”
As an example, Bailey shared that in 2019-2020, despite accounting for $38.5 million in tuition revenue, the university took in more than $34 million, based on the income statement model.
In 2023-24, Bailey said $33 million in student tuition revenue equated to $28 million.
“You’re starting to see the issue, right?” he said.
Bailey also noted $62 million in expenditures in 2020 versus $68 million in 2024, highlighting a $6 million upswing in costs. In addition, an already $5 million deficit added to the $6 million in cost increases adds up to the $11 million problem.
“That’s the structural problem,” he said.
When a student asked if the campus might close, Bailey was also frank in his response, stating that there are schools that are closing all the time and that they’re all closing for the same reason, though he didn’t specify examples.
“So I think there’s always going to be that possibility,” he said, referencing the question of closure. “I don’t want to sugarcoat it for you.
“I do think there is a genuine desire to do everything we can before we get to that stage. I think every other option, and I mean every other option, would need to be on the table before we go down that path.”
Bailey said it is his “own shortcomings as president” that have ultimately put faculty in a delicate position with the hiring cycle.
“I sure wish I could’ve told all of you last summer, ‘Hey, we have about a year where we’re going to have this issue, rather than, ‘Hey, it is now February and we had this issue in July. That is all on me and I understand that’s what’s causing a lot of anxiety.”
Dennis Slattery, an associate professor at SOU who teaches an online Masters of Business Administration in Accounting course, shared his thoughts during a Q:A session Bailey hosted following his presentation.
Slattery praised Bailey for his hard work and his heart, noting though that he would like to see more accountability from others.
“You have not been served well in some cases,” Slattery said.
“We should never be in February of 2026 without a weekly, daily cash flow,” he added. “That’s accounting 101 and I don’t understand how we weren’t managing just naturally.
“That’s hard to reconcile,” he added.
Slattery also noted that there was a roomful of people, some of whom were there looking for answers from someone in whom they no longer had trust or faith in to solve the problems.
“When does the solution happen? How soon will it happen and how much notice do we think we can have? Because people need to start making decisions for the rest of their (lives),” Slattery said.
With the Oregon Legislature in the middle of the short session, Bailey said they are deciding how to spend taxpayer dollars.
“None of that is a guarantee at all, but I think we will know a path very soon,” he said, referencing a time frame ranging from Feb. 13 to Feb. 20.
Bailey, addressing the group, also emphasized that he serves at the pleasure of the board.
“You know and I know that I also serve at the pleasure of our students, the faculty and the staff and so I absolutely will respect your decision about the leadership of the institution,” Bailey said.
In light of SOU’s current fiscal situation, Bailey said he now sees cash flow as an early warning system.
“It’s the carbon monoxide detector in your house,” Bailey said.
“By the way, this is the stuff that makes makes the business faculty pull their hair out because of our own processes and what we’ve done, not just in my time here, but what we’ve done for a long time, and maybe forever,” Bailey said.
He listed the following as components of what he described as ‘the perfect storm’ for the university:
- Assumptions of student tuition payments
- Percieved vs. actual cash loss; one-time funding, ‘clouding’ actual funds available
- Personnel: four CEOs, three comptrollers
- Workday software issues
- Income statement vs. balance sheet
“These are all things that I should have seen or done something different about,” he added.
Given a do-over, Bailey would’ve paused Workday software rollout
Bailey noted that SOU’s transition to Workday is not “the enemy,” and sees the possibility for an unknown amount of longterm savings from using Workday versus an outdated system.
He described a one-year period where, due to the “painstaking work pulling figures from one system to another,” he didn’t have awareness of the cash flow issue.
Bailey has since reflected, “What else could I have done differently?
“If I knew then, what I know now, there’s a couple of things I would have done,” Bailey said.
“Knowing what we know now, I would’ve stopped Workday,” he added. “I wouldn’t have canceled it, but I would’ve hit pause on it.”
“I don’t have a crystal ball and I don’t have a magic wand,” Bailey said.
SOU has hired four chief financial officers and three comptrollers in the last three of the four years Bailey has served as president of SOU. Carson Howell serves as the current vice president of finance and administration.
“I worked hard to try to bring a team here that would help give us the awareness that we need that would make better strategic decisions,” Bailey said.
He added that a lot of the scenarios of finding a permanent candidate were out of the university’s control.
One finalist took a job in the private sector two weeks before arriving on campus.
Bailey said he allowed the use of interim roles for the vice president of finance and administration while the university secured a permanent team.
Bailey said he noticed “some challenges in the way we were thinking about fiscal management” as his administration embarked on “SOU Forward” in 2023.
“There is a team in place now which is providing more awareness than we’ve ever had,” Bailey said. “By the way, that’s why we’re here, because the team is now assembled and doing the work to really understand this model better.”
Bailey: SOU ‘lean enough,’ hints he doesn’t want to add more cuts
As university officials continue to have discussions with state leaders and lawmakers, Bailey did put limits on more cuts at SOU if at all possible.
“We are really at the place now where we have to be very, very careful about going deeper in ways that could make us now unviable,” Bailey said.
He also acknowledged the structural deficit faced by SOU and other universities around the state amid costs and revenues “not linking up.”
“We’ve had a 30% decline in credit hours over the last 10 years,” Bailey added.
Bailey added that the break from the Oregon University System in 2015 has also contributed.
“When we think about the structure of a state, it’s the product of what you designed,” Bailey said. “What we have designed in this since the breaking of the Oregon University System in (effective in 2015) has been imperfect …. It’s just been flawed and so the state needs to think about what that structure should look like moving forward.”
Reach Ashland.news reporter Holly Dillemuth at [email protected].
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