Controversial Bill to Fix Oregon’s Cash-Strapped Public Universities Awaits Gov. Kotek’s Signature

Before adjourning last week, Oregon lawmakers passed a controversial bill aimed at finding solutions for the state’s financially challenged public universities, which chief sponsor Rep. Pam Marsh (D-Ashland) says face “fierce headwinds.”

The universities have experienced declining enrollment and consistent budget deficits over the past decade. Members of the state’s Legislature hope they can improve the situation with House Bill 4124.

Marsh, whose local university, Southern Oregon, required a $15 million bailout from lawmakers this year to meet cash flow needs, told her colleagues the status quo is unacceptable. Her legislation orders the state Higher Education Coordinating Commission to find “opportunities for collaboration, restructuring or integration in the post-secondary education system.”

The bill arrives a little more than a decade after lawmakers dissolved the centralized Oregon University System out of a desire to grant the universities greater independence. But a report HECC released in January found the hopes that independence would make the universities stronger haven’t panned out—at least in financial terms.

Marsh’s bill requires the commission to study the postsecondary education system in Oregon and offer recommendations for improvement by April 2027.

The legislation comes on the heels of HECC’s detailed look at spending and efficiency at Oregon’s public universities. The commission analyzed university spending, enrollment and staffing to determine whether they were making productive financial decisions.

“Public universities will have to look at optimizing operations,” the report said. “In a resource-constrained environment, efficiency is imperative.”

Some universities testified against HB 4124, voicing a variety of concerns ranging from potentially heavy-handed oversight to unwanted mergers.

“For rural-serving universities like ours, such mandates could weaken access, destabilize operations, and undermine the very efficiencies these recommendations seek to achieve,” said Charles Hofmann, chair of Eastern Oregon University’s board of trustees, in written testimony.

Supporters of the bill argue that the current, decentralized public university structure in Oregon has damaged collaboration among universities and diminished belief that college is a path to economic stability and employment.

Others, like state Sen. Todd Nash (R-Enterprise), who opposed the bill, worry the report will ignore regional universities’ unique needs and priorities. Nash’s Senate district includes Eastern Oregon University in La Grande, the state’s smallest public university.

“They just don't want somebody else to come in, make a report, and then have action that is going to do something detrimental,” he tells OJP.

One of the key findings in the January HECC report was the degree to which spending has risen over the past decade among the state’s four-year public universities. From fiscal 2015 to 2024, spending per full-time equivalent student increased more than the national average at all but one school—Oregon State University (see chart above).

“Universities have fixed costs, such as facilities, insurance, utilities, or contractual obligations, that do not decrease when student enrollment declines,” according to the report.

The largest increase in operating expenses, however, stems from faculty and staff salary and benefits packages.

“Universities face significant challenges…all while current funding computations fail to consider rising wages and benefits,” says Maureen Brakke, Western Oregon University’s executive director of marketing and communications.

OJP previously reported on how investment decisions for the state’s Public Employees Retirement Fund have contributed to budget problems for state agencies.

Oregon’s public universities are disproportionately reliant on student enrollment and tuition, according to the HECC report. State support for higher education in Oregon is paltry; the state ranks 46th in the nation in funding for four-year public institutions of higher learning, according to the State Higher Education Executive Officers Association’s fiscal 2024 report.

Financial pressures have led to emergency budgetary actions at most of the schools in fiscal years 2025 or 2026 from cutting staff to declaring severe financial distress.

Decreasing enrollment is a factor in Oregon’s higher-than-average spending per student. Overall enrollment at the seven public universities has declined over the past decade, even as Oregon’s population grew about 10%. One of the HECC report’s key findings is that even as enrollment shrank, the universities continued to add staff. In the face of meager public funding, that disconnect puts upward pressure on tuition.

Keeping tuition costs low is particularly important for schools such as Western Oregon University in Monmouth, which has a student body that is “82% Oregonian, 50% first generation, 27% Latino, 42% students of color, and 41% Pell eligible,” according to Brakke.

But keeping tuition increases low may not be realistic without greater support from Salem.

“The state has chosen to keep its investment in higher education minimal and should not be surprised that institutions start to struggle,” Brakke says. “Not surprisingly, states that are the top in economic prosperity also are in the top for funding of higher education.”

Given Oregon’s stagnant economy and looming massive reductions in federal funding for basic services such as health care and food stamps, lawmakers are unlikely to meaningfully increase state funding for higher education anytime soon—hence their support for HB 4124, which they believe could lead to the system operating more efficiently.

HB 4124 awaits Gov. Tina Kotek’s signature.