The Legislature passed a bill today that makes Oregon higher education a quasi-autonomous organization — not a state agency — with new powers to control its own revenues and spending without having to run big decisions through lawmakers.

The Legislature passed a bill today that makes Oregon higher education a quasi-autonomous organization — not a state agency — with new powers to control its own revenues and spending without having to run big decisions through lawmakers.

The reorganization bill merges state universities and community colleges under an Education Coordinating Commission with members appointed by the governor and will allow schools to keep millions in interest earnings from tuition and buy their own health and risk insurance.

Higher education is happy about getting out of the state risk pool because their workers are younger and healthier, said Ways and Means Committee co-chairman, Rep. Peter Buckley, D-Ashland. "They're highly educated people and take better care of themselves" so they're able to find cheaper health insurance.

However, Ways and Means Committee co-chairman, Rep. Dennis Richardson, R-Central Point, complained that the new system will result in a state worker pool that is older and more costly to insure.

Richardson supports the change, but said it was a "tough call."

He dinged the university system for being "not very transparent" on a recent audit by the Secretary of State's office. Although the new independent higher education system comes with pledges of significant savings and full accountability to legislators — and is the model followed by most states — Richardson said he doesn't expect it to result in lower tuition.

The new system is not intended as a means of tuition reduction, said Diane Saunders, an Oregon University System spokeswoman in Eugene.

"Right out of the gate, we'll save several million from health insurance," Saunders said. "Instead of being in a pool of all state agencies...It will control costs and revenues but I wouldn't want to say it will control tuition." Each university has always held tuition money in its own pot, but, under the new system, will hold onto interest earnings, SOU Vice President for Finance and Administration Craig Morris said.

SOU, he adds, has a year to get risk and health insurance or become self-insuring, and will "rewrite purchasing structures, invest money through our own internal bank" and control legal representation, instead of using the state attorney general's office.

"It's our hope to control some costs more efficiently, being out from under the umbrella of the state," said Morris. "It will take two or three years to accomplish."

The bill becomes law at the first of next year — but it won't lighten the blow of cuts the Legislature approved last week, Buckley said. Lawmakers voted for an 11 percent cut to the Oregon University System, with another 3.5 percent reduction set in the biennium's second year,

The impact of cuts to each university won't be announced by OUS until September but "there will be layoffs of staff and even some faculty at universities...it's going to be a tough biennium," Saunders said.

The 11 percent up-front cut does not mean SOU will suffer a similar cut, she adds, noting that cuts to individual schools will be calculated based on enrollment and other factors.

The cutback is "not a tsunami" compared to regular higher education budget reductions of the past decade, said Buckley. He noted recent projections from SOU show that, with tuition increases and state allocations, "the system is fairly stable for the next five years." The capital construction package appropriation, also expected to pass today, includes $21 million for seismic retrofitting and deferred maintenance of SOU's aging Science Building.

— John Darling