Hurricane Katrina has contributed to sky-rocketing energy prices nationwide, and now Kent State has to find extra funds to pay for this winter’s heat and electric bills.

The university anticipated and tried to plan for higher energy costs this year, said David Creamer, vice president for Administration, but this level of increase was not expected.

Every spring, the university lays out its financial plans for the upcoming year, estimating the number of students who will sign up for classes and the amount of heat that will be pumped into residence halls.

Kent State expected electric costs to rise this fall because the second phase of electric deregulation began this year, said Tom Dunn, associate director of Campus Environment and Operations. The deregulation allowed companies to raise the rates they charge to produce electricity.

Electricity can cost the university up to $450,000 per year, Dunn said. However, Kent State produces some of its electricity from personal generators by using natural gas. If it did not, electric costs could be doubled.

While the university was prepared for the higher electricity cost, Dunn said, it wasn’t expecting an increase at all in natural gas prices.

The university’s projected cost for natural gas this winter is $1 million, he said. Previously, units of natural gas cost about $4 to $5 each. Today, costs are reaching $13 per unit. The university consumes about 800,000 of these units per year.

About 50 percent of Kent State’s natural gas needs are planned in advance to reduce the effect of drastic price increases such as this year’s, Dunn said.

“About 40 percent in January has already been locked in price, so I’m only responsible to the market prices for six of the contracts,” he said.

Funds from tuition, state support and last year’s staff reductions were set aside to be used for rising energy costs, said Denise Zelko, director of university budget and internal audit. For additional funds, Kent State will turn to revenue from out-of-state tuition. While overall enrollment has declined, there is more out-of-state enrollment than had been expected. These funds will help off-set the extra energy costs.

Since university budgets are planned in the spring of the year before, costs can only be estimated, and these types of financial problems arise each year, Creamer said. Energy costs and building issues, such as roofs needing replaced, are typical causes of unexpected problems.

Health care costs are also touchy, Creamer said. The costs are established in January, in the middle of the budget year. Fiscal years run from July 1 to June 30. The university has underestimated the rate of rising costs in the past, and had to seek extra funds mid-year.

“When our enrollment was growing, it was easier to deal with that,” Creamer said.

“This year, we’re closer to the level we use to create the budget, so we’ve lost some flexibility there.”

For the past few years, the administration underestimated the amount of students who would actually attend Kent State the upcoming year. This fall, enrollment fell for the first time in eight years.

The university has taken cost-saving measures in recent years to plan for the future, Creamer said.

“We had to be ready for it, rather than react,” he said.

However, sometimes these situations cannot be anticipated.

“When we do a poor job of estimating or predicting these situations, or, worst case scenario, we face cuts from the state, we’re forced to make permanent reductions,” Creamer said.

Last year, the university made its second major staff reduction. The first was about two years earlier, Creamer said. About 130 to 140 total positions were eliminated in the reductions. The cost savings from these cuts were just under $4 million.

At the recommendation of the Governor’s Commission on Higher Education and the Economy, the Ohio Board of Regents researched university productivity for the past five years. According to the report, Kent State saved $55,699,517 from 2001 to 2004 through cost reductions and productivity improvements.

In 2003 and 2004, some of these reported savings came from staff reductions in departments such as Student Affairs and Admissions, and an eliminated ambulance service for the DeWeese Health Center, according to information provided by Zelko.

While no new cost-saving measures have been implemented this year, Creamer said, the university will be examining issues related to enrollment decline, recruitment and retention, hoping to reverse the fall’s decline.

Departments and individuals are aware of budget problems, Zelko said.

“I think cost-saving measures are just ingrained into the environment, and anything people can do to help, they are,” she said.

Contact administration reporter Rachel Abbey at [email protected].