Updated: UI told to prepare for 12.5 percent cut in state funds
URBANA — The University of Illinois has been told to prepare for a 12.5 percent cut in its state funding next year if legislators don't act to extend a state income tax increase that expires in January.
The Illinois Board of Higher Education has instructed the university to make contingency plans for the cut, which would amount to about $80 million, UI officials said Thursday.
The income tax increase approved in 2011, from 3 percent to 5 percent, is scheduled to be phased out in January. If it's not extended "there would be substantial impact on our appropriation," UI President Bob Easter told trustees meeting in Urbana on Thursday.
"It's a significant challenge of a magnitude we did not anticipate," Easter said later.
Most of the UI's budget goes toward personnel, and many employees have long-term contracts, so it will be a challenge to find the cuts, he said.
UI Vice President and Comptroller Walter Knorr said a 12.5 percent cut is a "real probability," as other state officials are talking about cuts of 10 to 14 percent. The impact on higher education as a whole would total $250 million, he said.
The UI's general revenue funding for fiscal 2014, which ends June 30, is about $647 million. With money for the state surveys, the total appropriation is about $663 million, essentially the same as in fiscal 2013, officials said.
The state owes the university about $326 million from this year's appropriation, Knorr said.
Easter and other UI officials will attend a budget hearing on March 21 in Springfield, a few days before Gov. Pat Quinn is scheduled to deliver his budget address on March 26.
Easter said he will point to projects such as the Digital Manufacturing and Design Innovation Institute to demonstrate the university's role in technology transfer and workforce training for the state. UI Labs is the lead agency on a $70 million federal grant for the lab, which will connect manufacturers with new computing capabilities.
UI faculty played a "critical role" in capturing that competitive grant, and the university has to maintain its ability to recruit and keep talented professors, Easter said. With proposed changes to state pensions and looming budget cuts, "we are vulnerable," he said.
At a Senate appropriations committee hearing Thursday, other state university presidents warned of larger class sizes, tuition increases and more courses taught by lower-paid adjunct faculty if the cuts go through.
Southern Illinois President Glenn Poshard and Western Illinois President Jack Thomas also said increasing the state's minimum wage could heighten budget problems, requiring millions more to pay their student workforces.
In other financial news, Knorr reported that the bond sale to finance the $165 million State Farm Center renovation and a new residence hall at Ikenberry Commons hit the markets at an opportune time. The 30-year bonds were sold at a 4.76 interest rate, less than the 5.39 percent the university expected, which will mean lower interest costs, he said.