UI budget review shows financial house in order
University has had net income of over $300 million each year since 2010
URBANA — Hundreds of millions of dollars brought in by the University of Illinois last year could go toward paying for a supplemental retirement plan, building renovations and helping boost professors' pay, according to an analysis of the university's budget.
"Overall, we're in pretty good shape — not great, but not terrible," said Mike Sandretto, who teaches accounting at the UI.
Relative to its peers, the UI has an average amount of cash, but a huge amount of deferred maintenance, he said. (He put the number at $1.5 billion to $1.8 billion for all three campuses). It also has a small endowment compared with schools like the University of Michigan.
Sandretto chairs the budget committee of the Urbana campus' Academic Senate and was asked by the quasi-legislative body to provide a presentation on the university's financial condition.
In his review, Sandretto said the UI had a net income of $300 million in 2013.
The UI has had a net income, essentially a profit, of more than $300 million every year since 2010. In 2005, 2006, 2008 and 2009, the UI did see losses, and in 2009, it risked being downgraded by bond-rating agencies, Sandretto said. During those years, the UI increased its cash by deferring maintenance, he said.
In recent years, the UI has accumulated about $1.8 billion in unrestricted cash, he said.
"We could probably spend about $700 million of our cash, and we'd still be OK," he said.
There are multiple demands on that cash, including the need to renovate buildings in Champaign-Urbana, Chicago and Springfield, he said. A significant amount of money will also likely go to faculty raises. UIC United Faculty, the new union on the Chicago campus that represents tenure-track and non-tenure-track faculty, has been bargaining for its first contract for about two years.
"When UIC faculty finally sign a contract, almost certainly, there will be back pay for them," Sandretto said.
The Urbana campus is also planning to rebuild its faculty ranks; Chancellor Phyllis Wise last year announced plans to hire 500 new faculty over five to seven years. Costs associated with those hires are not one-time, he said, but ongoing. Adding faculty also means adding support staff and updated labs.
Some of the cash could also fund pay raises for current faculty and supplemental retirement plans currently being discussed.
UI finance Professor Jeff Brown briefed attendees of Monday's senate meeting about the options being considered for a supplemental retirement plan. Those plans are being drafted in response to pension reform passed by the Illinois General Assembly that will reduce pension benefits for employees.
"We either pay for it now or we pay for it later" when key faculty and staff leave the UI for jobs elsewhere, Brown said.
The options under consideration include a university contribution to a tax-deferred 403(b) retirement account and encouraging employees to make contributions of their own. Officials also are exploring options for employees who will be affected by salary caps outlined in the legislation.
On Monday, the senate endorsed a resolution expressing support for the UI pursuing such additional retirement plans. The document urged UI President Bob Easter, Wise and the board of trustees to act quickly to create a plan that is competitive with peer universities.
"At the end of the day, it's up to the board of trustees on what they want this to exactly look like," Brown said.
Trustees are expected to consider options at their May board meeting in Chicago.
Brown also is chairing a new ad hoc senate committee that is taking a comprehensive look at compensation issues for faculty and academic staff on campus. Members are reviewing salary and other benefits data for the UI and comparing it with other universities. Members could address possible salary inequities on the Urbana campus and make recommendations to administration on how to better recruit, retain and reward faculty.