Rauner budget would mean UI loses a third of state funding

Rauner budget would mean UI loses a third of state funding

URBANA — The University of Illinois would lose almost a third of its state funding, and employees would see future pension benefits reduced, under budget proposals outlined by Gov. Bruce Rauner.

The UI's state appropriation would drop $209 million, from $667.5 million to $458.5 million annually, if Rauner's budget plan is ultimately approved. That's an unprecedented 31.5 percent funding cut.

It would represent a 3.7 percent reduction in the university's total $5.64 billion budget, which includes federal funding, research grants, private giving and other support.

UI officials today said a state funding cut of that magnitude could cause "substantial harm" to students and Illinois citizens by hurting the UI's core education and research missions.

"It certainly is disappointing news," said Christophe Pierre, UI vice president for academic affairs.

But he added, "This is a first step. It's still early in what is going to be a long and probably arduous and complex budget process."

Pierre said it's too early to say specifically how the university would absorb the reduction. He plans to sit down with the campuses to "look at all aspects of our operations, and almost everything will be on the table," including administrative services and student services.


The "guiding principle," he said, will be to preserve the university's teaching mission and quality of the faculty.

"It's essential that we are able to retain and keep hiring our best-in-class faculty from around the world, because in turn that determines the quality of our educational programs, including at the undergraduate level for in-state students, and the quality of the degrees that we award," he said.

Both President Bob Easter and Chancellor Phyllis Wise have ruled out a possible hiring freeze.

"Frankly, I think we're going to have to have candid discussions about a number of options," Pierre said. "Again, the quality of faculty and staff, our ability to hire them, to recruit them, to retain them as an institution, is paramount to us."

"This is not very different from what we were asked to do last year. Fortunately last year the cuts did not materialize. Our budget was flat," he said.

Rauner has repeatedly targeted administrative bureaucracy in his comments about higher education funding. Pierre said the university would study that, though it has been through several rounds of administrative consolidations in recent years.

The UI will also try to increase its other sources of revenue, including research funding, private donations and tuition income — though not by increases in tuition rates. UI trustees in January voted to freeze tuition rates for incoming freshmen next fall, and that won't change, Pierre said. But the university could boost tuition revenue by admitting more students at the graduate and professional level, for example, he said.

"All options will be considered," he said.

The university pledged to "participate vigorously" in the upcoming budget debate, emphasizing both prudent use of public resources and the preservation of the UI's quality and "broad mission for our students and the people of Illinois."

Fiscal experts at UI's Institute of Government and Public Affairs expect the governor's proposals to undergo substantial revision before a budget agreement is reached this spring.

UI-Chicago economist Richard Dye characterized it as "the opening bid in a negotiation. These cuts aren't going to happen in that magnitude."

Business Professor Jeff Brown called the budget address a "really heavy dose of fiscal reality combined with perhaps a little bit of political fantasy."

Rauner presented a budget that "we can afford, at current tax rates," similar to what U.S. Rep. Paul Ryan, House budget committee chairman, did a few years ago with the federal budget, said Brown, director of the UI's Center for Business and Public Policy.

"A lot of people didn't like it. At least it was an attempt to say, 'If you want to learn to live at current tax rates, these are the changes that will be required,'" Brown said.

Rauner's plan to reduce the state's pension debt would switch most state workers to a less-generous "Tier 2" benefits plan from now on, though it would provide a buy-out option for those who agree to switch to a 401(K)-style defined contribution plan.

In a budget summary, Rauner's office downplayed the impact of the higher education cuts, saying they represent less than 6 percent of universities' total budgets. It noted that the state's universities have endowments totaling more than $2.5 billion, though much of that is held by the UI. The plan would also preserve funding for community colleges and Monetary Award Program grants.

The governor said Illinois, the fifth-most populous state, would still rank fourth in support for higher education with the changes.

Funding for universities has been cut passively for the last 15 years, with inflation taking its toll on mostly flat budgets, said Dye, a state finance expert.

He gave Rauner credit for correctly characterizing the magnitude of the state's overall budget problem, which stems from years of a "mismatch" between sustainable revenue and pending, he said.

"People should know that, and notice that. The solution is going to mean some considerable pain," he said.

Rauner proposed no new revenue, but tax increases are sure to be proposed as the budget moves through the legislative process, which would mean less-drastic spending cuts, Brown and Dye said.

"The cuts that he proposes would be devastating for certain agencies ... but maybe that's the message," Dye said.

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787 wrote on February 18, 2015 at 6:02 pm

You can thank the democrat party of Illinois for this huge mess.... it has been years in the making.

Start at the top, with Mike Madigan, and then work your way down.

And then to hear the comments that Madigan made on the radio.   He's in complete denial that he's a large part of the problem here.   

Sid Saltfork wrote on February 18, 2015 at 8:02 pm

Expect to hear a big WHOOSH with employees leaving state employment.  Those who can retire, or close to it, will leave before the change happens.  His plan will have an impact on AG Madigan's theory of "police powers" regarding SB 1.  It allows the State Supreme Court to uphold the State of Illinois Constitution while pension reform still comes about.  Do I like it?  No, I have friends who will be affected by it.  However, it rests with the legislators who will see a compromise being made.  Mike Madigan will have a problem opposing it.

The emphasis on cutting the high administrative costs at the state's universities will be agreeable to most of the taxpayers.  The U.of I. can still recap some of the loss by charging rich out-of-state, and international students more in tuition costs.  

Bulldogmojo wrote on February 18, 2015 at 8:02 pm

 

Well, those of you foxsnooze conservative business owners in east centrasl Illinois who voted Rauner and his austerity plan into office will now have your vote come home to roost.

Austerity for the U of I means austerity for YOUR businesses in Champaign and surrounding counties.

Now you are going to find out that you are not the "job creators" you claim to be, that it's the paying customers who are the job creators. But don't take my word for it let's ask an actual self made millionaire Nick Hanauer

https://www.youtube.com/watch?v=bBx2Y5HhplI

 

PS. Austerity is failing in Greece...and everywhere else its been tried

Girn Blanston wrote on February 19, 2015 at 8:02 am

You can't just spend, spend, spend without paying your bills.

The cuts amount to 3.7% of the entire budget of the university.   This is hardly austerity by any stretch of the imagination.

Bulldogmojo wrote on February 19, 2015 at 9:02 am

 

Exactly and one of the "bills" that is owed is the $300 million+ past due to the this University.

What the locals fail to understand is that people who live paycheck to paycheck put ALL of their money into the state and local economy. We earn it and buy food, hire people to do home repair, buy cars and repairs. (btw that will be a taxable service) buy medicine for our families etc. every single penny into the economy.

When Rauner invests the millions he has stashed in tax shelters into the Illinois small businesses he claims will reinvigorate the economy, than I will take him seriously.

Beware of billionaires seeking public office.

Girn Blanston wrote on February 19, 2015 at 1:02 pm

The state not paying the university on past due items happened long before Rauner got into office.  

The Democrats there didn't do anything to pay back the University that money.   I put the blame firmly on them.  Any suggestions to the contrary are laughable.

 

 

 

Bulldogmojo wrote on February 19, 2015 at 10:02 pm

 

You don't see Rauner making good on the $300 mil+ though. He's the Gov now and it became HIS debt to this University when he was sworn in. He's got no plan but to break the law as he sees fit.

http://www.afscme31.org/news/comptroller-attorney-general-say-rauner-order-striking-fair-share-fees-isnt-legal

 

I'll remind the readers once again. A PUBLIC UNIVERSITY NEVER WAS AND WILL NEVER BE FOR-PROFIT. As you would say, "any suggestion to the contrary is laughable".

We are here to educate students in ALL disciplines. If you don't like what is taught here and who teaches it, give your kids the keys to a food truck.

Girn Blanston wrote on February 19, 2015 at 1:02 pm

Oh, and CNBC reports today that Greece will likely run out of money in a few weeks, so that's not really the best comparison.

Rocky7 wrote on February 19, 2015 at 12:02 am

Hm, let's think about items to cut.

 

1).Administration - lots of fat there.

 

2). Non-core programs - including American Indian Studies, African American Studies, various religious study programs.  (Oh Yeah, I can hear the screams already).

 

30. And here's a radical idea. How about pay cuts for the administration and faculty? An across-the-board 5% cut probably would balance out any remaining state budget cuts.

 

I know, I can hear the screams and the threats on my life.  But ask yourself this question.  Is a 5% pay cut a worthy sacrifice for a premier job in a premier university?  Think about it. It may save your job, your program or department.

jlc wrote on February 19, 2015 at 9:02 pm

My first job out of college was as a Junior Engineer. I'd never taken an engineering class in my life. The principals at the firm told me they valued the well-rounded, holistic perspective I had from my "non-core" social science degree over the overly-narrow, technical training that many engineering students graduated with. You can learn technical skills on the job much more easily than you can learn writing and thinking skills.

dadogg wrote on February 22, 2015 at 8:02 am

Those in the hard science areas would leave, and it would not longer but such a primier university. Pay for some in the liberal arts just should not be increased and yes some fat can be cut off the top. 

Local Yocal wrote on February 19, 2015 at 7:02 am
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There won't be cuts to number of administrators, their salaries, number of building projects. It will all get passed, like it has for the last 15 years, to the customers, making the U of I an elite rich kid school. Underfunding from the state has been the perfect elixir to raise tuition. It's an excuse that keeps on raising costs to the students. Only those who can afford a luxury apartment condo need apply. Poor and low income students who qualify to play D-1 academics are being priced the hell out. 

Rauner is making the exact mistakes that will shrink the Illinois economy. There is a way out, and the The Center for Tax and Budget Accountability has provided the recipe, but this Governor must have not received the memo. 

Illini Alum wrote on February 19, 2015 at 8:02 am

The "rich kids" have lots of alternative options. There is no guarantee these kids will fill up the school. The University would have to turn even further to international students, which at a certain point makes the school less desirable for said "rich kids",  and a negative feedback loop ensues, where even more internationals are needed. The school should not go this route.

The real solution is to allow the Engineering and Business Colleges to support the whole University, by pumping them up to their full potential. Instead, you have other Colleges spiteful and fighting tooth and nail against ENG and BUS for resources (The admissions department is specifically contrained from applying different policies to ENG and BUS applicant reviews, just for example).

Outside of Engineering and Business, this is really just a typical state flagship University. Above average students, but nothing that would qualify as Elite. Compare this to Michigan, where every department is filled with elite level students who graduate and throw money back at the school to the tune of a $10 billion endowment.

How does Illinois emulate this? No easy answer, but they can start by acting more like a private institution. And yes, this involves a certain number of "rich kids", and much more domestic geographical diversity. The school needs much more marketing nationally for its elite programs, and build out from there. Not easy by any stretch, but money doesn't grow on trees, and Illinois is effectively bankrupt ten times over.

In the end, Michigan is able to meet full financial need for all enrolled Michigan residents. That should be the goal, but you don't get there by pursuing 'above average'. You get there by being 'Elite'.

Bulldogmojo wrote on February 19, 2015 at 9:02 am

 

But but but but but but but you haven't heard of the Alumni Association's "strategic plan" to double the endowment?? http://www.uiaa.org/about/strategicplan/

Of course that is being implemented by an Alumni Association that is losing millions on ridiculous Mgmt salaries. http://www.uiaa.org/about/presentations/FY2014.pdf

So that should succeed. UGH 

Illini Alum wrote on February 19, 2015 at 7:02 am

If you got rid of a number of highly under-enrolled over-staffed departments along with the grievance departments that you mention, you might not need a 5% cut for the rest.

The main financial burden from staff does not come from the individual salaries so much as from pensions and the uncontrolled proliferation of unnecessary positions at all levels...

We do not need the Assistant to the Assistant of the Office Manager of the Dean of the Department of XYZ Studies to cut his salary by 5%. We need him gone and not replaced. Better yet, axe the pseudo-intelectual departments all together. There are plenty of other schools that students can attend be proselytized to on these topics, if that is what they desire. There is no reason that the U of I needs to offer these programs except to pander. They are huge money losers as they bring in essentially zero research dollars and produce graduates who are in no financial position to give back to the school (if employable at all).

The same goes for any department experiencing prolonged declines in enrollment. Everyone should be allowed a few bad years, but there are departments that are in permanent states of underenrollment and significantly over staffed, and they should be cut.

The University is effectively becoming private. It should start acting that way.

The school claims they will look at all options. Complete BS; the option above will never be considered. These are third rail topics that will not be touched.

Oh, and to those who talk politics, this has everything to do with money not growing on trees and very little to do with which party is to blame. Illinois is not the Federal government, it can't print money.

Girn Blanston wrote on February 19, 2015 at 8:02 am

Well said.

Some perspective:  This is a 3.7% cut in the entire budget for the University.

The number of new administration positions has grown by leaps and bounds over the last twenty years.  Even the salary "freezes" that have happened in the past ten have been circumvented.   They'll say "2%" pay annual increase across the board, and then there will be raises given during the year well above that, unbeknownst to most of the rest of the staff.  There are entire groups in departments were this happens.  

Worse, they're hiring new people at salaries at more than double the rate of existing staff.   This makes no sense, except for the new people coming in, who gladly take those offers.  Who wouldn't?

That said, a cut of 3.7% can be done across the entire university, and probably not even change salaries, or even freezing them.   

However, what's likely to happen is a salary freeze for "everyone", with the same people that have gamed the system continuing to do so, with no reprecussions.

 


The university really needs to do a pay increase audit to find out where this is happening and stop it, but it'll never happen.

 

Sid Saltfork wrote on February 20, 2015 at 12:02 pm

Illini Alum;  I like your idea regarding "the University is effectively becoming private".  I agree with you.  It should be a private university with no state funding.  Remove the name with no reference to the State of Illinois.  Call it Cat U., State Farm U., or whatever.  I believe that the taxpayers would be happy with it.  It would allow other state universities to attract more Illinois students.  It would be a win-win for all.

You could even bring the Chief back as a private university if you choose to do so.

Bulldogmojo wrote on February 19, 2015 at 9:02 am

Easter's speech to the troops moments after the speech...

Dear colleagues:

In his inaugural budget address today, Gov. Bruce Rauner recommended a 31.5 percent fiscal 2016 budget reduction for higher education – a proposal that, if enacted, would cut general revenue funding (GRF) for the University of Illinois by nearly $209 million.

It is important to note that this is the first step in the legislative budget process and we will work with the governor and members of the General Assembly to make what we believe is a strong case to support the University programs that help lift our state.

Our overarching goals are to sustain our academic quality and the value of University degrees; retain the faculty and staff who are the core of our excellence and our ability to recruit the world’s best; preserve our ability to conduct pioneering research that fosters innovation, economic growth and serves the needs of the citizens of our state and nation; and continue delivering critical services such as health care. A reduction in the appropriation at the magnitude proposed will certainly impact our core missions.

At the same time, reality dictates that we immediately begin preparing for the impact if the legislature ultimately approves a large-scale reduction in funding. We will work with our Board of Trustees, campus leadership, and our faculty and staff to look deeply at all that we do and make the difficult programmatic and organizational decisions that would be required.

The University stewards its financial resources carefully and has weathered past funding reductions with its quality intact. But we do not have the resources to overcome reductions of this magnitude without harm.

The University of Illinois is an investment that transforms the lives of students and drives progress for our state, and we will continue to vigorously advocate for its interests as the budget process unfolds.

My thanks to all of you for what you do each and every day to support this great university. And I will keep you posted throughout this eventful legislative session as developments occur.

 

Robert A. Easter

President

IlliniwekMerica wrote on February 19, 2015 at 10:02 am

Yes, this is bad. But why does it have to happen? 30+ years of Illinois political and financial mismanagement, from the Democrats, Republicans, and everybody inbetween. 

Nobody's going to like the cuts, but when over 25% of Illinois spending is going to fund current state workers pension benefits that are constitutionally mandated (I'm not arguing for or against cutting pensions benefits, but any logical person see's it has to happen), there has to be cuts somewhere. Raising taxes would help, but the Laffer curve is a real thing and raising taxes on the rich to cure our ills is a myth; it's the rich who can easily move out of the state to avoid said taxes. 

And I'll argue until I'm blue in the face that state funding has played a very small part in the run up in U of I tuition we've seen over the last however many years.  The largest culprit is easily accessable federal student loan dollars creating a bubble, just like easily accessable federal home-loan money was the main driver behind the housing bubble.

bhuns2 wrote on February 19, 2015 at 11:02 am

The reason that 25% of state spending is going to pensions is that this fund has been used and abused by the legislature as a dipping pool for spending for other purposes. It doesn't seem fair that the people who worked to put the money into that fund are the ones being punished, when it is the legislature who spent the funds they took from our checks on other things. State employees are not the ones who mismanaged the funds, our state government has been doing that grossly for years.

 

IlliniwekMerica wrote on February 19, 2015 at 11:02 am

I completely agree with you, it's not fair the workers are the ones being punished. We could go around all day trying to assign blame to the workers, union representatives, and Illinois legislatures for the mess we're in with the pensions (btw, in my opinion, it's far and wide the legislatures fault with a little blame on the union reps), but in the end, its going to be the workers feeling the hurt or the taxpayer feeling the hurt.  

Something has to change, but with the wording of the Illinois constitution, I believe its eventually going to be the illinois taxpayers hurting if we don't enact serious budget cuts along the lines of Rauner's proposals, which is also "not fair". 

Girn Blanston wrote on February 19, 2015 at 1:02 pm

During the speech, Rauner said all money that was currently due would be paid and that going forward things will change.  Money being paid out (and earned) to this point will be paid...that's to current workers and retirees.   From now on, current workers have to put their future earnings into a different type of plan. 

The only acception will be police and fire, which will be able to invest in the old plans (which I think is more than fair).  That I'm sure will be abused by some, but for most of the people that work those jobs it's well earned.

Given the Illinois constitution, I believe this is the only thing they can do.

It's going to take a long time to fix this, the pension problem will continue for decades as more people under the current system retire.

C in Champaign wrote on February 19, 2015 at 2:02 pm

Unfortunately Local's just got it wrong on this one, UI is not "an elite rich kid school," at least not where in-state tuition is concerned. At around $15,600 for in state students, it is a bargain when compared to almost any private 4 year college or university. Tuition at UIUC is less than $3,000 more than Illinois State, and $2,000 more than Northern Illinois University.

Anyone who has had kids engaged in a college search lately can tell you that, in most cases, $35,000 is a pretty standard starting point for the private coleges and universities, with most in excess of $40,000. So, for the cost of about two years, or less, of private university tuition, an in state student can get a top 50 ranked university degree, and top 11 among public universities. A relative bargain by any measure.

 

SaintClarence27 wrote on February 20, 2015 at 11:02 am

The Laffer Curve isn't really a real thing. It's a theorized thing, that may be a curve, or may have several peaks and valleys.

That's aside from the fact that most studies regarding the laffer curve have found optimal revenue generating tax rates to be in the 60-70% range. So if revenue generation is your goal, then no. If it's not, the Laffer curve isn't even relevant.

The reality is that, yes, this state is in dire financial straits (and members of Dire financial Straits). Do we need cuts? Of course. But doing so while intentionally reducing revenue is just as fiscally irresponsible.

Sid Saltfork wrote on February 20, 2015 at 12:02 pm

Good comment.  Both are needed.  Rauner will eventually agree to raise taxes.  He has hinted as much in campaign, and after taking office.  The problem he will face with the legislature is whether it will be a sales tax, an increase again in state income tax, or a progressive tax.  It will not be an increase in corporate taxes.  He has talked about taxing retirement income; but he cannot pick and choose what groups would pay the tax.  The tax would be on income derived from savings, 401k plans, pensions, farm leases, etc.  All retirees with incomes less than $55,000 per year, and Social Security income would not be taxed.  Much of his base would be paying the tax unless loop holes can be found.  Taxing retirment income will not be popular with the legislators of both parties for obivious reasons.

Chambanacitizen wrote on February 22, 2015 at 7:02 am

(Raises hand)  

I'd like to get paid for not working....but yet people crying about pension reductions are also the first ones to cry for cutting SNAP or welfare.  Typical C/U.

 

Sid Saltfork wrote on February 22, 2015 at 1:02 pm

No.  The people "crying about pension reductions" are against cuts to the poor.  They provided services to the poor.  They know the need.  They are outraged that the public cannot see that it was the corrupt politicians of both parties that caused this financial mess.  It is not "typical C/U".  It is statewide. 

If the citizens of Illinois regardless of political ideology wanted to change things, show up on a designated day with signs reading "End Political Corruption".  Demonstrate several days.  Demonstrate outside of legislators home offices.  Put the national spotlight on Illinois political corruption.

annejasons wrote on February 22, 2015 at 8:02 am

I didn't vote for him but I'm sure glad he won, spending more than the state  can afford is just dumb!

There will be cuts and not everyone will like them but it's the first move towards some financial sanity.

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