UI provost: Budget hole too big for just cuts

UI provost: Budget hole too big for just cuts

URBANA — The numbers are big: $70 million in budget cuts and a $190 million hole left to fill.

That's too much for the University of Illinois' flagship campus to absorb by slashing spending alone, interim Provost Ed Feser says.

The campus has to grow its way out of the state budget crisis and reduce its reliance on iffy state funding — by as much as half over the next decade, Feser said Thursday.

Another step under consideration: spending more of the $253 million in endowment income held by academic units.

In a campus and budget update, Feser laid out the stark numbers for a packed Beckman Institute Auditorium.

The campus received $236 million in state general revenue funds in fiscal 2015, but netted just $47 million in the stopgap measure approved in fiscal 2016, which ended July 1. Even after "significant reductions across campus" totaling $49 million, that left a $140 million cash shortfall, he said.

This year, the campus received a bit more than half of its 2015 funding, or about $119 million, and cut another $18 million on top of the $49 million cut last year, leaving it $50 million short. Together, that's a $190 million recurring hole in the budget.

The question is whether the state will eventually fill that gap or just require the campus to absorb it and "move on," Feser said.

"The amount of reductions is draconian. But we have to face the reality that we might have to cover the shortfall."

Of the cuts, about $32 million came from colleges, schools and other tuition-supported units; $29 million came from central campus; and $8 million came from facilities and utilities. The campus is holding back $2 million to try to make some investments for growth, Feser said.

Tuition income grew by $16 million in fiscal 2016 even under a tuition freeze, because rates had risen steadily in previous years, and those students are still making their way through the system, he said. That has helped offset the state funding cuts.

But at some point, that growth will drop off if tuition rates remain stable — which President Tim Killeen is committed to in order to keep the university affordable, Feser said. By 2020, tuition income is projected to grow by $2 million to $3 million a year, he said.

Some of that money is used to fund central campus services or general raises, but that pool is beginning to shrink, he said.

Feser said the campus and Killeen are "working very hard" to scrape together money for general raises, which employees haven't had for several years. He noted that a 2 percent salary increase costs the campus an additional $12 million to $14 million — forever.

"We don't want to fund a salary program if we don't know how to pay for it," he said.

The campus also needs money to hire and retain faculty, support financial aid — which helped produce the largest and most diverse freshman class in the UI's history this year, he noted — address a maintenance backlog and fund initiatives like the Campus Design Center.

And there's general uncertainty about the state's long-term fiscal capacity to support the university, he said.

"We don't think it's very good," Feser said.

That's why officials want to reduce the campus' dependence on the state by half over an eight-to-10-year period, he said.

Even with full funding in fiscal 2015, the UI system received only about 12 percent of its funding from state general revenue, i.e. tax support — though that doesn't count more than $1 billion the state pays toward pensions and health care costs. The rest of the UI's money comes from tuition and fees, private gifts, grants and other income.

To plug the $190 million deficit, the campus is asking college deans to hold back $21.6 million in cash reserves "in case we need to call on it." It's taking another $28.4 million from centrally funded units. And it may "amortize" the remaining $90 million over the next 10 years, essentially paying it off with $9 million in cuts or new funding annually — though that complicates plans to come up with money for midyear raises, he said.

For the moment, the campus has no plans to touch the "indirect cost recovery" accounts held by faculty, money set aside for discretionary spending from their research grants, he said. That could affect productivity, which "hurts us in the long run," he said.

But academic units also have a balance of about $253 million in money earned from gifts to the UI's endowment. Some of that money is restricted for specific uses that might not be applicable at the moment — say, an endowed faculty position for a particular research area or a scholarship for a student from a specific high school. But colleges are also holding onto other unrestricted money because of a "rainy day" mentality, Feser said.

Other universities use endowment income to pay for general faculty positions, but that would mean the UI would have to cover the fringe benefits as well — pensions and health care costs that the state normally absorbs, he said.

"If we think about reducing our reliance on the state, we may have to change our approach to how we use endowment earnings, and use our money more effectively," he said.

Toward that end, and to improve efficiency, administrators are also talking with deans about possible reorganizations and opportunities to create new units or positions that will "capture new and emerging fields," such as the College of Medicine, he said.

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champaign61821 wrote on September 23, 2016 at 8:09 am

What a refreshingly honest analysis of the realities facing the U of I by Mr. Feser.  I'm sure the comment section will ruin it rather quickly by blaming either Madigan or Rauner, instead of objectively talking about what Mr. Feser presented.

Don Mega wrote on September 23, 2016 at 8:09 am

Unions... don't forget the Unions..

tellingthetruth wrote on September 23, 2016 at 10:09 am

As a 20+ year Civil Service employee who is not in a Union (which I do support Unions - they have their merits), it has been a bit disheartening to not have a salary increase in 4 years, while we see more and more six figure salaries being given out like candy.  Our health insurance has almost increased two fold, parking, etc., it's been well over a year without dental reimbursements, which now I'm sure I'll never see.

All this being said, I am fortunate to have a full-time job, with benefits for a great department on campus. Life could be a LOT worse for me, I understand that.

However, even the small cost of living increases boosted moral; you shouldn't have to upgrade your position to get an increase in salary; however, that is pretty much what you have to do if you want to get raises without collective bargaining. Because of the way this campus does business, the amount of "staff" work has more than doubled, yet they keep hiring administrative positions with pretty hefty salaries.  Why is there no salary freeze/hiring freeze for these administrative positions that are continuously being filled?

On the flip side of this, some would argue that I should have went to college or I should go to college to get the degree for the salary.  Shouldn't 20+ years of campus knowledge account for something, I guess not?  It's a catch 22 - however, large salaries ARE being given out, even if these salaries are not State funded, it's still a bit tough to swallow.

 

Don Mega wrote on September 23, 2016 at 2:09 pm

I believe AFSME is the largest union on campus and they lost their annual raise 3 years ago.. 

Reykjavik wrote on September 23, 2016 at 10:09 pm

It is reassuring to have Feser in the Provost's position.  These times are stressful for staff and faculty, regardless of their politics or union membership, but less so with a leader who lays out the situation so plainly.

UIUC got into the endowment and start-up aspect later than some peers, but these activities seem to be trending up.  

And C-U remains a great place to live.

fuddrules wrote on September 24, 2016 at 4:09 am

Wasteful U is going to have to cut some waste.   I'm not sure they know how but they'll never get what they consider "full" payment from the state.   That's a bygone era. 

davidpettigrew32@gmail.com wrote on September 24, 2016 at 10:09 pm

I really do not understand. They raised Killen's salary, they created a new position for Barbara Wilson because she needed a promotion and now we are crying about the budget. Just please give us all a break. U of I administrators should be returning some of those ridiculous amount of money that they are receiving this way they can help the U they say they love so much.