The UI has weathered the initial waves of the global economic downturn and state financial turmoil, but the outlook is far from sunny.
Several university officials making presentations at the Sept. 14 UI Board of Trustees meeting in Urbana outlined many of the challenges that lie ahead for the university, but many of their comments were tempered with hope the UI could navigate the future through foresight and planning.
Walter Knorr, a university vice president, chief financial officer and comptroller, said while the state of Illinois continues to face staggering financial challenges, the university had taken action to rein in costs and bring in new income to make up for the shortfall in state support.
"The university was running on all pistons, except for our state situation," he said of last year, noting the state's current-year appropriation of $667 million represented a support rate below 1966 levels, when adjusted for inflation. The state used to fund about half of the university's daily operational costs; it now funds about 12.3 percent of day-to-day costs.
He said the state also continues to hold $325 million in unpaid vouchers owed the university and has an overall backlog of $8 billion in unpaid bills.
Trustees passed at the meeting a $5.4 billion budget for the 2013 fiscal year, representing a 3.7 percent increase in day-to-day operating costs and a 7.6 increase overall when mandated pension contributions are added. The board also approved the university's request for state operating funds for fiscal year 2014, which represents a 4.9 percent increase.
Knorr said the "main drivers" of recent university revenue growth have come from tuition ($73 million), the UIC hospital and medical services plan ($62.3 million) and sponsored research ($46.6 million). He said sponsored research had risen 6.5 percent over the last decade.
He said the university will have to continue to monitor itself to ensure it is operating efficiently, as well as continue to reach for new forms of non-state revenue.
He said approaches adopted in the Administrative Review and Restructuring initiative over the last two years would have to be melded into the normal planning processes at the unit level for new efficiencies to be identified. ARR is credited with providing the university $50 million in recurring savings because of changes in procurement practices, the creation of shared service centers and the implementation of a unified communications systems.
"It's a philosophy of doing more with less," he said, which represents a "transformational change" and a "new way of thinking."
By keeping spending in check and investing in foundational projects, the university has become stronger, he said.
"We've been mindful of investing our resources in core areas," he said.
David Merriman, professor and the associate director of the Institute of Government and Public Affairs, painted a dark picture of the state's financial difficulties for trustees - but said even these challenges are not insurmountable if state leaders could find a way to work through the problems together.
"It's less about the fiscal situation in this state and more about a lack of a plan," he said, noting the long-term problems of state-employee pensions and Medicaid costs continuing to be left unresolved by legislators.
For example, the Illinois Flash Index, which tracks state economic expansion and contraction, continues to improve.
"It's been expanding since early this year," he said. "We're in a recovery, but it's a very slow recovery."
Merriman said the state did not fare well as the subject of a recent federal "state budget crisis" task force, which compared the economic indicators of Illinois to those of five other states.
"The budget process in Illinois is broken," he said. "It's broken in several states."
The state's highest ranking was in the strength of its local governments.
Trustee Timothy Koritz said in the university healthcare system report that some of the problems could become further exacerbated if a provision in the Affordable Care Act doubles the size of Medicaid rolls and further diverts state funds.
And those problems could directly affect the Chicago campus's hospital as well, which recently reported a slim net profit of $14 million, its highest in 15 years.
Medicaid patients "represent the largest payer mix at our hospital," he said.
Chancellor Phyllis M. Wise spoke less of financials and more of academics, again featuring positives during an era of challenge.
She said virtually unchanged national rankings, a highly ranked freshman class and a devoted faculty are all signs the state of the Urbana campus continues to be good.
"It is truly the workhouse and the racehorse of Illinois," she said. "I really believe this is a year of opportunity. The distractions we had last year are over."
Wise said the results of her Visioning Future Excellence initiative will soon be made available after she spent the last year visiting with campus stakeholders concerning the development of a "sustainable academic business plan" to chart the university's future.
But even without those results Wise said there are several issues facing higher education that are easily identified. Among them: decreasing student financial aid, global competition, more competitive federal grants and contracts, increased market share competition and the continuing global recession.
She said student aid "is not where we'd like it to be. We'd like to give financial aid to a greater number of students. We'd like to meet all of their unmet need."
She told trustees the Urbana campus had already become more "agile and nimble" in its decision-making processes, increased productivity, streamlined operations, and was working to offer more tools for faculty members, enhance research opportunities and increase diversity among students and staff members.
"We must get ready to deal with the quickening pace of the world," she said. "We've got to do it more efficiently ... we have to look at other areas like public-private partnerships like we've never done before. We realize we have our work cut out for us."
- Trustee Pamela Strobel announced the government, personnel and ethics committee would soon begin reviewing all of the university's governing rules.
"Our goal would be to update and streamline these," she said.
Strobel said the review will be conducted with the involvement of faculty members, the University Senates Conference and the president's office.
"We want to make sure we're including the right groups through the university," she said.
She set a preliminary goal of May 2013 for finalizing the review.
- Trustee Karen Hasara, the academic and student affairs committee chair, reported the committee was working on strategies to rebuild the faculty ranks following a spate of recent retirements.
She said administrators have been directed to be more strategic in their hiring in an effort to rebuild areas of faculty strength and increase faculty diversity.
She said the issue is important in light of rising enrollment, which she said creates class-size pressures for the faculty.
"It's obvious our current trajectory is neither sustainable nor wise for the future," she said. "We need to be more strategic, I believe."
- USC Chair Nicholas Burbules read a statement to trustees noting the improved lines of communication over the past year.
"Shared government processes have come through stronger than ever before," he said. "That's the framework we've been able to start with this year."
He said the relationship of "mutual trust, respect and transparency" was further forged with a summer retreat in which trustees, administrators and faculty participated. He called the retreat "a milestone in the evolution of shared governance.
"I believe we've come a long way in establishing these relationships at the university," he said.
Matt Wheeler, the Urbana campus Senate Executive Committee chair, said the repaired relationship had improved campus employee morale.
He thanked trustees for "keeping the lines of communication open."
UI Board of Trustees approve fiscal year 2013 budget
Operating budget of $5.4 billion includes $813 million in sponsored research
At its Sept. 14 meeting in Urbana, the UI Board of Trustees approved a $5.4 billion budget for fiscal year 2013 that reflects a 3.7 percent increase in day-to-day operating costs for its three campuses.
Overall, the budget for the fiscal year that began July 1 is up $383.3 million, or 7.6 percent, from fiscal 2012. But that total includes an estimated $227.6 million increase in state-controlled payments for employee health care and pension benefits, which rose more than 28 percent for fiscal 2013. A large portion of that increase stems from past underfunding of pensions by the state and is required by statute.
Excluding those payments, the operating budget rose $155.6 million, or 3.7 percent, to cover day-to-day operating costs for the UI campuses in Urbana, Chicago and Springfield. Combined, the campuses have nearly 23,000 employees and award more than 19,000 UI degrees annually.
Budget revenues include a $667 million direct state appropriation for operating costs, down $42.5 million - or 6 percent - from fiscal 2012. State funding, which once accounted for nearly half of the operating budget, has been on a steady decline and now covers just 12.3 percent of the university's day-to-day costs.
University President Bob Easter said the reduction was "anticipated and planned for" as the state continues to wrestle with a lingering budget shortfall.
"The university's financial footing remains strong, despite the challenges of a long and lingering economic downturn," Easter said. "Through prudent financial planning and operating efficiencies, we are continuing to advance the academic and research programs that have made the University of Illinois a world leader in education and innovation."
State funding and tuition revenue compose the bulk of the budget's unrestricted funds used for the university's educational mission including salaries and academic support costs. Unrestricted funds increased $40.1 million for fiscal 2013, up 2 percent from the year before.
Revenue from restricted funds rose by $115.5 million, or 5.1 percent. Restricted funds include research grants, hospital and medical-service plan revenues, gifts and auxiliary operations such as campus housing and food services. Those funds must be spent for the specified purpose or in accordance with donor restrictions.
The budget reflects about $50 million in cost reallocation from a universitywide initiative begun in 2009 that has streamlined administrative costs. Avijit Ghosh, special adviser to the president, told trustees that he expects savings will grow to $60 million annually by 2014.
The budget includes a second consecutive year of pay increases for UI faculty and staff members, who received no raises in fiscal years 2010 and 2011 and an average 1.5 percent increase in fiscal 2009. The merit-based raises will average 2.5 percent, down from 3 percent last year.
Easter said the raises are "small but critical" to attract and retain top faculty members, who are vital to the university's teaching and research missions and in high demand by colleges across the nation and beyond.
Other budget highlights include an increase of $46.6 million, or 6.2 percent, in sponsored projects - primarily research funding - and $62.3 million for hospital operations and medical services, up 9 percent from a year ago. Total sponsored research for 2013 will be $813 million, up 6.5 percent from $765 million in fiscal 2002.
The UI will receive more federal research funding than any university in Illinois in fiscal 2013, and its federal funding is more than all of the other public universities in Illinois combined.
The board also approved the university's request for state operating funds for fiscal 2014, which begins July 1, 2013. The proposal seeks $749 million, up $81.5 million (4.9 percent) from fiscal 2013.
The request is the first step in the annual budget process, and will be submitted to the Illinois Board of Higher Education and the state of Illinois for consideration.
UIC science building
The board approved a new $104 million Advanced Chemical Technology Building at UIC, which will support leading edge, interdisciplinary research involving faculty members from biology, chemistry and physics.
The state-of-the-art facility will foster research activity, including drug discovery, neuroscience and nanoscience, generate new innovative commercial technology that will advance society, and create jobs and economic growth in biopharmaceuticals and other areas.
UIS master plan
The board approved an update to the master plan for the Springfield campus that provides new locations for a planned Public Safety Building and Student Union based on recent studies. The state has appropriated $4 million for the Public Safety Building, with groundbreaking expected in 2013 and opening in 2014. Students have approved a new fee to help fund a Student Union, but private fundraising and other steps must be completed before the project goes to the board for approval. The facility is projected to open in the fall of 2015.
The master plan, which guides long-term growth and development of the 5,000-student campus, was originally approved in 2000, and was last updated in 2008.