Pressures on the university's budget will only increase in the coming year, Walter Knorr, the U. of I. vice president and chief financial officer, said at the March 7 U. of I. Board of Trustees meeting in Urbana.
Knorr said the sequester, designed to cut $85 billion from the federal budget, includes about a 5 percent cut for federal research-funding agencies and could expose the university to as much as $60 million in lost research funding in the next year.
So far the impact has been minimal, Knorr said, but that may change as specific funding reductions are announced. He described the cuts as "rolling."
President Bob Easter said it may be months before specific research projects that will be affected are announced.
"It will be some time before we know the full magnitude of the cuts," he said.
Some of the uncertainty stems from how each agency administers the cuts, Easter said. The National Institutes of Health, for example, has said it will cut current and future programs; the National Science Foundation has promised to continue current funding and only cut future projects.
Knorr said the university also will take a $2.3 million hit from a recent adjustment to the Medicare reimbursement rate. Trustee Timothy Koritz, the chair of the University Healthcare System Committee, said the UIC Hospital could see a $15 million loss in revenue because of changes in the Medicaid reimbursement rate.
Easter said the university's lobbying office in Washington, D.C., continues to advocate on behalf of federal university issues to legislators, and university officials continue to be involved in state-level discussions in Springfield. Koritz said the state had already filed a challenge to change the Medicaid rate.
Knorr said the state of Illinois continues to contribute to the university's financial insecurity.
The state recently was a record-setting $525 million behind in promised payments and the university annually carries over an average of about $300 million owed to its budget. The current backlog is $475 million.
Additionally, Gov. Pat Quinn recently proposed a nearly 5 percent cut to next year's state higher education budget, which could mean a loss of at least $32 million in the university's operating budget and a return to inflation-adjusted 1965 funding levels.
Knorr said university officials have been touting the U. of I.'s "diversity of revenues" in an effort to receive a better bond rating and escape the shadow of the state's financial reputation.
"Of eight cylinders," he said of the university's varied funding sources, "certainly seven are firing."
Board Chairman Christopher G. Kennedy noted that the $300 million owed annually by the state was close to the revenue goals outlined earlier in the meeting by new U. of I. Foundation President and CEO Thomas J. Farrell - providing the potential to blunt some of the systemic financial challenges.
Farrell told trustees his goal is to increase the foundation's fundraising efforts by doubling gift totals to $450 million and the endowment to $1.5 billion in the next 10 years. Those increases would bring both revenue streams closer in line with giving levels at peer institutions.
"We can help create results that can fuel the overall operations," Farrell said.
Kennedy said he was disappointed with Quinn's proposed cuts to higher education, and that the Monetary Award Program's scholarship funding is static.
"It's hard to look at the state budget," he said, "and conclude anything other than they think education is for the wealthy."