The state of Illinois’ $4 billion state budget deficit brought the UI a $58 million diminution in state support this fiscal year, which began July 1. But the university is not alone: Nearly all of its Big Ten peers, and indeed public universities around the nation, are struggling to fill multimillion-dollar gaps in their operating budgets and worrying what they will do if funding recedes further next fiscal year.
For example, the University of Minnesota is facing a historic $185 million cut (12 percent) from its tax appropriation for the 2004-05 biennium.
Pennsylvania State University has been hit with four budget cuts over the past two fiscal years: a permanent cut of $12 million at the beginning of the 2002-03 fiscal year and three mid-year rescissions that have trimmed away an aggregate of $50 million. Penn State is waiting for its state legislature to break its gridlock and approve the university’s 2003-04 appropriation, which is expected to be $306.5 million, 5 percent less than the prior year.
Since FY01, the University of Iowa has seen its general education fund drop from $252.7 to $225.7 million, a decline of nearly 11 percent.
The University of Wisconsin system is seeing its share of taxpayer support shrink, too. In 1973-74, the system’s first operating year, UW derived 49.9 percent of its budgeted revenue from the state. By this year, state appropriations declined to 27.3 percent after legislators slashed $250 million from UW’s $3.6 billion budget.
Since FY90, the state of Illinois has reallocated about $657 million in tax appropriations from state universities to other entities – a loss of $351.9 million (in 2004 dollars) to UI alone. While funding for higher education increased by 10.7 percent over that period, the majority of the additional funds were directed to student aid and to the State Universities Retirement System to compensate for inadequate funding during the 1980s.
State tax appropriations directed to UI accounted for nearly half of all the university’s revenue in 1980. Just four fiscal years ago, the percentage of UI’s budget derived from tax appropriations had shrunk to 25 percent. In FY04, that proportion is 21 percent.
While UI and other state universities have raised tuition and fees in an attempt to offset decreased state funding, inflation has nearly outpaced the revenue from those increases, said Chester Gardner, vice president for academic affairs. Gardner spoke at a Nov. 10 news conference at which he unveiled UI’s tuition proposals for FY04-05.
Throughout the ’90s and up to the current fiscal year, the Consumer Price Index averaged 2.7 percent per year. During that time, general undergraduate tuition went up by 6.5 percent, a disparity that has rankled critics who thought the tuition increases were unwarranted.
“Public universities have come under a lot of criticism because tuition has increased at roughly twice the rate of inflation,” Gardner said. “However, state appropriations have increased only 1.4 percent since FY90. State appropriations have not kept up with inflation; they’ve been well below inflation. So we’ve had to raise tuition at twice the inflation rate, and what we’ve been able to do in doing that is just keep pace with inflation.”
In addition to income lost through baseline budget reductions and rescissions, inflation has eroded another $40.2 million of UI’s spending power since FY90 through escalating costs for commodities such as utilities and employee/retiree insurance coverage.
The university’s spending has increased at roughly the rate of inflation, and while the increased emphasis on cost control is fair, the university’s spending has not spun out of control, Gardner said.
“Our costs reflect what we spent. Our state appropriations and our tuition are spent on our core missions of education and service. What has happened now is that the state has had other demands on its resources. Our appropriations have not kept pace with inflation, and so we’ve had to shift more of the financial responsibility to students and their families,” Gardner said.
However, by augmenting student aid through supplements to MAP grants, UI has safeguarded access despite escalating tuition, said Provost Richard Herman.
The trend of declining state support over the past two decades signifies a subtle shift in the social contract about higher education and who should bear its costs, said Stanley Ikenberry, regent professor and president emeritus.
“I think the fundamental nature of the public university, its relationship to the state and our links to the broader public will need to be re-examined, very likely within the next 10 years,” Ikenberry said.
In the state of Illinois, the new Truth in Tuition law, which goes into effect with the 2004-05 academic year, assures new undergraduates that their tuition at state universities will remain constant for four years – insulated from diminutions in state support or escalating costs that have fueled tuition and fee increases in the past.
While Illinois is enacting a new promise to its constituents through guaranteed tuition rates, administrators at the University of California-Berkeley are wondering if they can continue to uphold a guarantee made to their constituents more than four decades ago. California’s 1960 Master Plan for Higher Education promised all eligible students spots at the university. But some critics say UC-Berkeley violated the plan this year when it denied admission to some 1,500 community-college transfer students for the winter term because of surging enrollments and dwindling state funding.
During the past three fiscal years, UC-Berkeley has seen its state funding plummet 14 percent while its enrollment has swollen 18 percent. The state’s $4 billion deficit prompted a $424 million cut in state funding this fiscal year that forced UC to postpone the opening of its 10th campus at Merced for another year. Another potential $600 million cut looms on the horizon for 2004-05 and lawmakers have said they will not provide additional funding for the 5,000 new undergraduates that UC expects next year.
While state support has declined, sponsored research funding has grown dramatically at UI. The competitive grants and contracts portion of UI’s budget increased 103 percent since 1990. Grants and contracts make up one-fifth of the UI’s overall operating budget, which comprises $550 million in federally sponsored research projects.
The boom in sponsored research funding is all the more remarkable because the university’s faculty has declined by 300 FTE positions since FY90, Herman said. However, those unfilled positions, created mainly by attrition, also represent a potential loss of more than $60 million in research funding.
Before a recent speech at Penn State, Ikenberry said he did a “crude, back of the envelope calculation” that revealed that if states funded higher education at the same rate they had 20 years ago, there would be enough money to build 100 new Penn States.
