Transcript Illinois’ Plan for Protecting our Excellence

Planning in a Period of
Uncertainty
April, 2010
The Perfect Storm
• A worldwide financial crisis and an already weak
state
• Significant long-term financial challenges for the
state
How do we best move forward in a
way that protect our institutions?
State Financial Issues
• The state’s General Revenue Fund budget for
operations is approximately $26 billion.
• Started FY 2010 with $2.8 billion in unpaid vouchers.
There is no revenue source to pay these past due bills.
• One-time funds ($5.7 billion from borrowings, $2
billion stimulus funds, $300 million fund sweeps)
used to help cover this year’s costs.
• Even with one-time funds, the state slips further
behind with its payments.
The state will start FY11 with a minimum
shortfall of $9 to $13 billion—or 35% to
50% of the state’s operating
appropriation!
Budget Context
Status of FY10 State Budget
• Short-term solutions will get us through
at least part of year.
• Stimulus funds ($45.5m) used in
University appropriation.
• The State is ~$400 million behind in
payments – a great risk to our
institution
Stimulus Funding:
Short-term help; Long-term risk
Operating
• $45.5m shortfall in FY10 University budget
funded with stimulus funding
• State can’t cut FY10 operating below FY08
• These stimulus funds are gone in FY11
Stimulus Grants
• Research funds provide 2 year opportunity
• Federal deficit may not allow indefinite
funding
State Support Per Tuition Dollar
FY 1970 to FY 2009
12.8 to 1
8.6 to 1
4.5 to 1
2.9 to 1
1.5 to 1
1.4 to 1
1.3 to 1
1.2 to 1
1.1 to 1
FY02-09 excludes health insurance re-direction to CMS.
We have become increasingly self-reliant for direct operating
costs.
UIUC
FY00 - FY10
General Revenue Funds and Payments on Behalf
600
500
Amount in Millions
400
300
200
100
0
FY00
FY01
FY02
FY03
GRF
FY04
FY05
Payments on Behalf
FY06
GRF + POB
FY07
FY08
FY09
FY10
State of Illinois Debt
(Dollars in Billions)
$120
$100
$80
The state is faced with a
significant amount of
pension and bond debt
compared with the size of its
budget
$71.3
Pension Debt
$60
$40
$20
Bonded Debt
$0
GRF
Debt
Page 8
Real Gross Domestic Product by State
1997 – 2008
(Millions of Chained 2000 Dollars)
The decline of manufacturing has
held back growth in Illinois
compared to the nation
*Average of top five performing states.
Source: U.S. Bureau of Economic Analysis.
How Bad Will It Get?
 Probably see continued erosion of state’s
competitive position (dropped from 4th to 15th
in terms of per capita income in the last 15
years)
 Forecasts suggest loss of 150-170,000 more
jobs over next 12 months
Summary of State Financial
Issues
• Uncertainty regarding needed tax increase
• State is almost $400 million behind on
payments to the University
• Stimulus funding runs out this year
• Pension system dramatically underfunded
• Structural changes to Illinois Economy
Total risk to Higher Ed is many
tens of millions of dollars!
How Do We Respond?
Planning Considerations
• Revenue
– State Funds—declining industrial base;
significant unfunded retirement costs
– Tuition—One of the highest cost publics;
cost growing beyond capacity to pay
• Expense
– Personnel—80% of total costs
– Utilities—significant cost growth in recent
years.
– Facilities require investment
– Financial Aid—major investment required
Covering the Anticipated Shortfall
• Cut the cost of our operations: purchasing, IT,
space. . .
• Reduce our footprint in a selective way:
eliminate, downsize or reorganize some
activities
• Highly differentiated unit budget reductions
based on a number of factors, such as:
– Duplicative activity
– Strategic need
– Source of funds
• Funds already set aside
What We Have Done So Far
Cost Reduction
• Administrative Costs
– Already low costs; 4.75% of total costs
compared with 6.25% avg. for peers
– Aggressive cost reduction: First stage of
administrative reductions—$1.3m in savings
• Utilities
– Accelerated energy conservation efforts—
millions in annual savings (9.5% in last 12 mo.)
– Millions being spent on rapid payback
projects
Staff Reduction
• Voluntary Separation and Retirement
Programs
– How people leave matters
– A program to reduce staff levels in a way that
protects our community
– Protecting diversity of recent hires
Large Cost Reduction Efforts
• System-wide Administrative Review
Committee
– Exploring next steps for strategic procurement, IT
efficiencies & service centers
– Review administrative structure for possible
streamlining
• Campus: Stewarding Excellence @ Illinois
– Three interlinked processes:
• Institutional transformation
• Cost reduction
• Revenue generation
Stewarding Excellence @ Illinois
• Administrative reviews
– VC Public Engagement
– Graduate College
– VC Research
– IT@Illinois
• Refocusing Scholarships
• State funded units
– Extension
– Police Training Institute
Stewarding Excellence @ Illinois
• Some examination academic
organization
– Small colleges
– Teaching support
– Library
– Aviation
• Most efforts to insure effective use of
academic resources are in colleges
Stewarding EXCELLENCE @ Illinois
http://oc.illinois.edu/budget/