Transcript Slide 1

Short and Intermediate Term
Financial Planning
December, 2009
The Perfect Storm
 A worldwide financial crisis and an already
weak state
 Significant long-term financial challenges for
the state
 An overextended institution with limited cash
 Facility and other costs that can not be
deferred
How do we best move forward in a way that
protects our institution?
Budget Context
Scope of State Budget Problem
 Without a tax increase, the State’s structural
budget deficit is $4 billion or more.
 Tax revenue continues to decline
 State has mandates (debt service, Medicaid) &
costs that grow in economic downturns
(unemployment, health care, social services)
 State has backlog of unpaid bills lead some to
characterize State budget problem as an $11
billion shortfall
Source: Commission on Government Forecasting and Accountability
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Budget Context
Status of FY10 State Budget
 Short-term solutions will get us through at
least part of year. Super-majority required to
approve revenue increases now.
 Stimulus funds ($45.5m) used in University
appropriation.
 Risks to campus: indirect appropriations
($30m+), growth since FY08 ($11m) &
benefits($$$$)
 The State is 150+ days behind on payments
– a great risk to our institution
FY 2010 Budget Outcomes
 On the surface things look good:
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No GRF Reductions
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Cost Increases – 1.7% reallocation
 However, significant mid-year risks:
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State revenues continue to decline
Shortfall may require action at any time
Possible passing of benefit and other costs on
to campus.
State of Illinois
Longer-term Financial Issues
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
FY02-09 excludes health insurance re-direction to CMS.
1.4 to 1
1.3 to 1
1.2 to 1
1.1 to 1
State Tax Appropriation
Changes by Agency
In Constant 2008 Dollars (CPI)
Elementary/Secondary
18.6%
12.0%
Human Services
3.7%
State Average
Higher Education
-24.1%
-32.0%
All Other
FY02 - FY09 exclude $45 million from higher education for Health Insurance payment to CMS.
State of Illinois Debt
(Dollars in Billions)
(Dollars in Billions)
$71.3
Pension Debt
$27.5
Bonded Debt
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Real Gross Domestic Product by State
1997 – 2008
(Millions of Chained 2000 Dollars)
*Average of top five performing states.
Source: U.S. Bureau of Economic Analysis.
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 gone in FY11; state
must have new revenue to cover
Stimulus Grants
 Research funds provide 2 year opportunity
 Federal deficit may not allow indefinite
funding
Summary of State Financial Issues
 Uncertainty regarding taxes
 ISAC funding cut by > 50% Restored but not
funded
 State is 180+ days behind on payments to the
University
 Stimulus funding runs out this year
 Rumors of benefit charges to university
 Pension system dramatically underfunded
Total risk to campus is many tens of millions
of dollars!
Campus Financial Challenges
Planning Constraints
 Revenue
 State Funds—declining industrial base;

significant unfunded retirement costs
Tuition—One of the highest cost publics; cost
growing beyond capacity to pay
 Expense
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Personnel—80% of total costs
Utilities—significant cost growth in recent
years. Facilities still require investment
Financial Aid—major investment required
Planning Constraints (cont.)
 Buildings/ Maintenance
 State stopped supporting facilities in 2002
 Campus stepped up to cover desperately
needed remodeling and facilities
 Deferred maintenance of $550 million!
 Below average $ per square foot to
maintenance—and it shows!
Planning Issues (strengths)
 High quality faculty, students & staff
 Improving financial control & health
 Fee support for facilities & Library/IT
 Stabilized utility costs—both price &
conservation
 Good state capital budget
 Aggressive pursuit of stimulus grants
How Do We Respond?
First Steps: Unit Financial Control
 Eliminate Deficits—we need to
move quickly. Most recurring
deficits resolved this year.
 Raise Cash—delay hires and
purchases. 4.5% of college
budgets set aside in special
accounts
Some Actions Taken Centrally
 Hiring plans required again this year; hires
must be limited
 Initiatives stretched over a multi-year period;
a review of funding for all recent initiatives
 Increased vigilance regarding unit finances
 Administrative reduction program goes
forward: > $1.2m this year
 Establishment of advisory groups
These steps will not be enough . . .
. . . We need to move beyond belttightening and take a deep look at
our institution
How do we move forward in an era of
declining resources?
College Planning
Initial work done in FY09. Some characteristics
of the next step:
 Focus on protecting quality and reducing
costs
 Plans needed quickly—initial unit plans by
mid-December
 Bottom up effort with significant faculty & staff
involvement
 Everything must be on the table
College Planning (cont.)
 Plan for three levels of reduction: 7%, 10%
and 15%
 Plans must include short-term actions (to raise
cash) & long-term actions (to reduce costs)
 Plans should consider possible revenue
growth and efficiencies
 Plans should not be limited by organization.
Look for opportunities across departments and
colleges
Steering Committee
 Deba Dutta—Graduate College
 Bob Hauser—ACES
 Tanya Gallagher—AHS
 Linda Smith—GSLIS
 Ruth Watkins—LAS
Faculty Advisory Group
 Elabbas Benmamoun—Linguistics
 Ralph Brubaker—Law
 Deba Dutta—Grad College & Engineering
 Rayvon Fouché—History
 Scott Irwin—ACE
 Tony Liss—Physics
 Jim Lisy—Chemistry
 Edward McAuley—Kinesiology
 Curtis Perry—English
 Kim Shinew—Recreation
 Linda Smith—GSLIS
 Ginger Winckler—VM
Discussion