Transcript SIU President Glenn Poshard SIUE TOWN HALL PRESENTATION 4.24.13 How the Budget is Developed State Budget SIUE’s budget development process for the state budget is.

SIU President Glenn Poshard
SIUE TOWN HALL PRESENTATION
4.24.13
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How the Budget is Developed
State Budget
SIUE’s budget development process for the state budget
is very collaborative and involves a number of
constituencies, with primary involvement of the
University Planning & Budget Council (UPBC), which
makes budget recommendations to the Chancellor. UPBC
includes representatives from faculty, staff, and students.
The process for developing the state operating budget
begins nearly two years in advance of the final approved
budget. It is not final until the appropriation funding level
for SIU is approved by the legislature. In recent years, this
has occurred as early as May and as late as September.
http://www.siue.edu/budget/about.shtml
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How the Budget is Developed
Non-State Budget
The non-state budget development process is different for
each fund group. For example, SIUE’s fee units (e.g., Morris
University Center, Student Fitness Center, etc.) undergo a
thorough, internal fee review process which involves the
preparation of extensive, detailed financial forecasts by the fee
units and their committees and includes a financial review and
input by a large number of constituents. The VC for Student
Affairs and the Student Government Association engage in a
process to make fee increase recommendations. These
recommendations for the mandatory student fee units,
including requests for fee increases or new fees, must be
approved by the Board of Trustees.
http://www.siue.edu/budget/about.shtml
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State Operating Budget Historical Data
FY 2002
FY 2007
FY 2009
FY 2010
FY 2011
FY2012
FY2013
State Approp.
Income Fund
$72.9 M
$63.8 M
$69.2 M
$69.5 M
$64.2 M
$63.5 M
$59.7 M
$28.9 M
$53.8 M
$63.2 M
$70.6 M
$74.4 M
$82.5 M
$86.5
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State Operating Budget Historical Data
% of Total
FY02
FY13
State Approp.
Income Fund
71.6%
28.4%
40.8%
59.2%
For every tuition dollar
a student paid, the
state paid (estimated):
$2.52
$0.69
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FY14 Budget Challenges
1.Enrollment growth is no longer “assured”
2. Providing additional scholarship/financial aid funding
to enhance student enrollment
3.Operating & Maintenance expense for new buildings
not provided by state (Science Building, Art & Design,
Engineering, Lukas Annex) $1.1M in FY14 and total
recurring expense greater than $2.5M
4.Potential loss of $1.25M Pharmacy OSF funding
5.Potential of no tuition and fee rate increases in FY14
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SIUE Challenges – Today vs. Ten Years Ago
Declining Student Population
Higher Tuition & Fee Costs
Cash Flow Situation
State’s Negative Credit Rating/Pension Reform
Increased Level of Scrutiny by State & Federal Govt.
Competition for University Housing
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Pension Reform
Six Simple Steps: Reforming the Illinois State
Universities Retirement System
We proposed six steps to set the State University
Retirement System (SURS) on the path to fiscal
sustainability while ensuring retirement security for
participants and honoring the constitutional guarantee
against reducing already accrued benefits.
http://igpa.uillinois.edu/system/files/Six-Simple-Steps-for-Reforming-SURS.pdf
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The steps in our proposal fall in three broad
categories:
 Reduce the normal cost and liabilities of the
Tier 1 defined benefit plan
 Focus on how the pension system should be
funded
 Institute a “hybrid” system to replace the
Tier II program for current employees
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Reducing Costs and Liabilities
Step #1:
The retirement annuity of current and future
retirees will increase annually by one-half of the
unadjusted percentage increase (but not less than
zero) in the consumer price index-u in the
previous twelve months, compounded upon the
preceding year’s annuity.
Impact:
Reduces normal cost going forward and reduces
unfunded liabilities.
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Reducing Costs and Liabilities
Step #2:
Going forward, Effective Rate of Interest (ERI) for
all purposes, including the money purchase benefit
formula, portable lump sum refunds, purchase of
service credits and returns of excess contribution
will be set to a value equivalent to 75 basis points
above the interest paid by 30-year U.S. Treasury
Bonds.
Impact:
Reduces normal cost going forward and reduces
unfunded liabilities.
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Sharing the Funding Liability
Step #3:
Universities and colleges will contribute up to 6.2%
of the pension eligible payroll of their employees
to fund the annual normal cost. The cost shift will
be transitioned at a rate of 0.5% of pensionable
pay per year for the first eleven years and 0.7% the
twelfth year.
Impact:
Reduces normal cost payment obligations for the
state.
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Sharing the Funding Liability
Step #4:
All employees enrolled in the Tier 1 defined benefit
program will contribute an additional 2% of pay
towards pension cost at a rate of an additional 0.5%
of pay a year for the next four years. The additional
employee contribution will not be included in the
calculation of benefits under the Money Purchase
Plan.
Impact:
Reduces normal cost payment obligations for the
state.
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Sharing the Funding Liability
Step #5:
In return for the above cost-shifting, the state shall be required
to amortize the current unfunded liabilities of SURS in
accordance with a payment schedule that steadily improves the
funding ratio and is calculated based on a straight line
amortization of the current unfunded liabilities with a reasonable
closed amortization period. Furthermore, the state shall be
contractually obligated to contribute to the pension system each
year the full amount of all its payment obligations. If the state
fails to make full payment, the pension system or any of its
members may take legal action to compel the state to make that
payment
Impact:
Assures long term funding and amortization of unfunded
liabilities.
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Revised Retirement Plan for New Employees
Step #6:
Any new employee who becomes a member of SURS will
participate in a hybrid plan comprising a defined benefit (DB)
and an individual defined contribution (DC) plan. The current
retirement plans – Tier II plan and Self-Managed Plan – will no
longer be offered to new employees. Any employee who is
currently a member of SURS can elect to terminate
participation in their current plan and elect to have retirement
benefits of future creditable service provided under the new
retirement plan. The irrevocable choice must be made during
the six-month period following the effective date of the new
plan.
Impact:
Reduces state normal cost payments by shifting costs to
universities and colleges. Institutions gain flexibility to design
system to fit their own needs.
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SIU President Glenn Poshard
SIUE TOWN HALL PRESENTATION
4.24.13
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