Senate Budget Update Linda P'B' Katehi University of Illinois at UrbanaChampaign

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Senate Budget Update Linda P.B.
KatehiUniversity of Illinois at
Urbana-Champaign
February 23, 2009
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Agenda

• Overview
• We are not Alone
• State of Illinois Finances
• State of the Campus
• Meeting this Challenge
• Planning for the Worse
• Capturing the Opportunity
• The Stimulus Package
• Looking Forward
• Q A

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We are not Alone.
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National Slow-Down At Least 44 States Face
Budget Shortfalls
WA
VT
ME
ND
MT
MN
OR
NH
WI
ID
CT
NY
SD
MI
RI
WY
MA
PA
IA
NB
OH
NV
DE
IL
IN
UT
WV
CA
CO
MD
VA
MO
KS
KY
NC
TN
OK
AZ
SC
NM
AR
GA
AL
MS
TX
LA
FL
AK
HI
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Economic Outlook

• There have been 10 recessions since WW II with an
  average length of ten months
• The longest two 1973 1981 lasted 16 months.
  The shortest 1957 lasted six months
• Most economists believe that the current
  recession will be one of the longest since WW II
  at least 18 to 24 months

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Budget ContextScope of State Budget Problem

• Without revenue measures, the states structural
  budget deficit is 2.1 to 2.4 billion
• Unprecedented instability in the economy may
  cause additional declines in state revenue
• Some expenditures may increase over
  appropriations state mandates (debt service,
  public safety, Medicaid) and demands on Human
  Services grow in economic downturns
  (unemployment, health care, social services)
• State has backlog of unpaid bills lead some to
  characterize state budget problem as 4-5 billion

Source Commission on Government Forecasting and
Accountability
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• Anticipated Impact on Our Campus

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What this Means for Illinois

• Current recurring state revenue shortfall is 7-8
  of General Revenue and growing
• Since some expenditures are mandated by law or
  necessitated by public safety, other areas may
  face larger reductions
• Our minimum reduction is 2.5 called for by IBHE.
  
• Given the magnitude of state shortfall, a more
  realistic planning assumption is a 10 GRF
  reduction

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Illinois Tuition Increases Have Not
OvercomeLoss of State Direct Tax Support,
FY89-FY09(Changes in Average Expenditures Per
Student)
2,900 per student
Tuition
State Support
FY 2009 Difference -2,900 per student or 119
million in total!
In 2008 dollars
Excludes benefit payments by State
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Planning Constraints

• Revenue
• State Funds - declining industrial base
  significant unfunded retirement costs
• Tuition - Significant growth in recent years
  increases will be required to help offset
  declines in state support
• Expense - Growing faster than revenue
• Personnel - 80 of total costs significant
  growth losing ground on faculty salaries
• Utilities - significant cost growth in recent
  years. Facilities still require investment
• Financial Aid - major investment required

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FY09 Budget1.6 Billion Funds Are Not
Interchangeable!
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• Meeting the Challenge

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A Values-Guided Process

• Protect quality of core programs
• Serve well students and others who depend on us
• Minimize adverse effects on our people

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Unit Budget Reductions

• Some one-time actions will protect units this
  year
• All units will contribute at least 1.5
• GRF funded units will pay more, particularly
  those without student connection
• If cash rescission becomes permanent, deeper
  reductions will be required for FY10
• Deficits can not be incurred

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Short-term Actions

• Only critical hires are allowed at this time (all
  colleges have been advised to limit hires)
• State funded travel is limited to that required
  for development and scholarship
• Purchases and new services will be deferred
  unless critical
• Make necessary investments to allow institution
  to compete for funding

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Meeting a 10 Rescission

• Capture natural gas savings2.5M
• Assess GRF funded units full share of
  reduction3.3M
• Capture unit set-aside5.0M
• Assess Academic Unit GRF1.6M
• Assess Non-tuition Units3.3

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Meeting a 10 Rescission (cont.)

• Delay some commitments and facilities
  projects2.5M
• Sweep selected admin. balances.8M
• Additional targeted reductions1M
• Borrow large balances2.5M

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Considerations for Next Year

• Cash rescissions often become permanent
• Personnel rules do not allow rapid response to
  changing economic environment
• Campus cash balances are low, providing less
  flexibility
• While long term actions can create efficiencies,
  short term actions are required to raise cash
• Deficits are not an option! Colleges need to
  limit expenditures wherever possible

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If FY09 Cash Rescission Becomes Permanent
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Long-Term Actions for Effectiveness and Efficiency

• IT_at_Illinois - a project to redesign how we
  support IT on campus
• Service Centers - finding ways to minimize what
  is spent on support services
• Process Improvement - using business methodology
  to improve quality and reduce cost of delivery of
  support services
• Energy Conservation - we are moving aggressively
  to reduce our costs

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Capturing the Opportunity.
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Stimulus Package

• The American Recovery and Reinvestment Act
  789.5B
• Significant funding for research agencies
  demonstrating that the Congress recognizes
  science and innovation as playing a role in the
  near-term and long-term economic health of the
  nation
• All the funds of the bill are available to expend
  between now and September 2010

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Distribution of Funds by Agency

• NIH 10.4 B
• NSF 3 B
• D of Energy
• Office of Science 1.6B
• ARPA-E 400M
• Energy Programs 30B
• Energy Efficiency and Renewables 2.5B
• Smart Grid 4.5B
• Others 10B

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Distribution of Funds by Agency

• D of Education
• State Fiscal Stabilization Plan 53.6 B
• Student Aid 15.6B
• Teacher Quality Enhancement 100M
• Institute of Education Science 250M
• NASA 1 B
• NOAA 830M
• NIST 580M
• Geological Surveys 140M

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Distribution of Funds by Agency

• Department of Labor 2.95B
• EPA 7.22B
• Other 10B

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While times like these are unique in the their
volatility and uncertainty. we should not be
immobilized by fear but be energized by the
opportunity to participate in an unprecedented
reshaping of our future.