Two things haven’t changed since Interim Vice Chancellor for Academic Affairs and Provost Edward Feser concluded a month of campus budget presentations: The state still doesn’t have a budget, and the university still doesn’t have its annual appropriation.
Feser’s presentations were an in-depth look at the state of campus finances, providing campus constituents an uncomfortable dose of reality as well as a path forward.
“We need to think as a community,” Feser said. “We need to be guided by our mission and values.”
He said those include research excellence, a focus on students and learning, the value of both disciplinary breadth and depth, diversity, and the need to increase student accessibility and affordability.
Feser said while there are certainly serious concerns with the lack of an appropriation at this point in the fiscal year, the university must be proactive in addressing the longer-term issue, which is the very real possibility that the state's support will fall significantly over a period of time.
“We hope that it doesn’t, we argue that it shouldn’t, but we have a fiscal responsibility to plan that it will," he said.
Feser said the state has been a national leader in its support of public higher education, something Illinois’ elected officials should be celebrating rather than viewing as a reason to make cuts.
"We’re one of the best-funded universities in the Big Ten," he said, “which has allowed us to create a truly great public institution of higher education and be a driver of technological change and economic growth in the state.”
Yet, while the level of state support has remained relatively stable over the past 10 years, the amount set aside for employee health and pension payments has "crowded out" money once earmarked for university operations.
Feser said it would be unwise to think the state's support would increase anytime soon, considering the financial pressures the state faces and the political impasse in Springfield. Instead, support is likely to fall.
He said the state's current level of support is about 12 percent of operations. With tuition adding about 33 percent, “We’re increasingly becoming a tuition-funded institution.”
Of the Urbana campus’s total budget, 62 percent goes to academic units and 19 percent goes to central administration and services. He said moves already have been instituted to reduce central administrative costs and more are in the works.
He said the campus has reserves of about $1.1 billion, but nearly all of them have been set aside purposely to fund necessary building projects, address deferred maintenance, finance faculty startup packages, and support academic and research programs. Only a small percentage is held centrally, and some central and college reserves have already been used to replace the unsent state appropriation. A portion falls into the category of endowment earnings and gifts dedicated for specific uses.
Feser said the university must do everything it can to further maximize the use of resources, reduce administrative costs and develop new programs that are both intellectually important and improve the university’s financial position.
"We have to reduce costs even more aggressively, we have to do things differently than we've done before," he said.
He said a big part of the solution is to change the campus budgeting approach, making it more transparent and realigning incentives so that strategic decisions can be made at appropriate levels. As it stands, budgeting, accounting and reporting systems differ widely from college to college, and faculty and unit leaders have a difficult time understanding how funds are generated or allocated.
Feser said the longstanding campus budgeting approach has been to make incremental changes to a historical budget that was set when the primary source of flexible funds was from a general revenue fund appropriation from the state. That historical and incremental budgeting approach emerged because funding was stable or increasing, and such an approach functions reasonably well under those circumstances.
However, that situation no longer exists, Feser said. The current approach doesn't provide enough information for administrators at various levels, guided by the shared-governance system, to make the kinds of strategic programmatic decisions that will help the university adjust to the new financial reality. It also ignores the fact that sources of revenues have diversified over time.
"What does it truly cost to educate a student in program 'X'?" he said. "We don't know enough about that. In some cases, we're making decisions without full information. A new approach would allow better decisions to be made, with better knowledge of the overall academic and financial impact of those decisions."
The new budgeting approach also would provide more detailed information to every decision-maker in the process, as well as inform programs in which enrollment is lagging that changes need to be made to increase student interest.
For 2017, academic leaders have been asked to produce planning scenarios that include a range of possible budget cuts. Feser said there would be incentives offered for organizational innovation.
Part of the plan moving forward includes the hiring of a vice provost for planning and budgeting, a position that has been vacant for more than a year. That hiring was completed last week with the announcement of the appointment of Paul Ellinger, the head of the department of agricultural and consumer economics and an expert in finance. Feser said having Ellinger on board is necessary to move budget reform forward, as the campus budget office has been understaffed and changing direction is complex and needs to be done systematically so that all campus stakeholders are engaged.
Feser believes the campus has what it takes to address the current and long-term financial challenges. “We have to work together, but we can do this,” Feser said, citing other top universities that have adjusted to similar reductions in support from their states.