Chancellor Message 1/25/11

Message to Faculty and Staff
RE Update on the state's ongoing budget crisis

Dear UIC Faculty and Staff,

Since I became chancellor two years ago, no issue has been of greater concern to our community - and to me - than the state's budget crisis and its impact on UIC. In recent weeks alone, I have received numerous communications on this topic, and many other e-mails have been shared on campus listservs. No doubt you have seen some of these postings. Most come from members of our community who care deeply about UIC's mission and its future, express understandable concern about our ongoing fiscal crisis, and raise thoughtful comments and questions. I want to take this opportunity to share another of my periodic messages about the budget - to lay out the facts as clearly as I understand them and try to address at least some of the questions and concerns that have been raised.

The University of Illinois, including UIC, remains an institution that faces historic budget challenges and one which operates in an environment of great uncertainty that makes planning for the future very difficult. Simply put, we face two separate but related problems: an ongoing operating cash-flow problem due to chronic delays in general revenue payments from the State of Illinois, and the longer-term issue of disinvestment in the campus - budget cuts, flat budgets, cash rescissions and lack of capital funding, dating back to FY 2002. In the current Fiscal Year 2011, we sustained an effective cut of 6.3 percent, or nearly $47 million University-wide.

While the campus's overall budget is approximately $1.8 billion, 65 percent of these funds are "restricted" in that they must be used for a specific purpose; for example, state reimbursement of patient care costs to the Medical Center, or philanthropic donations to support a scholarship program or building project. So, like most public universities, we are heavily dependent upon our "unrestricted" funds, primarily state general revenue funds and tuition. As the provost and I have reported to you for the past several years, the State has been many months behind in payments to the University, thus depriving us of a reliable stream of critically needed revenue. At this writing, the State is in arrears in payments to the University of Illinois of $406 million in general funds and $31 million in Monetary Award Program (MAP) scholarship funds in FY 2011, for a total of $437 million. UIC's share of this is approximately $190 million, or more than 10 percent of our annual budget. This is an extraordinary situation, putting enormous pressure on us in terms of day-to-day operations and hobbling our ability to plan for and invest in our future.

Among other things, this situation forces the campus and individual units to maintain cash reserves. UIC's monthly payroll obligation totals $73.8 million. Our cash reserves are what will enable us, if the State's situation worsens, to keep paying salaries or to cope with emergencies, such as a critical infrastructure problem (the fire in the College of Pharmacy in 2008 would be an example). First and foremost, any university, including UIC, depends upon its faculty and staff, and we must be certain that we can pay salaries. The cash reserves also ensure that we can meet any demands from the State for rescissions - essentially, giving money back to the State that has already been appropriated - without affecting day-to-day operations and throwing us into even greater turmoil. These balances also could be used to buffer the campus and the units holding the balances from the immediate impact of anticipated budget reductions.

In the waning days of the last General Assembly session, Springfield passed an increase in the Illinois income tax. However, many analysts, including the University's Institute of Government and Public Affairs' Fiscal Futures Project, found that while the new tax policies will reduce projected budget gaps significantly, the budget shortfall won't be eliminated. Professor David Merriman, associate director of IGPA, gave a very detailed presentation about the state's financial problems (PDF file) at last week's Trustees meeting. And there will be a lag from the time the tax increase takes effect to the point where we will see relief on the university's bottom line. Even then, there is no guarantee that the recent practice of long delays in promised payments will be alleviated, especially since the legislature did not approve additional borrowing authority to catch up on its outstanding obligations. So while the tax increase will help the state's finances, by no means does it spell an end to the serious problems facing UIC and other public universities and institutions.

In the face of the crisis, Interim President Stanley Ikenberry last year instituted a program of unpaid furloughs. President Hogan has said on several occasions - as recently as last week - that he does NOT want to implement any more furloughs. He also has indicated he supports a salary increase for FY 2012. While nothing will be final until the Board of Trustees takes action on our FY 2012 budget, I applaud Mike Hogan's position and hope we will be able to provide our faculty and staff with a well-deserved salary increase.

Regarding the broader state financial picture, we continue to operate in an atmosphere of challenge and uncertainty. All units have been asked to prepare for scenarios for FY 2012 budget reductions of varying severity. We hope to know more when the Governor delivers his annual budget address to the General Assembly, usually in February. Once the campus's budget review meetings are completed in late April, we will make a final decision on what reductions need to be implemented. Meanwhile, both the campus and the university as a whole continue to seek operating cost reductions and efficiencies through the administrative review processes launched in 2010 by Interim President Ikenberry.

Some members of our community have raised questions about transparency and ongoing access to budget information. Virtually everything I've said here also has been discussed in open meetings of the University Board of Trustees and the campus Senate. The provost and I meet regularly with the Senate and Senate Executive Committee to discuss important issues, including those relating to the budget. At the university level, President Hogan has met with the Senates on all three campuses. In public sessions with agendas posted well in advance, the Board of Trustees hears presentations on university financial matters, including the operating budgets and budget requests to the state, and takes votes on our budgets and tuition levels. The university's budget summary of operations is available online.

I will report to you again as more is known about the budget situation. I want to close by expressing my sincere thanks to all of you, our faculty and staff, for your remarkable dedication to our students, patients and to excellence in fulfilling every aspect of our mission.

Sincerely,

Paula Allen-Meares
Vice President of the University of Illinois
Chancellor of the Chicago Campus
John Corbally Presidential Professor