MEMORANDUM
TO: LAS Executive Officers
FR: Dwight A. McBride, Dean
RE: FY11 Budget Overview
July 27, 2010

At the end of May, the Illinois legislature submitted a budget for FY11 to the governor that was unbalanced.  Consequently, the legislature provided the governor broad authority to make reductions in order to balance the budget.  The governor’s amended budget for FY11 imposes a $100 million reduction in support for higher education.  This translates to a 6.2% reduction for the University of Illinois representing $46.4 million system-wide and $22.3 million for UIC.  This essentially reduces state support to the FY06 funding level in accordance with conditions for accepting federal stimulus funds.  Without the shield of this requirement the cut could have been much deeper.  Reductions to higher education and other state agencies while totaling some $1.4 billion do not even begin to address the full structural imbalance in the State of Illinois’s budget, which some observers believe to be in the range of $13 billion.  The prevailing view is that further action on the budget will not take place until after the state elections in early November.

The budget planning guidelines issued by the campus require a 5.6% reduction to the campus’s state budget, which includes the appropriation from the general revenue fund (GRF) as well as tuition revenue.  For LAS this totals $3.9 million.  This is what is required to cover the $22.3 million GRF cut. The 5.6% can be broken down further: 4.85% to cover the $22.3 million GRF cut and .75% or $2.9 million for campus reallocation. 

The Board of Trustees approved a 9.5% increase to base undergraduate and graduate tuition rates.  In addition, the LAS tuition differential for undergraduate majors in the natural sciences and psychology increased from $700 to $875 per semester.  LAS’ share of the increase totals $7.2 million ($6.2 million base and $1.0 differential).   As is required, the tuition differential increase will be made available exclusively to the units that generate this revenue—mainly for teaching laboratory renovations and equipment.  The increment from tuition revenue is unusually large this year due to this year’s price increase, price increases from prior years (due to the 4-year guaranteed tuition program), and modest enrollment increases.

Despite what, on its face, looks like a good outcome for LAS ($7.2 million tuition increase less $3.9 million reduction = $3.3 million net budget increase) uncertainty remains the order of the day.  It is hard to envision future tuition increases approaching 10% per year.  Additionally, the State’s precarious financial position continues to be of great concern.  Absent a large tax increase it is difficult to see how the State will be able to balance its budget.  Furthermore, severe cuts could ensue when the stimulus requirement to maintain our FY06 level of funding disappears in FY12.  The State’s cash flow problems continue to affect us.  As of June 30, the State owed the University about $280 million representing an amount 100 times larger than what the amount usually is by the close of the fiscal year.  This increases the probability of a cash rescission in FY11.

Given these uncertainties the Provost has directed us to prepare for further reductions.  In this year’s budget cycle the Colleges were asked to prepare plans for three scenarios the worst of which called for a 10.3% reduction of our total allocable state base (GRF plus tuition revenue) or $7.2 million to LAS.  We must therefore be prepared for further reductions of $3.3 million ($7.2 million planned less $3.9 million implemented).  We are also to plan for this decrease to become permanent in FY12.  This essentially wipes out the FY11 $3.3 million net budget increase.

To reserve against a possible rescission in FY10 (and it is still not too late for the State to announce one) the campus collected $17.5 million from units ($3.5 from LAS) and another $4 million from furloughs.  These funds are essentially being held in escrow by the campus and we are assured that they will be returned to us if they are not needed.  However, if an announced rescission exceeds these amounts we could be forced to transfer even more funds.

Barring any unforeseen catastrophe, the college plans to fund the FY11 budget cut and any cash rescission centrally without going to the departments directly.  There will be no further reduction in units’ WEE budgets or programming funds.  Commitments to individual faculty will be honored in full.  As you all are painfully aware the college has done precious little hiring over the last two years.  In fact, our faculty FTE has continued to go downward as those who separate from the University are not replaced.  We have also reduced administrative staff college-wide and streamlined instructional budgets.  These actions have created a small buffer that we have been able to use to fund budget cuts and cash rescissions centrally.  We have also been able to react to outside raids on our faculty as well as reward those who achieve promotion and tenure.  We must continue to maintain a pool of flexible recurring funds in order to react in a measured and strategic way to unpredictable and sudden shocks to our budget.   When stability returns we will then have a pool of funds that we can begin responsibly to invest.    

SALARIES AND HIRING

The campus has announced that there will be no general salary increase program this year.  The only exceptions to this are increases required to retain critical faculty and staff, or the need to reward those promoted to a higher rank or higher-level position.  Each case must be individually justified and the sum of such adjustments should be less than 1% of the unit’s total salary base.  In LAS, this was accomplished through written counter-offers, retention letters, and other formal written agreements all of which will be honored.

Salary increase exceptions are also permitted for faculty and staff paid 100% on sponsored projects (fund codes 400000 through 599999) for which the grant budget provides for a salary increase.  Language from the FY11 Campus policy on pay increases for employees funded on grants and contracts reads as follows:

In cases where, in the view of the dean or vice chancellor, there has been meritorious performance, a modest increase in the range of 2% may be granted.  Under current Campus policy, these salary increases will become part of the employee’s permanent base salary even if grant funding decreases in the future.

Federal policies prohibit an individual from being paid at different rates from different fund sources.  Therefore, for faculty and staff who are paid partially on sponsored projects and partially on other funds, the zero salary increase guideline still remains.

If you have cases please forward a letter of justification to Associate Dean Jessica Williams no later than Friday, August 13, 2010.

The GEO has signed a new contract with UIC calling for a 2% increase in the minimum stipend.  Therefore, the 50% nine-month minimum has increased from $14,000 to 14,280.  This applies to RA’s as well as TA’s and GA’s even though RA’s are not part of the GEO.  No pay increases will be given to graduate students who are currently above the minimum.  Departments whose rate structures are above the minimum will keep the same rate structures as last year.  If a student has qualified to move to a higher tier within departments that have multiple tiers then that student should move to the higher tier.  But the tiers themselves remain the same as last year.

At this point, LAS unit executive officers have all received individual letters authorizing searches in your specific units.  Even with the uncertainty surrounding the budget it is essential that these searches go forward. We have conservatively planned a very limited number of searches so that we can be most certain of bringing them to successful conclusions.

CAMPUS BUDGET POLICY CHANGES

Since FY06, colleges and departments have been receiving 50% of the ICR revenue.  With the recruitment of the new Vice-Chancellor for Research 2.5% from each the college and the provost share will flow directly to the OVCR.  That means that LAS’s share will now go down from 30% to 27.5%.  The department share will remain the same at 20%.

In FY11, there will be a change in how tuition remission is distributed.  In the past, the tuition remission was distributed the same way as ICR (with 50% going to colleges/departments).  In FY09, the college/department portion was increased from 50% to 75%.  The incremental 25% flowed to the college that enrolled the RA.  This was to the make tuition remission policy consistent with the existing tuition revenue distribution policy.  However, the existing 50% continued to flow per normal ICR distribution rules.  In FY11, the entire 75% will flow back to the college in which the RA is enrolled.  This may result in some minor reduction to the revenue flowing back to departments. 

For now the campus has decided to leave in place the current tuition revenue distribution model where the colleges receive 75% of undergraduate and graduate base tuition, 75% of undergraduate tuition differential and 85% of the graduate tuition differential.  However, effective fall 2010 online and extramural tuition revenue will be subject to the same 25% campus holdback.  This is an increase from 15% and 20%, respectively.

We continue our work together in an era of uncertainty that is without precedent for our state and campus.  Still I remain confident in our ability to weather these turbulent times together.  There is still much exciting research, innovative teaching and learning, and critical community engagement of which we in LAS can be duly proud.  I urge you to keep those points of pride fresh before you as we continue our great work in the new academic year.

Please send your comments to LAS_QUESTIONS@uic.edu.