an update on the financial status of our campus urbana-champaign campus

An Update on the Financial Status of Our Campus

Urbana-Champaign Campus

Today’s Discussion:

• State of the State

• Strengthening our Financial Foundation

• Moving Forward– Investing in Illinois– Planning for FY12 & beyond

The Condition of the State has Changed

State Financial Issues• The state’s General Revenue Fund budget for

operations is approximately $26 billion.

• Started FY 2011 with >$3 billion in unpaid vouchers. There is no revenue source to pay these past due bills.

• One-time funds ($5.7 billion from borrowings, $2 billion stimulus funds, $300 million fund sweeps) used to help cover FY10’s costs.

• Many one-time funds no longer available

The state started FY11 with a minimum shortfall of $13 billion—50% of the

state’s operating appropriation!

The 11th Hour Tax Increase

• Tax increase should cover structural deficit• Borrowing for payment catch-up was not

yet approved—maybe later in spring• Until then, some cash flow issues remain

While it will take weeks to fully sort out implications of increase, the State’s

financial position has improved dramatically

While Risks Remain, Campus has Taken Decisive Action

Campus Planning Efforts: Taking action so that Illinois can

thrive

• Protecting our ability to:–Hire & retain the best faculty—our

reputation depends on it– Protect quality and access for our

students– Ensure Illinois remains a leader in

higher education

Ensure Financial Stability

Reduce Central Costs

Reduce College Costs

Enhance Our Revenue Base

Strengthening our Foundation

Through interconnected efforts to:

Enhancing Financial Stability

Improving our Balance Sheet

• Increased financial oversight:–With Business & Financial Services,

monitor financial health of units– Colleges aggressively eliminating

deficits– Central involvement required for some

deficits• Utilities• IP discovery and patent defenseImproved cash position will facilitate a

smoother transition to lower GRF

Managing Human Resources:Our Largest Cost

• Reducing staff size to control costs and accelerate efficiencies:– Incentive program reduced staff levels by 420

people– $17m in net savings anticipated– Constrained hiring tied to critical needs

• Development of service centers, consolidation of responsibilities and elimination of non-essential activities

Net effect: 585 FTE decrease on state/tuition since FY09!

Reducing Central Costs• Implementing sunset provisions for

centrally funded projects• Investing in energy conservation—

$8m+ in annual savings

• Expanding central & cross-college service centers

• Advancing IT initiatives to save millions

• unified communications• server consolidation

Reducing College Costs• Colleges are accountable for their

finances• Colleges are reducing administrative

costs:– Consolidating HR, Business & IT services– Extension reorganization—from 70 to 30 offices

– Administrative consolidation—School of Languages & Literature; Education (3 units); School of Earth, Society & Environment; others

Allowing reallocation of funds to highest academic priorities

Stewarding Excellence Projects

• IT @ Illinois• Public Engagement• Scholarships• Teaching Support• Small Academic

Units• Aviation• Police Training Inst.• Initiatives & Small

Centers

• Graduate College• Revenue

Generation• Extension• Advancement• Biology Education• Library• VC Research• Space Utilization• UtilitiesTwo new projects: Beckman & IGB and

NCSA

Stewarding Excellence @ Illinois

Savings/Income from Selected Efforts

• IT projects: ~$20-25 Million over 5 years

One Example: FY 11 est. savings for servers/server rooms consolidationCampus Savings (Utilities): $149,640Unit Savings (capital, maintenance): $532,375Cost Avoidance: $303,000

Stewarding Excellence @ Illinois

Savings/Income from Selected Efforts

• PTI—self-supporting or closure: ~$900,000

• Institute of Aviation: $500,000-$750,000

• Scholarships: $500,000 over 5 years$500,000 in tuition waivers reallocated

from DIA to general student population

Stewarding Excellence @ Illinois

Savings Through Transformation

• All of the SE@I projects investigated opportunities for structural, programmatic or process changes

• Additional savings, revenue streams and increased efficiencies (cost avoidance) are anticipated as a result of several SE@I reviews.

Stewarding Excellence @ Illinois

When it ends

• Process is winding down—perhaps one more project

• However, in depth self examination will continue:– Graduate College review of doctoral

programs launched this year– Instituting ongoing academic program

review

Enhancing Revenue

• International student tuition and fees– Pay for additional costs– Offset declining GRF– Fund increase in Illinois resident

financial aid

• Summer session—on-line programs keep this revenue at Illinois

• Self-supporting master’s programs

Conservation of Cash

• Campus cash management efforts

• Limited hires and deferred expenditures allowed units to build needed reserves

• Greater focus on financial control throughout campus

• College revenues grew while costs declined

Year-end Outcomes

• Cash balances held by academic units increased significantly

• Deficits were reduced by 23% this past year

Our permanent & cash set-asides, held by college & campus, will allow us to

move forward in a deliberative manner

Investing to Protect & Advance our Campus

Protecting Access and the Student Experience

• Financial Aid– Significant investment—growing by $4.5m– Access Illinois—the final major theme for

“Brilliant Futures”

• Expansion of James Scholars program• College efforts—iFoundary, LAS OnLine, Library

Learning Commons, FAA career services. . .

• Expanding small UG classes (Discovery & others) & establishment of UG research office

Protecting Quality of Life• Investing in Scholarship– Research Board– Center for Advanced Study–Humanities & Arts Research Fund– Expansion of Turing Cluster– Library collection catch-up

• Supporting research compliance & safety

• Supporting Classroom Technology• Improving our facilities

Hiring and Retaining the Best Faculty

• FY11 preventive retention program• Increased campus promotion increment• Supporting aggressive retention efforts• Faculty searches approved across campus

in FY11• VRP program will allow strategic hires in

critical areas (133 faculty approved)

Planning for FY12 and Beyond

Macro Level Planning

• Macro level planning—looking at new costs and revenue over a multi-year period

• New costs driven by:– Core operations: salary program,

financial aid, facilities costs. . .– Strategic needs: retention of faculty,

diversity, protecting quality programs, selected investments

Actions guided by strategic planning

Macro Level Planning (cont.)

• Revenue projections:– UA’s 3-year GRF estimates– Tuition estimates showing declining growth– ICR growth based on current trends– Highly differentiated unit assessments

• Improve financial position will allow multi-year phase-in of reductions

We have the resources & ability to move forward in a manner that protects our

quality

What we have learned

Beginnings of Cultural Change

• Financial sustainability—we can’t deficit spend our way to excellence

• Making choices regarding new directions—few institutions can do everything

• The capacity to adjust our footprint—we have a long history of new ventures but are just learning how to make difficult decisions & adjust our scope

Moving Forward• Nationwide, higher education is

facing continuing challenges—Illinois is no exception– Texas, California, Indiana and other

states are calling for a new round of major cuts to higher education

–While challenges remain, a NY Times editorial says: “the Illinois Legislature has begun to show residents and corporate leaders that it is serious about fixing the budget” (1/16/11)

Some Final Thoughts

• As an institution, we are learning new skills and changing our culture—that takes time

• However, in this remarkably challenging period, we have shown the capacity to take necessary steps to protect & advance our institution