Education Desk: UI Provost Delivers Cold, Hard Facts

Oct 27, 2016

Colleges and universities have been starved for state funding through the ongoing budget impasse. The interim provost at the flagship campus of the University of Illinois recently presented faculty and staff with a blunt accounting of the school’s financial situation.

 

As one of the top administrators at the U of I, Edward Feser's academic specialty is in regional economics. In short, he’s a numbers guy. So when he decided to give the campus community an update on the school’s response to the budget problems, his talk included a big dose of digits. But that’s not all there is to it.

Interview Highlights

On quantifying the budget cuts:

“We wanted to explain how we were dealing with the state funding shortfall. So from fiscal '16, from the stop-gap allocation that was provided, if we account for the amount of money that was directed to the university, and we also account for the permanent spending reductions that we implemented of $49 million annually -- after you account for those two things, in fiscal '16, we remain $140 million short. If we look at fiscal '17, we applied additional spending reductions of about $18 million. And then if we take account of the second round of stop-gap funding that was provided, we’re in the hole for fiscal '17 by $50 million.

"So if you look at the last two fiscal years in which we’ve had no budget, and instead stop-gap allocations, we are short $190 million from those two years. And that’s after we reduced spending by about $68 or $69 million. And to give you a sense of the magnitude of that reduction -- $69 million -- it’s important to realize that in fiscal '15, we received about $236 million in general revenue funding. So in two years, we’ve made a substantial revenue reduction in our spending, and we’re still $190 million short from those two years. We wanted to explain that to the campus, to help faculty understand it, and to explain how we were addressing that near-term shortfall.”

 On the value of being blunt:

“I think there’s a hunger on our campus for frank discussion about the long-run future of the campus. So I tried very hard not to sugarcoat what we face, but at the same time to say you know, there is a path. And if we, as a university, find a way to work together -- the faculty, the staff, the administration -- we can find a path to protecting this great university, which I emphasize to people all the time, you don’t have more than about 60-some universities of this stature in the United States. And worldwide, this is a tremendous university. So we do need to protect it.”

 On putting these cuts into context:“These are unprecedented reductions. You don’t simply cut your higher ed by 50 percent one year, or 60 percent in one year. I mean, this is not normal. People are talking about states across the country which are reducing their spending on higher ed because other spending is crowding out that spending. But no states have failed to pass fiscal year budgets and then resorted to stop-gaps that have led to this magnitude of reductions for public higher ed on such a short time-frame.” On UIUC's plan for response to the budget crisis:“In my view and in most faculty’s view and most dean’s view, we don’t have an adequate approach to how we budget resources across the campus. The budgeting model was based on different economic circumstances, and we’re putting a lot of energy right now into an effort to completely re-tool that process. That’s an enormous exercise which will take us 12 or 18 months to get done, but I think it will put the university on a sounder footing. Essentially you can think of it boiling down to making sure that the way in which you’re accounting for what you’re doing, sharing information about what you’re doing and making allocation decisions -- aligning those things more directly with your academic strategy.

"That’s probably one of the biggest challenges we’ve faced, is when you have a budget crisis like this and you don’t have any sense of where it’s going to go, there’s no obvious resolution of where this impasse will end, it introduces tremendous uncertainty into the system. Deans aren’t sure where and how to invest, whether they need to account and cover for this massive shortfall or whether the state will come back and reimburse at some level; the university is at risk for going into some kind of a holding pattern. And when you’re one of the top 61, 62 research universities in the United States, you can’t afford to be in a holding pattern. You have to be aggressive. Our competitors -- UC Berkeley, UCLA -- they’re not in holding patterns. We have to find a way to keep moving forward even in the face of the budget crisis.”

 

On faculty flight due to budget crisis:

“Well, we saw much more significant numbers of departures this year. We were very aggressive in trying to retain our best faculty, but we are seeing increasing numbers of faculty being recruited by other universities. We have heard anecdotal evidence of some states targeting Illinois for top faculty because of the budget impasse, and you know, it’s not as simple as saying, 'Well, I could earn more if I go to Texas or I could earn more if I go to California or Michigan.' I think for most faculty, it’s a question of whether the university is on a sound trajectory and can remain strong in the conditions in which it operates. And so I think foremost in many faculty’s minds is the state of Illinois’ economy and Illinois’ politics, and whether they feel this is a place that continue to be supportive of higher education. That’s probably the biggest issue we’ve been trying to deal with in faculty retention.

"But we have seen larger numbers of faculty leave this year. We’re very concerned about the coming year because it’s one thing to have one year of no budget; it’s another to go into a second year and then we really don’t have a clear sense of how things will resolve themselves after the election. We could be going into multiple years with stop-gap budgets, we’re told. We’re not standing still. We are dealing with a lot of headwind, but we are making investments.

"It is significant that we have our largest freshman class. We are drawing strong applicants. We had more applicants for the campus than ever. So the University of Illinois is a strong institution, but it can be damaged. One of the worries I have is some people say, ‘Well, you’re saying it’s very strong, I guess you’ll be fine if this impasse continues.’ And I say you know the two don’t go together.”

 

On the effects of uncertainty:

"Yes, it paralyzes everyone. You don’t know whether you’ve been slashed permanently, in which case you’d be forced to make severe reductions which would introduce lasting damage, but you’d be forced to do it. It would lead to slower economic growth, because many people would be laid off and there’d be less money circulating in the regional economy in the Central Illinois area. The economic impact on the state of the University of Illinois at Urbana-Champaign is massive. But you’d know you had to do it. But you’re not going to do those things if in fact the state is able to find a solution that leads to a more stable revenue path, even if that revenue path is downward.”

 

On the optics of promoting Barbara Wilson to vice-president, giving president Timothy Killeen a $100,000 bonus and hiring a football coach while the university is in a $190 million hole:

“Well, certainly the public perception is important, but it’s also important to realize that Barbara Wilson wasn’t a new position. She was a replacement position. She replaced Christophe Pierre. We have a university system, and the system has a vice-president for academic affairs, and Barbara took that position. As that was covered, it seemed to give the impression that that was a new position. It wasn’t a new position; it was re-structured to provide additional responsibilities. One of the things that Barb will have a greater influence over is the alignment of the academic mission at the system level with the resource question, the budget question. And before, that was not clarified in that position….

“The president’s salary is not something that we on the campus determine but it was something negotiated when he was hired. And all of these salaries, you’re paying market rate and competitive salaries. I don’t think, when you look at our administrators’ salaries, that the University of Illinois at Urbana-Champaign, that they are out of line with where our Big 10 peers are. We’re stuck dealing with those market rates in many cases, and it sends the message that we’re flush with funds, which we’re not, but you know, you have to make sure you have the right people everywhere, all the way up from faculty and staff to administrators, if we’re going to take on the challenge. And salaries are obviously a big part of our expense.”

 

On the problem of persuading lawmakers that the U of I needs more money while persuading families that the school is a good investment for their students’ education:

“You’re right, it has been a challenge to figure out how to navigate the political dialog. I have had politicians say to me, ‘Well, you know, probably nothing will happen until we see “more blood on the floor,” which apparently means more layoffs and pain. Because until that happens, apparently some are not motivated to regard the challenge as particularly severe….

“No one would manage a business this way. No one would take a $2 billion organization like the University of Illinois at Urbana-Champaign and simply put it into a state of perpetual uncertainty until you see enough damage that you’re motivated to act. So yes, it has been a challenge to figure out how to navigate the debate, but my view is this: I’m just going to be honest with people about what we face, and we’re going to do everything we can on the campus to be as proactive as we can within the restraints that the state has placed upon us. And you know, spending a lot of time gaming the politics is something, quite frankly, I don’t have time for.”

 

On whether the ongoing budget storm will trigger the use of “rainy-day" funds:

“We have endowment earnings that have not been spent. These are not a recurring source of funds… the amount that has accumulated is essentially a cash balance. And one of the reasons that happens is that many of the gifts that people give are tied to various things…. I was dealing with one a couple of weeks ago where it was a gift for an endowed professorship, but it only covers the discretionary funds for the professor; it doesn’t cover the base salary. So if you don’t have the base salary, which you often don’t in the current budget climate, you can’t spend the discretionary funds….

"One of the points I made at the presentation was yes, a certain amount of that accumulation is the result of gifts that are narrowly-defined and that are hard to target and distribute based on the terms of the gift agreement. But some share is also simply because we haven’t been aggressive in spending all of our endowment earnings. I think some departments and schools and colleges may have been holding some as kind of a fund that they could use as kind of a rainy-day fund. What we’re emphasizing across the campus is that is not an appropriate way to steward those funds, so we are pushing all our units to make sure they’re using all of their endowment earnings to their maximum capacity. That’s going to be essential to the university going forward as we rely more and more on philanthropy to fund the institution as the state dials back.”