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Planning & Budget

Planning & Budget
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TO: Faculty and Staff

President Poshard provided the following report to the SIU Board of Trustees at last week's meeting.

Vaughn Vandegrift, Chancellor

President Glenn W. Poshard's Report to the Board of Trustees at its meeting on Thursday, July 14, 2011

Thank you, Mr. Chairman.

I would like to take this opportunity to brief the board on the recently enacted state budget and its impact on public higher education in general and specifically what the overall FY12 state budget means for SIU.

This year was another very difficult year for budget making at the state level. In March, Governor Quinn proposed an FY12 budget in which expected expenditures exceeded expected revenues by more than $2.0 billion.

This imbalance in the proposal led to the formation of a bi-partisan budget agreement in the House of Representatives which resulted in a new state budget that more closely aligned spending pressures with projected revenues.

The agreement resulted in significant cuts in K-12 education as well as the operational budgets of state agencies. In addition, hundreds of millions of dollars in liability associated with the state's health insurance program for the poor were pushed off into future fiscal years by both legislative and executive budget actions.

State agencies ordinary and contingent expense lines were hit particularly hard by the budget cutting. These cuts will filter through to the various colleges and departments within the university that provide services and programs to state government. I expect that reimbursement rates, indirect administrative costs, consulting and other services will be reduced or eliminated further this year as a result of this budget.

At this point we have no indication of any specific cuts to state agency issued grants to public universities, but as we have learned from the loss of over a hundred million dollars in IBHE grants programs over the last five years, there will be reductions in this area that will also adversely impact the university.

The good news, if you could call any news about this budget good, is that the overall appropriation levels in this budget plan are significantly lower than expected revenues. This was done by the bi-partisan budget coalition in an attempt to reduce the backlog of unpaid bills, which is expected to be in the neighborhood of $4.0 billion dollars by the end of FY12.

This unpaid bill figure is expected to be $6 to $8 billion lower than last year and represents a significant improvement in the state's cash flow position. The combination of increasing revenues from an improving economy and the temporary income tax increase coupled with this austere budget should help state government continue to dig out of this financial mess.

Regarding the specific cash flow situation of the university and the payments owed by the state we find ourselves in a little worse position than a year ago. At this point in FY10 the university was owed about 37% of its appropriation and as of today we are owed about 45% of our FY11 state operating grant.

Primarily this lag has been created by the American Recovery and Reinvestment Act requirement that certain Medicaid vendors be paid for their services within 30 days in order for the state to receive a higher federal Medicaid match. This federal incentive expired June 30th and should result in a more balanced approach to the state's competing cash flow pressures going forward.

However; I do not want to minimize our concerns in this regard. The state owes SIU almost $100 million for the fiscal year that ended June 30th. This represents the longest delay in state payments in the now four years we have been tracking cash flow.

The last payment we received was in May and it represented reimbursement for the November payroll. Legislation was enacted again this year to allow these payments to be made well after the lapse period is normally scheduled to end; however, this is the time of year when public universities cash flow positions are at their weakest, so we continue to monitor the situation and to work with the Comptroller to ensure that we maintain access to our state payments in a manner that allows the university to meet its obligations.

In terms of the new state budget for public higher education, the general revenue funds appropriations were reduced by $35 million over last year's levels. This represented a year over year percentage decrease of 1.6%.

Public universities saw their overall funding levels reduced by $15.2 million or 1.15%. For Southern Illinois University, this level represented a decrease of $2.2 million over FY11.

I anticipated a very difficult year in defending against steep operational cuts to our public universities. I am pleased that we were able to convince legislators who were very much in a budget cutting mood that public higher education had taken its share of cuts over the last several years and that deeper cuts would seriously impact student outcomes.

We have already witnessed reductions in student work positions and internship opportunities as well as larger class sizes and in some areas, fewer course offerings. Continuing to cut public higher education's state operating grants will most certainly lead to longer time to degree and negative financial consequences to impacted students.

I am hopeful that this year's result will serve as a positive building block to reverse a disturbing decline in public funding levels for our state universities that are now at levels not seen since the close of the twentieth century.

If the expectation is that our public universities are to prepare our students for the global economic competition of the 21st century, then we must demand public investment levels that honestly reflect what it takes to meet that challenge.

Unfortunately, the funding outcome for the state's Monetary Award Program, one of the country's largest financial aid programs for students from modest economic means, did not fare as well as our operational funding. The funding level for MAP was reduced by $17.2 million, a 4.3% reduction.

This cut was not initially envisioned by legislative appropriation committees, but resulted when an attempt to take away the eligibility of for-profit institutions to participate in the MAP program failed.

The purchasing power of the MAP grant has fallen significantly during the last several years. In 2007 the maximum MAP award covered almost 80% of the cost of tuition and fees at a public university; it now covers just over 40%.

Students attending Southern Illinois University receive more than $25 million annually in MAP funds, affecting about 1 in 5 SIU students.

A last minute effort to restore the MAP cut was attempted by the Senate, but the measure was attached to an additional spending bill that was not approved by the House of Representatives.

Adequate MAP funding levels are critical to preserving some level of affordability for our students and their families so the restoration of these funds will be a priority of mine as the fall veto session approaches.

Funding for the Illinois Veteran's Grant program is also provided for in the FY12 budget. As we all know, the funding level was zeroed out in last year's state budget which created a significant funding pressure on the SIU budget.

While the appropriation level provided in the FY12 funding plan is still inadequate to reimburse the University for its total cost of providing this benefit to our veterans, it is still good news to know that the state is again willing to resume some responsibility in this area.

Two very important University health care programs were also protected from budget cuts this year. The Simmons Cancer Institute received its full funding costs associated with running the day to day operations of the facility and SIUe received level funding for state support of its School of Pharmacy. These two critical assets to our basket of health care programs will receive almost $2.5 million in funding this year in the new state budget.

We have worked very hard in Springfield for several years on these two priorities and have been able to move each of these funding initiatives from non-reoccurring legislative grants and intergovernmental agreements to full fledged appropriations within the SIU budget. We have successfully secured more than $15 million in the last five years to help grow these two successful programs.

While much of my time in Springfield this spring was spent working on the SIU budget I think it is important to briefly mention several other legislative issues that are also very important to our University community.

We worked very hard with our fellow public universities in defeating several onerous legislative measures that would have placed our public universities at a distinct competitive disadvantage with private universities in the state, as well as out-of-state colleges and universities, in the recruiting and retaining of faculty and staff.

Most importantly we were successful in convincing rank and file legislators to delay action on the reduction of pension benefits for current employees.

There is no question that we must take a comprehensive approach to finding solutions to the chronic underfunding of the state's pension funds, but the solution proposed by the legislation was unreasonable and disproportionately skewed against the real economic concerns of university employees.

Placing the full financial burden of solving the pension system funding problems on employees was not only unfair, but also failed to recognize the long term implications of preserving the academic quality of our programs by ensuring non-competiveness in our salary and fringe benefit offerings, not to mention the real possibility of a rush of retirements by experienced faculty and staff.

My administration continues to participate in discussions with representatives of the annuitants association, our sister universities, the community colleges and the various bargaining representatives at each of these institutions to see if it is possible to reach a more balanced plan to preserve and stabilize our pension systems.

Proposals to increase health care premium costs for university retirees and to eliminate the dependent tuition discount for long term university employees were also defeated or stalled this legislative session.

I feel strongly that the tuition discount is one of the best incentives we have for recruitment of our employees' children to attend SIU. I will continue to explain and educate our legislators about the importance of this benefit and how it serves the interests of our University and the affordability goals of the IBHE Public Agenda.

Several initiatives sought by public universities did successfully pass the legislature this session. Among them was the performance based funding proposal supported by all of public higher education. This has been a three year effort that will result this summer in a task force comprised of a broad based higher education membership that will define and establish several performance funding metrics.

These metrics will be used in formulating next year's IBHE higher education funding request. This effort arose from IBHE's Public Agenda plan and is the state's first serious effort in many years to align student outcomes with state funding.

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