February 7, 2010

Dear Senate Colleagues,

The report by Howard Bunsis, recently circulated by the AAUP, concludes that the UI system is in “solid financial condition”.  Given this conclusion, many are wondering why the situation is being portrayed otherwise by President Ikenberry and campus-level administrators.  We write to you to provide a few facts about the current situation.

The Bunsis report is based on numbers from the fiscal year ending June 30, 2008, and does not reflect the fiscal reality after that date.    Further, it does not distinguish between funds budgeted and funds actually received by the University.  Our current problem is not last year’s budget, but rather the severe shortfall of budgeted payments from the State of Illinois during the current fiscal year, which began on July 1, 2009.  The members of the Senate Budget Committee have been working closely with the Provost’s office to understand the University budget.  Here are the facts as we understand them.

• The State is currently $436M behind in payments to the University.  This shortfall is distributed among the three campuses and the Urbana campus share of the shortfall is approximately $200M.
• $200M is 28% of the budgeted unrestricted funds, the vast majority of which (80-90%) are for salaries and payments to personnel.
• Most of the budget of the University consists of restricted funds, meaning they are allocated to specific uses.  For instance, Federal grants must be spent on the projects for which they were awarded.  Therefore when assessing the impact of the shortfall, it should be compared to the total of unrestricted funds, not the sum of all revenue.
• The University of Illinois Foundation is a separate corporate entity from the University of Illinois.  Its funds are designated for specific purposes by its donors.  While the University could conceivably request a short-term loan from the Foundation, Foundation funds are not directly available as a revenue source.
• Given the State’s financial situation, its ability to eventually pay the University the full amount appropriated by the legislature is in question. Therefore, a significant budget rescission is possible.

In summary, the immediate crisis faced by the University and the Urbana campus is the ability to make payroll.  This has been precipitated by the serious shortfall in payments from the State.  Attached you will find a summary assessment of the State and campus financial position prepared by Associate Provost Mike Andrechak, which you may find helpful.

Sincerely,

Carey Ash, Robert Brunner, Bruce Hajek, Tony Liss (chair), Trenton Morrow,
Regina Stevenson
(Members of the Senate Budget Committee)

Members of the Senate Executive Committee