BG.05.02

April 25, 2005

UNIVERSITY OF ILLINOIS
URBANA-CHAMPAIGN SENATE

Committee on the Budget
2004-2005 Annual Report

The Senate Committee on the Budget studies the University and campus budgets, the criteria used to determine allocation of resources at our campus, and the educational policy implications of budgetary decision-making. The Committee makes recommendations on proposed budgetary increases, as well as other matters that fall within its purview.

The Senate Budget Committee of 2004-2005 focused on four issues relevant to the 2006 budget process and structural change: 1) State-University budget process; 2) University commitment to access; 3) benefits and faculty and staff recruitment; 4) University development and faculty excellence. The following report and recommendations were transmitted to Interim Provost Jesse Delia in a letter dated
March 27, 2005

1) State-University Budget Process
The University’s budget process has historically been tied to the State at both the legislative and gubernatorial levels; which has resulted in Illinois becoming one of the world’s finest public institutions.

Over time a structural change has arisen where University needs have outstripped the State’s capacity to be the leading source of funds for the University. While it is impossible for the State to be the leading source of funds, it does not signify that the State is any less important to the mission and identity of the University. Being a true public institution with all it connotes is a core value—access, service, and aspiration.
The Urbana-Champaign campus though continues to struggle with the impact of declining state resources, and cumulative reductions pose increasing challenges for both academic and administrative units campus wide. At both the college and department levels, effort has been made to protect the quality of our instruction, research and outreach programs to the extent possible, while still meeting required budgetary reductions.

Many units have suffered reductions in administrative and support functions to do this, resulting in additional challenges as units seek to support faculty and programs in an environment stressed by implementation of new administrative information systems. This is happening at all levels of the organizations and should be of significant concern moving forward.
Two of the most pressing strategic impacts are on the undergraduate experience and efficiency of the research grant process. Maintaining a high quality undergraduate experience is critical for not only intrinsic reasons, but practical reasons as well. First, as we raise tuition, students and their families will reassess our value proposition. Second, as we look to expand our development efforts and initiate the new campaign, a strong undergraduate program will be essential to selling the University and connecting with patrons.
The second pressing impact area is our granting process and the efficient execution of research proposals. As more and more non-faculty resources are cut to preserve the core faculty, faculty members do more and more secretarial and administrative functions. While faculty need to share the burdens of cost cutting, it is important that in our cost saving efforts we don’t start to negatively impact our revenue generating abilities.

Recommendations:

1) That the administration work with the Legislature and the Governor to rebuild the strong covenant between the State and the University. The relationship rebuilding should be based on mutual respect and understanding: Respect about the limitations that the State faces and an understanding of the contribution the University makes to the fabric of life for all Illinoisans.

2) That the administration conduct a structural assessment of the budget process and the role of the State’s budget and the State’s budget process on the University’s overall budget process. The structural change in States’ roles in public universities is not a new phenomenon (Archibald and Feldman, 2003), yet little has changed in the State-University budget process.

3) That an assessment be conducted of the cumulative impact of budget reallocations and reductions on the undergraduate experience and our revenue generating ability from research. Case studies of impacts to the undergraduate experience, for example, may prove helpful in a number of ways. 2) University Commitment to Access
The consistent drop in state funding has produced unusually large tuition increases over the past several years. We will need to be particularly vigilant to be sure that admission continues to be determined largely by talent and not by a family’s ability to pay. Up to this point, the campus has consistently increased financial aid proportionally to increases in tuition. Going forward, though, one can imagine significant tuition increases that will challenge the University’s laudable commitment to access.
It is essential to continue the policy of commitment to access in order to avoid a situation in which admission is effectively determined by family wealth and not the applicant’s abilities. The new Illinois Promise initiative will be vital to families below the poverty line, and the Committee applauds this initiative. But Illinois Promise will not address the problem of low income families above the poverty line whose children might be discouraged from applying by the large increases in tuition.

Recommendations:
1) For those families above the poverty line whose children might be discouraged by the large increases in tuition, the only solution is to continue and to advertise University policy that any increase in tuition is always matched by increased funding for financial aid. As part of the University’s adjustment to structural changes in the University’s financial model, strategically assess how this can happen and what the cost will be.

2) Given the publicity associated with tuition increases, it will also be necessary to publicize the University’s continuing commitment to provide adequate financial aid to all families who qualify under existing programs. Going forward, the challenges to the University’s core value of access should be unrelenting. 3) University Benefits
A third area of budget-related structural change is occurring with respect to benefits, especially pensions and health care. While there are many implications of rapidly rising benefits costs and reductions in pension benefits, an important strategic implication is the negative impact on faculty recruitment and retention. The State’s pension system is under significant pressure due to chronic under funding and increasing obligations (UI Office of Planning and Budgeting, 2005). University faculty, staff, students and retirees are concerned with the burgeoning health care costs and stability of the pension system. Retaining quality and breadth of health coverage at affordable costs is vitally important for all these groups.
More and more of the burden of funding benefits, though, will be placed directly on the University going forward. New resources and new institutional arrangements may be required to keep the University as a salary and benefits leader among its peers.

Recommendations:
1) Study the structural changes and the associated dynamic implications involving the benefits question: changes in cost structure, changes in quality of the offer, and changes in revenue sources. Within the study review alternative benefits models, keeping in mind faculty recruitment and retention.

2) Develop a long-range benefits plan that is integrated with the University’s changing revenue model.

4) University Development and Faculty Excellence
The current campaign to raise $1.5 billion with a focus on campus/unit and a long-term plan to position the University of
Illinois
to be the preeminent public institution of higher education in the nation is ambitious and encouraging. We support this initiative and any further development along these lines.
Preeminent faculty are paramount for achieving the preeminent status of the University, and endowed chairs and professorships are part and parcel of maintaining a high-caliber faculty. Our long-term goal should be to greatly increase the number of endowed chairs and professorships.

Recommendations:
1) We would like to see named chairs and professorships as a high priority of the campaign. Departments need help replacing lost funds and better integration with Development and the campaign. This funding “leg” will be increasingly critical for Departments to achieve their aspirations.

2) The amount of $2 million for an endowed chair and $0.5 million for an endowed professorship may be difficult targets for many donors. We recommend exploring efficient and creative ways of initiating and maintaining endowed support.

3) A crucial way for the success of strategic development campaigns is to involve units at the basic level. At the moment the departmental involvement in such plans is rather uneven. We recommend greater involvement for all departments. One viable way is to help departments make regular contact with its alumni by way of newsletters, on paper or electronic, whichever is feasible.
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COMMITTEE ON THE BUDGET

Peter Goldsmith, Chair
Frank Rusch
James Barrett
Alison Schmulbach
Adam Blahnik
Alex Winter-Nelson
Tim Liao
Bill Adams, ex officio
Jason Plummer