An Update on the Financial Status of Our Campus Urbana-Champaign Campus

1. An Update on the Financial Status of Our Campus Urbana-Champaign Campus

2. Today’s Discussion: • State of the State • Strengthening our Financial Foundation • Moving Forward • Investing in Illinois • Planning for FY12 & beyond

3. The Condition of the State has Changed

4. 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!

5. 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

6. While Risks Remain, Campus has Taken Decisive Action

7. 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

8. Strengthening our FoundationThrough interconnected efforts to: Ensure Financial Stability Reduce Central Costs Reduce College Costs Enhance Our Revenue Base

9. Enhancing Financial StabilityImproving 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 defense Improved cash position will facilitate a smoother transition to lower GRF

10. 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!

11. 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

12. 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

13. 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 Utilities Stewarding Excellence Projects Two new projects: Beckman & IGB and NCSA

14. 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 consolidation • Campus Savings (Utilities): $149,640 • Unit Savings (capital, maintenance): $532,375 • Cost Avoidance: $303,000

15. Stewarding Excellence @ IllinoisSavings/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

16. Stewarding Excellence @ IllinoisSavings 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.

17. Stewarding Excellence @ IllinoisWhen 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

18. 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

19. 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

20. 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

21. Investing to Protect & Advance our Campus

22. 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

23. 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

24. 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)

25. Planning for FY12 and Beyond

26. 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

27. 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

28. What we have learned

29. 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

30. 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)

31. 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