Unbad pension and budget news

As you'll have learned if you are following the SIUC Unions United blog, the attempt to gut our pension benefits failed to pass, though the signature of a prominent pro-business (i.e., anti-tax) lobbyist on the memo announcing the end of that push is rather troubling, to say the least.

Glen Poshard, in an email report sent to faculty on Thursday, reports that state appropriations for next year will also be rather less bad than had been feared, and a number of proposals detrimental to SIUC have been defeated. I can't say how much credit Poshard himself deserves for achieving this result—most of the results he describes spared all state universities, of course, and thus were no doubt fought for by his colleagues at other state universities as well. But presumably his political experience isn't hurting us any--and his rather full report on the state legislative session shows his (or at least staff's) full engagement with these issues. Most of you will have received his email (which I paste at the end of this post), but I'll here pull out some of the high points and consider their impact on our budget.



First to the worst part of the news: serious cuts to the state's MAP financial aid program. This cut, unless it is rescinded (as a similar threatened cut was rescinded last year) will result in considerable hardship for our students. In addition to this hardship, the cut would also have an effect on the SIUC budget; while SIUC would presumably not attempt to offset this cut internally, enrollment and tuition would decline were students forced to drop out (or never enroll in the first place). Last year a large lobbying effort by SIUC students helped to defeat this cut: let's hope that once again we can roll back this cut, which would further erode our core mission of serving students from less wealthy backgrounds.

To better news. The legislature has opted for the low end of cuts under discussion to our appropriations. Public universities were cut by 1.1% rather than the 5% feared. For the SIU system, this amounts to a cut of $2.2 million. And in one area the state is increasing its funding. After providing no support for the Illinois Veterans Grant program last year, the state will this year provide SIU with some $1.3 million. Thus the total in lower revenue from these sources (state appropriations and Veterans Grant funding) to the SIU system will be only $800,000, and SIUC's share of that will be no more than $500,000 (as our budget is just a bit more than that of SIUE and the medical school combined).

This roughly $500,000 in lost revenue will be more than offset by the increase in tuition, even with flat enrollment or a slight decrease in enrollment, given that we raised tuition for new students this year, and last year we saw a $3 million increase in tuition funding despite no increase in tuition rates for new students and a decline in enrollment. In addition, the hiring freeze in effect on campus will lead to millions in savings. For comparative purposes, SIUC spent some $1.9 million less on faculty during FY 2011 than was spent in FY 2010, and the amount spent in FY 2012 (absent an end to the hiring freeze or substantial raises) will be less still.

SIUC, then, will have considerably more money to spend next year than it had to spend last year. This will remove any conceivable justification for furloughs or layoffs next year. And this in turn ought to make it far easier for the two sides to reach agreements on new contracts. We will have a particularly good chance to see whether one of the union theses about negotiation is true. The unions say (and I tend to believe), that it's not about the money: it's about power. The administration wants the power to determine staff & faculty salaries; collective bargaining is a major obstacle to this "flexibility" sought by our administration.

If the administrative bargaining position were dictated by financial realities, they would be willing to drop their demand for the power to unilaterally declare furlough days or lay off staff & faculty--at least for the next year. But I expect/fear that their initial response will be to offer vague 'hopes' that furloughs & layoffs will not be required, while insisting on retaining the power to inflict furloughs & layoffs on staff should they choose to do so.

What should the union response be? Well, that can wait for another post--or for your comments.

I paste the email report from Poshard (via Cheng) below for any who haven't seen it.

Dear Colleagues:

I am pleased to share with you the following legislative update from President Poshard, who worked tirelessly throughout the spring session on behalf of our students, faculty and staff.  While we will continue to face challenges in FY2012, the budget situation is more promising than we had originally anticipated.

Please see below, a message from the President.

Sincerely,

Rita Cheng
Chancellor
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To the Employees of Southern Illinois University:

I would like to take this opportunity to provide you some brief highlights of the state legislature‚s spring session that concluded on Tuesday.

While the Governor must still take action on the proposed state budget for FY12, the news for public universities is promising, given the dire budget situation in Springfield. 

The FY12 general revenue funds appropriations for all of higher education were reduced by $35 million over FY11 levels.  This represents a year over year percentage decrease of 1.6%. Public universities saw their overall funding levels reduced by $15.2 million or 1.1%.  For Southern Illinois University, this level represented a decrease of $2.2 million over FY11.

Two competing higher education funding plans were proposed by the legislature this year.  The first plan called for a 5% reduction in funding for our four year institutions; and until early evening on Memorial Day, was still under serious consideration.  Fortunately, our legislative supporters came through at a critical point in negotiations and the smaller reductions were enacted.

Text of the FY12 appropriation bill for higher education can be found here: http://www.ilga.gov/legislation/97/HB/PDF/09700HB3700eng.pdf

I anticipated a very difficult year in defending against steep operational cuts to our public universities.  All of the Presidents and Chancellors representing our public universities worked very hard to convince lawmakers that higher education had taken its share of state budget cuts over the last two years.

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.  The funding level for MAP was reduced by $17.2 million, a 4.3% reduction which could result in over a one million dollar reduction for SIU students.

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 provided at approximately a 25% level 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 amounts to about $1.3 million of the $5.3 million obligation we have 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.

Much of my time in Springfield this spring was spent working against several 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.

We were successful in convincing rank and file legislators to abandon the idea of reducing 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.

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 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.  The legislation can be found here http://www.ilga.gov/legislation/97/HB/PDF/09700HB1503enr.pdf . 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.

Public universities were also successful in requesting the legislature to again extend the lapse period of the current fiscal year from August 31 to December 31.  As I write this, the state owes SIU 45% of its FY11 appropriations, nearly $97 million with less than a month to go in FY11.  These funds would have expired by August 31 if the lapse period had not been changed and monies would no longer be available to the university to make payroll.  Last year, the University did not receive its complete appropriation until December 31st. In order for us to cash flow these late payments we must be able to count on these funds, even if they arrive six months late.

As further information becomes available on the Governor‚s intentions regarding the FY12 state budget, and the other bills I have referred to in this report, I will keep you informed.

Sincerely,

Glenn Poshard
President