Budget Message from the President
March 31, 2010
While the warmer temperatures and blue skies this week are proving a welcome respite from a long winter, at this time it appears no similar relief is imminent to the stateâs dire financial situation.
As we begin the final quarter of Fiscal Year 2010 and contemplate the governorâs proposed budget for Fiscal Year 2011, it is clear that today NIU faces the greatest and most serious financial crisis in its 115 year history. Specifically, without question we will be wrestling with not one, but two major budget issues: a serious cash flow problem for the remainder of this fiscal year that will likely carry over into the next fiscal year AND an operating budget for next year that, under the Governorâs current proposal, will be slashed by $6.7 million.
FY2010 Cash Flow Crisis
As of today, entering the final quarter of our fiscal year, the state owes NIU $55,332,544 in FY2010 appropriated funds that have not yet been delivered. To my distress, there is no payment schedule to deliver the remainder of our funds owed, nor is anyone in Springfield able to provide a definitive answer on when, how much or even if further payments to the public universities will be made. This makes operating this university a remarkable challenge. As I shared with you in December, it costs us approximately $1 million each day to meet payroll and expenses.
With an eye toward minimizing the debt NIU will undoubtedly carry forward into the new fiscal year due to the stateâs lack of timely payments, I instructed all university vice presidents to lapse two percent of their FY2010 operating budget. That is to say, they will be leaving this amount unspent at the close of the fiscal year. Doing so will reduce the debt that we carry forward by more than $4.5 million. That is a substantial savings, and nearly every dollar saved will help make it possible to meet our payroll obligations.
I realize that spending reductions of this magnitude late in the fiscal year will not be easy. However, this is substantially less than the cuts I asked the vice presidents to plan for in December, 2009.
The bottom line is that the cash flow crisis that has hurt us this year will spill over into FY2011, further complicating what is already shaping up to be a dire year for state agencies and elementary, secondary and higher education.
The stateâs budget discussions have become so important to each and every person at NIU that we now have our own State Budget Update tab on the universityâs home page. There you will find a budget counter that tracks the flow of funds from the state and is updated when the university receives any of its appropriations payments from the state. I encourage each of you to regularly visit this budget information site to keep up with the latest facts on the stateâs budget discussions.
Fiscal Year 2011- Begins July 1, 2010
Next yearâs financial picture is even more dire.
The governorâs proposed budget will further reduce our state appropriation by $6.7 million. To put that in perspective, such a cut means that our appropriation for FY2011 will be less than what we received from the state in FY1999, over 10 years ago.
Should the General Assembly approve the governorâs proposed one percent income tax hike for education or another revenue generating approach, things would improve. The political reality, however, is that the prospects for such an increase in 2010 are slim. We must therefore plan for Fiscal Year 2011 with the facts at hand, not âwishful thinking.â If additional revenues for education are approved, I will be delighted to adjust our budget plan for FY11 accordingly. Conversely, there are no guarantees that the legislature will not demand even deeper cuts than those set forth by the governor. For now our planning will be based upon Governor Quinnâs proposed budget for NIU, a $6.7 million reduction from our general revenue base of this year. Living within those means will require a variety of adjustments.
Yesterday, I instructed vice presidents to plan for FY2011 assuming a three percent base budget reduction. Frankly, I am erring on the optimistic side and hoping this will be sufficient; some believe up to a five percent or even larger base budget reduction could be required. Each vice president has been given responsibility for determining how best to meet this goal.
As I said last week during my testimony before the Senate Appropriations Committee, protecting jobs and maintaining the quality of our academic programs and services remain my steadfast and primary concerns. I stand by that statement, but given the cash flow crisis and the debt the university will be forced to carry forward into FY2011, compounded with base budget reductions from the state and an unknown payment schedule for our FY2011 appropriation vouchers, it is becoming increasingly difficult to protect every position at the university.
In response to a question from committee staff prior to the hearing, I informed the Senate Appropriations Committee that the governorâs proposed budget for FY2011 could require an immediate reduction in the NIU workforce that could impact up to 257 faculty and staff and 86 student employees. That reduction could take the form of temporary layoffs, reduced work weeks, permanent elimination of positions, or a combination of all those and other options yet to be identified. Such reductions could have a ripple effect on the DeKalb community estimated at $11.2 million per year.
Please know I have asked vice presidents to exhaust every budget tool that we have to find savings to limit the impact on current personnel. However, the simple fact of the matter is that payroll accounts for approximately 77 percent of our operating costs. We may have no other choice but to reduce payroll obligations. All options must remain on the table and know that we will be reviewing all university divisions. Before involuntary staff reductions take place, I assure you that I will provide clear, advance notice to our campus community following our procedures and guidelines.
As much as I wish I could spare academic and student services from further cuts, it is not possible. Academic and student affairs programs and support services, both on and off campus, account for nearly 74 percent of our spending. We simply canât extract enough savings from the rest of the university to spare these departments.
It pains me to have to deliver this message. We have labored long and hard to avoid this outcome. It is only through longstanding careful, conservative stewardship of our resources that we have been able to put off these drastic measures for so long. Unfortunately, there is little room left in which to maneuver.
Another unfortunate measure required to make up some of the shortfall will be a tuition increase. Under the stateâs Truth in Tuition statute, tuition remains the same for most continuing students during their time to degree. However I firmly believe that we simply cannot attempt to offset our reduced state appropriation on the backs of the incoming class of freshmen. Doing so would be irresponsible even in good times; under the current economic conditions it would be unconscionable.
We will also recoup some savings by once again instituting a four-day work week for the DeKalb campus during the summer months. More details will be forthcoming in the coming weeks.
Naturally, the austerity measures put in place late last year â a hard hiring freeze for all new and vacant appointments, asking all departments on campus to reduce spending and to find ways to delay processing of purchases, contracts and appointments until the last possible moment; limiting travel and related expenditures; and limiting maintenance to health- and safety-related projects â will remain in place for the foreseeable future.
We will also continue working hard in Springfield to ensure that other sources of revenue (e.g. grant funding from other state agencies that support programs here; MAP Grant funding that many students rely upon to pay tuition) remain in place. Be assured, I will continue to lobby the General Assembly for relief from the nearly $10 million in annual unfunded state mandates that weigh so heavy upon our budget.
I believe these are prudent, responsible steps that will help us navigate what promises to be a very challenging year.
None of this is easy to contemplate. However, I urge all of us to remain united and focus on these real issues and challenges facing our great university. We have proven repeatedly that Northern Illinois University can weather adversity. We have done so by working together and putting the needs of the university and our students first. Those same core values will help us get through this crisis and minimize the pain to any one part of the university family.
In this climate, communication is essential. So I urge you to frequently check our State Budget Update Web site for the latest information. Also, take advantage of the new Rumors and Questions function on that page. The weeks and months ahead may be filled with conjecture and misinformation, and this site will provide an opportunity to anonymously ask questions about the budget process. We will do our best to post straight-forward responses to inquiries received.
I also urge you to exercise your right as a citizen and contact your state legislators. Pay close attention to their positions on higher education funding, and do not hesitate to voice your opinion.
Very truly yours,
John G. Peters
Note: If you decide to contact your state legislators, please remember it is inappropriate to use university resources (stationery, postage, e-mail, facsimiles, telephones, etc.) to communicate personal opinions to legislators and policy makers.