Illinois universities relieved as state gets budget at last

Richard J. Helldobler doesn't think any university leader could have been ready to go through the past two years in Illinois, when the state's public institutions withered under severe funding restrictions because of a prolonged state budget standoff.

Institutions had to make do with stopgap funding that came from the state in fits and starts. When the state didn't approve funding for its large student aid scheme – the Monetary Award Program, known as MAP – institutions had to decide whether to credit student accounts anyway. Then they had to find ways to bolster their cash flow to make up for MAP funding until it arrived.

“Nothing in your training prepares you to deal with this kind of catastrophic funding loss,” said Dr Helldobler, since last summer the interim president of the 9,500-student Northeastern Illinois University in Chicago. “What you do is you roll up your sleeves and try to do the next best thing.”

For Northeastern Illinois – and many of the state's other institutions – that meant deep, painful cuts. In May of this year, the 1,200-employee Northeastern Illinois announced 180 job cuts that did not affect faculty. They followed the elimination of 65 non-instructional positions in 2015. The university has also granted leave of absence to employees, frozen hiring and delayed maintenance. It closed and cancelled classes for several days this spring. It eliminated hundreds of student jobs.

So it is no surprise that college leaders sounded relieved after lawmakers last week narrowly overrode a gubernatorial veto and passed a state budget for the first time since 2015. The $36 billion (£27.9 billion) spending plan enables them to move out of a triage mindset.

“It allows us to begin to sort of plan again,” Dr Helldobler said. “When you can't plan because you don't know if you're going to get any state appropriation, that makes it very difficult.”

But the state's spending plan is a mixed bag for the higher education sector. It cuts state support for universities and community colleges by 10 per cent below 2015 levels – although they will still receive much more than they did during the stopgap 2016 and 2017 fiscal years. It also adds more than $36 million to the MAP programme, pushing it above $400 million in the 2018 fiscal year after two years of uncertainty and stop-and-start appropriations.

The full ramifications of the new budget – and the end of the impasse – can't be fully measured so soon. Still, it is clear that the impasse seriously hurt both institutions and students by forcing painful cuts, eroding enrolments and driving down confidence in public education. It is also clear that it has changed the outlook of many leaders for the future.

The spending plan does not resolve fundamental disagreements over taxes, regulations and hundreds of billions of dollars in unfunded state pension liabilities.

“I think most universities will engage in conversations about what it means to be in public higher education in Illinois,” Dr Helldobler said. “People need to understand this isn't over. We really think that the budget will be a very complex conversation next year as well.”

The dire situation at the state’s colleges and universities was a key factor for some legislators. State senator Dale Righter, a Republican whose district includes Eastern Illinois University in Charleston, was the only Republican senator to support tax increases in the budget package. He cited damage the budget standoff has inflicted on Eastern Illinois University, according to the Chicago Tribune.

Eastern Illinois has cut hundreds of positions amid the state’s budget crisis. The university’s president, David Glassman, said in March that the university had cut low-enrolment programmes, eliminated 413 positions – almost a quarter of its employee headcount – imposed leave days for employees, and reallocated funds internally in order to continue operating.

Nonetheless, the financial sector became increasingly worried about the university in light of the state budget standoff. Moody’s Investor Service downgraded Eastern Illinois in June, saying the move reflected the university's highly stressed financial position and noting the institution had nearly exhausted its liquidity. The ratings agency also downgraded other Illinois public universities it rates, including the University of Illinois, plus Illinois State, Northern Illinois, Southern Illinois, Governors State and Northeastern Illinois universities.

Some universities maintained higher bond ratings than others based on stronger financial positions. Generally, the state's larger and better-known institutions, which have diverse revenue sources such as federal grants and endowment income, fared better throughout the crisis than its smaller institutions, which rely more heavily on the state for funding.

Northeastern Illinois is an example of a university that struggled. In the 2015 fiscal year, the last year Illinois had a budget in place, the state provided $36.7 million in funding to Northeastern Illinois, and it fully funded MAP grants for students. Those two sources of funding were worth about 40 per cent of the university’s $92 million budget.

In the 2016 fiscal year, the state provided $10.7 million in funding plus MAP grants, leaving a funding shortfall of about $26 million. After more stopgap funding was released in July 2016, the university calculated a shortfall of about $17 million for the 2017 fiscal year, according to a university spokesman.

But even the state's most prominent university system felt the pressure from the budget situation. The University of Illinois System, which in 2015 relied on state revenue for only about 12 per cent of its $5.6 billion operating budget, proposed a deal with the state. The system was willing to agree to performance-based funding metrics in exchange for predictable funding over five years.

The University of Illinois stood out from most of the state's other public institutions because it was able to increase enrolment during the budget standoff. Still, it has shed staff members and reported an uptick in the number of faculty members leaving its flagship campus.

For the hardest-hit public institutions in Illinois, the passage of the state budget is only the beginning of attempts to chart a way forward.

The long-troubled Chicago State University laid off about 300 employees, a third of its workforce, during the standoff. It only enrolled 86 freshmen in the autumn of 2016, and enrolment had fallen from more than 7,300 in 2010 to under 3,600. Some feared its closure was unavoidable.

The stability of a state budget will allow the university room to pay its bills, restart recruiting that had been all but stopped and plan for the future, said Paul Vallas, Chicago State's chief administrative officer. Mr Vallas, a former Chicago State board member, took the position in April along with a new interim president.

“We used to get about a third of our revenue from the state,” Vallas said. “Now it's in the high 20s [per cent]. We'd like to be less dependent on state funding, and we'd like to be more financially self-sufficient.”

The university plans a $79 million budget for the 2018 fiscal year.

Northeastern Illinois is going through a similar planning process, said its interim president, Dr Helldobler. It's evaluating programmes for growth, shrinking or elimination. It's looking at different budget models.

The process might be painful. But the past two years have been painful, too.

“At least now we have an appropriation,” Dr Helldobler said. “Let's get down to work, as opposed to negotiating furloughs or negotiating 180 position eliminations and those kinds of draconian measures.”

This is an edited version of a story which first appeared in Inside Higher Ed.