To: All Faculty & All Academic Professionals & All Civil Service Staff
           <everybody@illinois.edu> 
    From: "Chancellor Cantor and Provost Richard Herman" <provost@uiuc.edu>

Reply-To: provost@uiuc.edu
 Subject: MASSMAIL - Campus Financial Picture

Dear Colleagues:

It was less than two months ago that we wrote to you, inviting you to join 
in a campus-wide dialogue to shape the future of our campus, to ensure 
academic excellence, to continue and expand our national leadership role.  
When we issued our invitation, the State's financial outlook was 
deteriorating, and we did not know how the campus' resources might be 
affected.  The near-term prospects for State revenues have clarified over 
the last few weeks. We want to share with you what we now know about our 
financial circumstance and describe how we propose to deal with the 
situation we face.  Before turning to specifics, however, we want to 
reiterate the conviction expressed in our earlier letter.  It is 
imperative, now more than ever, that we think as creatively as we can about 
scholarly and educational opportunities that will define our institution 
for the years to come.  As an institution facing some tight fiscal 
constraints, we, like many of our peers, do not have the luxury of feeding 
all of our aspirations. As a great institution, we also do not have the 
luxury of standing still, for we will slide back quickly if we pass up 
opportunities for investment in areas ripe for discovery.  We will need to 
be exceedingly clever and opportunistic in finding sources of support; 
nevertheless, we must redouble our commitment to moving forward.
    
With these thoughts in mind, we turn now to the details of our current 
budgetary outlook.  Like other states across the country, state revenues in 
Illinois are falling significantly short of what had been expected.  As a 
result, the State will not be able to provide the full amounts that were 
budgeted for its agencies and operation, including higher education, in the 
current fiscal year.  In our case, the campus will have to spend $14.8 
million less than we previously had budgeted for this year.  This reflects 
a university-wide number of $32.5 million.  The largest portion ($10.7 
million of the $14.8 million) of this shortfall results from the 
requirement that the campus pay a larger share of employee health care 
costs which in the past have been paid by the State.  All of this is likely 
to continue into fiscal year 2003, although the outlook remains uncertain. 
 We do not know what if any new funds will be available to us from the 
State for next year.
  
We thus face two different financial questions:  How shall we reduce 
expenditures in the current year by $14.8 million?  How shall we plan for a 
FY03 State budget that may well be somewhat smaller than this year's 
budget?
  
These questions arise at a time when our campus has gained considerable 
momentum across a broad front with important new programs and initiatives. 
 While the questions we face are financial, our answers to them must be 
grounded in institutional values and aspirations.  We must find ways to 
cope with our short-term financial circumstance that continue our forward 
movement, that build on our accomplishments of recent years if at a slower 
pace than had been hoped, and that protect our missions of teaching, 
research, and public engagement.  In order to accomplish these goals, we 
will have to make harder choices than in recent years.  Our campus has had 
to make such choices before, and in doing so we have become a stronger 
institution.  We must examine anew what is most important to our missions 
and our aspirations, what must be protected, and where investments must be 
made.  Our decisions must be principled choices based on our shared vision 
for this institution.  Among other things, this vision requires us to 
protect and enhance our library as a priceless asset, to realize the 
post-genomic initiative, to show leadership in general education and in the 
humanistic disciplines that support it, to create a truly diverse campus, 
to build our graduate fellowship support, and to preserve our capacity to 
act on new ideas and to make critical cross-campus programmatic 
investments.
  
The alternatives-to make no choices and instead reduce expenditures across 
the board; to declare a moratorium on programmatic development and 
initiatives-are not options for us.  They would mean separating our actions 
from our values, ignoring our own institutional history, turning our back 
on our aspirations, at least until times get better.  These are not the 
practices that brought us all to Illinois.  These are not the practices 
that will take charge of our institutional future.
    
Here is what we propose to do.  In order to minimize the effect of the 
current year's $14.8 million shortfall on our units, we will provide as 
much of the needed funds as possible.  By contributing campus reserves and 
other flexible funds, we will furnish one-half of the total amount.  The 
other half will be provided by campus units reducing their expenditures.  
They will not be asked to do so on an across-the-board basis, however.  
Rather, we will protect the priority of our teaching, research, and public 
engagement missions by asking administrative and service units to reduce 
their expenditures for the year by 2.5% while academic units reduce their 
expenditures by 1.25%.  The University Library will not be required to 
participate in this rescission.

As we have said, we do not know what the FY03 budget will look like.  The 
Governor will first put his budget before the legislature in February.  By 
that time, we hope to have a much better understanding of the State's 
fiscal picture.  For now, we are working with a range of scenarios 
including one based on the assumption that the FY03 campus budget will be 
smaller than the FY02 budget.  In that scenario, this year's mid-year 
reduction of expenditures would become a permanent cut in next year's base 
budget.
 
For FY03, we have asked the deans and vice chancellors to consider how to 
deal with base budget rescissions in ways that protect the core missions of 
the campus, including our ability to invest in areas of great opportunity. 
 Insofar as possible, we plan to continue to provide some cash relief to 
the units during at least FY03 in order to ease the effect of a base budget 
rescission.  In this way, our planning for next year will seek to allow us 
to continue to realize some of key initiatives already underway as well as 
some of those yet to be dreamt.

As you may know, a number of public universities began suffering cuts last 
year.  Many of our peer institutions face rescissions deeper than ours.  
Clearly, higher education nationally is in for a bit of a rough ride.  
However, it has been clear for many years that all universities, especially 
publics, need to diversify their approach to funding.  We took a step in 
this direction last year with a tuition rise and we expect private fund 
raising efforts to increase.  We are faced with a harder set of choices 
than we expected, and while the momentum that we have built up over the 
past several years will be slowed, we are determined that it will not stop. 
 To this end, we have just responded to unit requests for monies from this 
year's tuition surcharge.  With the advice of various faculty and student 
advisory committees, we have provided support for new faculty positions, 
graduate fellowships, and advising.  Our goals will include protecting 
those surcharge dollars, especially as they reflect a compact with our 
students, and the faculty excellence funds which have served us so well.  
This past year we hired 195 faculty and for the first time in twenty years 
our faculty numbers have increased (by 75).  Behind these numbers are 
wonderful individuals and significant programmatic expansion.  These are 
hard fought gains which must be retained.
  
We face serious challenges.  Working together, we believe these challenges 
can be met in a way that preserves the special strengths of our university 
and allows us to continue to make significant progress in areas that are 
most critical and rich in opportunity.

Very truly yours,


Nancy Cantor                          Richard H. Herman
Chancellor                            Provost and Vice Chancellor
                                         for Academic Affairs  
This mailing approved by:
The Office of the Chancellor

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