To: All Faculty & All Academic Professionals & All Civil Service Staff
           <everybody@illinois.edu> 
    From: "President Michael J. Hogan" <presmike@uillinois.edu>

Reply-To: presmike@uillinois.edu
 Subject: University update

Dear Colleagues, 
Thank you for your continued hard work and support as we navigate a 
variety of challenging issues. It's a busy time in Springfield and at 
University and I'm hearing from many of you about these challenges. I look 
forward to continuing to visit with you, but in the meantime, let me 
address questions I've been hearing:
  Q:  What can you tell us about pension reform?
  A:  Pension reform is troubling because it could negatively affect our 
current employees and compromise recruitment efforts. We hope the State 
will meet commitments it's made to our employees and our Governmental 
Relations staff is working hard on this issue in Springfield. Yet, we must 
remember that pension issues are one part of larger budget issues in the 
state. We must try to advance our interests in this area, without damaging 
our interests in other areas important to the University.
  Q:  What is the State budget situation?
  A:  The passage of new tax legislation promises to reduce the state's 
structural deficit and offers a partial solution to our serious budget 
problems. Still, the State faces billions in unpaid bills. Eliminating 
this deficit may take a combination of borrowing, new revenues, and 
reduced expenditures, which may include reductions in support for the 
University. Currently, the State owes the University almost $500 million 
of its FY 2011 operating budget and MAP (student financial aid) funding, 
even though we're nearly eight months into the current fiscal year. 
Dealing with this may require the State to borrow some additional money as 
part of a debt restructuring plan, which may or may not win legislative 
support before the end of the fiscal year. It is clear that the State has 
long-term structural fiscal problems to deal with, as well as the short-
term cash crisis, and we are not out of the woods yet. We must continue to 
monitor resources diligently and manage State allocations as carefully as 
possible.
  Q:  Why are we trimming our budgets further, when the Governor's budget 
doesn't decrease our appropriation?
  A:  We're grateful to the Governor for not proposing further cuts to our 
budget in his recent address. Still, we know that flat funding doesn't 
account for cost increases or inflation in our costs, and it doesn't 
support compensation adjustments or replacement of lost faculty and staff. 
We must pay our bills, including paying faculty and staff, even if the 
State doesn't enact a debt restructuring plan and State payments to us 
continue to lag. Also, I promised that I would not support furloughs. I'm 
glad that I've kept that promise and careful budget oversight will help us 
avoid furloughs next year, as well. Depending on State action, I'm hopeful 
that we'll be able to provide our faculty and staff with the first 
compensation adjustment we've had since August 2008. This remains one of 
my highest priorities.  In short, our budget constraints safeguard us 
against further delays in State payments or rescissions this year and 
next; buffer us against potential reductions in our State appropriation or 
other adjustments to our budget; help us avoid furlough days; and, I hope, 
cover costs of a compensation program.
  Q:  What about other revenues to replace state funding?
  A:  First, our hardworking faculty and staff continue to do more with 
less and generate new revenues. Our Interim VP for Research, Larry Schook, 
will work with colleagues to drive our research numbers higher. We're also 
appointing a director of federal relations in Washington, D.C, who will 
further expand our federal funding opportunities. Also, Dr. Schook will 
work in Washington, Springfield, and through our corporate partnerships to 
open new avenues for revenue opportunities.  And, we're coming to the end 
of a very successful capital campaign and expect to meet, even exceed, our 
$2.25 billion Brilliant Futures goal. This will dovetail with a new 
initiative to raise millions for new scholarships, particularly need-based 
scholarships. At the same time, we're exploring new and more successful 
ways to organize our fundraising operations. The goal of this effort will 
be to obtain a much better return on our investment. Finally, tuition is 
now our largest and most reliable revenue source. To our Board's credit, 
trustees want to make it more predictable for our students and their 
families, by tying tuition increases to inflation rates, State 
appropriations, and the success of our efforts to reduce administrative 
costs. Achieving a proper balance between these revenue sources and 
administrative efficiencies is the key to our long-term well-being. 
  Q:  Where are we with the Administrative Review & Restructuring (ARR) 
report and the efficiencies it recommends?
  A:  Under the leadership of Stan Ikenberry and Avijit Ghosh, we're 
making great progress. We're actively implementing the ARR reforms in many 
areas, including procurement, capital projects, human resources, and 
information technology. More work will be ongoing. We've already realized 
about $5 million in recurring annual administrative costs and expect that 
number to about double by the end of this fiscal year. These reforms are 
overseen by a steering committee, which includes the chancellors, vice 
presidents and the chair of our University Senates Conference. In each 
area, we also benefit from the advice of implementation committees that 
include campus-level experts. Let me take this opportunity to express my 
sincere appreciation for the help and good work of all of the people 
involved, even though at times it entails changes that can be difficult to 
make.
  Q: How are we covering costs of new administrative positions and how 
does this square with reducing administrative overhead?
  A:  The new cost for these positions is nominal. The VP for Health 
Affairs is covered by clinical revenues, not new general fund costs. The 
cost for the VP-Research is not new. This is a re-titling of the existing 
VP for Technology and Economic Development. Our new Executive Director of 
Human Resources and Executive Chief Information Officer are not new hires. 
They're internal promotions. We expect all these positions to either 
generate new revenues or further cost-reductions. What's involved is not 
additional cost, but rather reallocation of resources to generate more 
revenue, reduce costs, and improve the services we provide for our 
faculty, staff, and students. This is what our University has always done, 
particularly when facing financial stress, to remain great and improve its 
competitive position.
  Q:  What is the status of the searches for a new Vice President & 
Chancellor on our Springfield and Urbana-Champaign campuses?
  A:  Thanks to the outstanding work of the search advisory committees, 
these searches are going very well. Let me express my gratitude to both 
committees, chaired by Dr. Tih-Fen Ting (Springfield) and Dr. Doug Beck 
(Urbana-Champaign). The search for at Springfield is in its final stages, 
as the committee has put forth its finalists. The search advisory 
committee for the VP/Chancellor at UIUC, formed in December, already 
posted the position description and is receiving nominations. I want to 
personally extend my gratitude to the committee members, who are 
dedicating so much time and effort to these important searches. 
  Q:  What are we doing about the new procurement reform law?
  A: Nothing has been more aggravating to all of us who must deal with the 
onerous regulatory processes embedded in this policy. I know that all of 
us, as public employees, expect to comply with reasonable systems of 
accountability. But, we believe there should be a proper balance between 
accountability and regulation that undermines our effectiveness. I want to 
thank our University Ethics Officer, Donna McNeely, and our Office of 
Business and Financial Services for their ongoing efforts to secure 
reasonable adjustments to how this new procurement law is interpreted and 
applied. I also want to thank the various state agencies, which have made 
these adjustments. At the same time, our Office of Governmental Relations 
is working tirelessly to call the attention of these same officials, as 
well as legislators in Springfield, to the need for further adjustments to 
the policy. 

I hope these answers to the questions and concerns I'm hearing is 
informative. Rest assured that others will follow as I try to keep you 
abreast of the progress we are making on these and the other issues with 
which we're dealing. Thank you for your time and consideration. Mostly, 
thank you for all you do each day to help us through these challenging 
times.

Sincerely,
Mike

Michael J. Hogan
President, University of Illinois
This mailing approved by:
The Office of the President

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