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

Reply-To: presmike@uillinois.edu
 Subject: MASSMAIL - Financial Update

April 7, 2011

Dear Colleagues and Friends of the University of Illinois:

I want to take this opportunity to share with you my perspective on the 
state's ongoing budget and pension crises and their possible impact on 
the University in the coming fiscal year -- and beyond. The state's 
budget situation remains grim with a significant operating deficit that 
includes a backlog of unpaid bills expected to approach $7 billion by the 
end of this fiscal year. As of April 4, 2011, the state owes the 
University over $470 million in appropriation and financial aid payments 
for this fiscal year.

The governor proposed a fiscal year 2012 operating budget that would 
maintain funding for public universities at this year's level, with a $25 
million increase proposed in financial aid for eligible students. The 
University's share of this proposal would be a $697 million general 
revenue fund appropriation and approximately $61 million in financial aid 
for our students. However, based on comments at both the Senate and House 
higher education appropriations hearings, we have been forewarned to 
prepare for a significant reduction in our fiscal 2012 appropriation. In 
those hearings I stressed the value of higher education in general, the 
University's key role in generating tangible results for our students and 
the state, and the need for sustained state support to assure our 
continued success. See the URL below for my testimony this week before 
the House Appropriations Committee.
http://www.uillinois.edu/president/speeches/2011/April4.Appropriations.cfm

Two months are remaining in the state's legislative session and we must 
realistically prepare for a reduction in the University's fiscal 2012 
appropriation. The University is no longer protected by Federal stimulus 
stabilization operating grant agreements that prohibited reductions in 
state operating appropriations below certain levels. Legislative 
leadership has indicated that a reduction of the Governor's operating 
budget proposal of as much as $2 billion is under consideration. It is 
too early to predict the outcome of these budget deliberations and the 
ultimate impact on the University, but the campuses and UA have been 
actively planning for various scenarios.  

I am acutely aware that our faculty and staff have not had a general 
compensation increase since August 2008. Avoiding another round of 
furlough days remains one of my top priorities for fiscal 2012, as is a 
meaningful compensation adjustment.

While we will follow closely the fiscal 2012 appropriation budget 
legislation and will push for maximum funding, I am also wary of the 
pension and health-care adjustments that are being discussed in 
Springfield and the profound impact these adjustments would have on our 
faculty and staff.

The State University Retirement System (SURS) funding level has dropped 
to a dangerously low assets-to-long-term-liability ratio of 40% as of 
June 30, 2010, and SURS is paying out substantially more in benefits than 
it takes in contributions. Besides the statutory pension reforms (benefit 
accruals, retirement age) for new employees that became effective January 
1, 2011, there is now some public discussion in the media and by 
legislators of extending these pension reforms to current University 
employees on a prospective basis, as well as possibly increasing employee 
pension contributions or offering alternate defined contribution 
retirement plans. As I said at this week's meeting of the House 
Appropriations Committee, I believe the state should meet its promises to 
our faculty and staff, the majority of whom do not qualify for Social 
Security, to fund pension benefits earned. Lawmakers are also examining 
other benefit changes that would affect University employees and 
retirees, including increasing employee, retiree, and University 
contributions to health insurance; eliminating dependent tuition waivers 
for University employees; taxing benefit payments; and other actions. 
While it is clear there continues to be a state budget crisis in 
Illinois, it is not clear what priorities will be set or actions taken to 
address it.

I am committed to achieving the best outcome possible for our faculty and 
staff, and in the ensuing seven weeks I will work diligently with our 
governmental relations staff and elected officials in Springfield toward 
that goal. Like you, I believe the state should do everything in its 
power to fully fund and honor its commitments. But the state's budget and 
pension funding problems are foreboding, and I want you to be fully 
informed on these issues. 
	
To that end, a pension information forum is being held on each campus 
next week to brief you on current proposed legislation that may affect 
your benefits. On April 11th, 12 noon, the forum will be held at the 
Alice Campbell Alumni Center Ballroom on the Urbana-Champaign campus. 
Another session will be held on April 11th at 4 p.m. in Conference Rooms 
C & D of the Public Affairs Center on our Springfield campus. The session 
on our Chicago campus will be held on April 12th at 2 p.m. at the UIC 
Forum. I urge you to attend one of these sessions to be fully briefed on 
the issues. A website 
https://nessie.uihr.uillinois.edu/cf/policies/index.cfm?Item_ID=4534 is 
available containing the proposed benefit bills, with links to reports 
and summaries which you can use as an additional information resource. We 
are coordinating with other state public universities so that we can 
speak with one voice with a common goal to preserve earned benefits. 

We are living with great uncertainty, but, by working together, we can 
navigate passage through these extremely difficult times and emerge with 
our best days still ahead. As I noted in my testimony before legislative 
committees last month and this month, the University of Illinois is a 
tremendous resource for the state. Our faculty, staff, and students 
continue to generate discoveries that enrich people's lives and add to 
the social, cultural, and economic well-being of the state. I'm deeply 
proud of the work you do and appreciative of your commitment to our great 
University.

Sincerely,
Mike

Michael J. Hogan, President
University of Illinois

This mailing approved by:
The Office of the President

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