Illinois Higher Education FY16 Budget Recommendations IBHE Board Presentation February 3, 2015 Dr. Alan Phillips

FY15 Budget Context (State) Pension and Medicaid costs are exceeding the rate of State revenue growth. The State is currently experiencing a debt crisis. The State is months behind in its payments to colleges and universities. Adequate financial aid funding, for both MAP and Pell, continues to be of concern. The reduction in tax rates for the remainder of FY15 as well as for FY16 will make it difficult for the State to meet its financial obligations.

FY15 Budget Context (Colleges & Universities) State funding for higher education operations has declined steadily over the last 15 years. The availability of financial aid funding is declining at a time when low-income families have less ability to pay for college. Over the last several years, there has been minimal funding for capital projects, to include renovation, remodeling, maintenance, and repair. Unfunded state mandates and regulatory requirements undermine efficiency and productivity. Institutions try to protect instruction, but are often forced to squeeze cost savings out of instruction and student support services. The burden of financing a college education has increasingly fallen on students and families, and as costs continue to increase, we are beginning to see declining levels of enrollment.

FY15 Budget Framework For FY16, we will not be using a Step Budget framework. We will instead be submitting a Maintenance (i.e. Level Funding) Budget recommendation. The FY 16 budget recommendations will support the goals of the Public Agenda. The FY16 budget recommendations will include a performance funding component.

Key Fiscal Concerns and Priorities Core funding for public colleges and universities. Cash flow to public colleges and universities Funding for need based financial aid. Adequate funding for institutional grant programs. Capital Funding, to include, Capital Renewal and Deferred Maintenance funding. The impact of unfunded mandates. The continued implementation of Performance Based Funding. The priority for funding is directed toward maintaining core capacity, deferred maintenance, MAP, and funding for grants.

FY16 Higher Education Budget Recommendation The IBHE staff is recommending a Maintenance (i.e. Level Funding) Budget for the agencies and institutions of higher education, with four exceptions. The exceptions are as follows: An additional $50 million request for MAP grants. An additional $3 million request for ISAC Administrative Funding to offset reductions in federal funding no longer available to support agency operations. An additional $4 million request for ISAC Outreach efforts necessary to help students make informed choices about college and financial aid. This would offset reductions in federal funding no longer available to support outreach efforts. A $1 million request for Higher Education Cooperation Act (HECA) Grants. The IBHE recommendations include the SURS certified amount of $1.6B, an increase of $45M (2.9%) over FY15.

FY16 Performance Funding Recommendations The performance funding allocations are based on the FY15 performance funding model, which did not change for FY16, and represent a .5% appropriation set-aside as in previous years.  The only difference is that the FY16 model reflects current data from each institution used to calculate the FY16 performance funding values. The recommendation is also to lock the performance funding model for a period of three years. This will enable us to stabilize the model and will provide us with the time we need to better address some of the remaining performance funding issues. Community College Performance Funding remains unchanged from previous years.

Proposed FY16 Performance Funding Allocation (Public Universities) FY 2016 PBF Allocation with 0.5% Performance Funding Set-Aside Performance Funding FY2015 ($ in thousands) FY2016 Model Appropriation FY2015 - FY 2016 Set Aside* Performance Funds Net Change 0.5% Set-Aside $ Change % Change Public Universities $ 1,229,438.5 6,147.2 0.0 (0.0) (0.00) % Chicago State University 37,166.6 185.8 143.8 -42.0 37,124.6 (42.0) (0.11) Eastern Illinois University 43,964.8 219.8 243.2 23.4 43,988.2 0.05 Governors State 24,615.9 123.1 166.3 43.2 24,659.1 0.18 Illinois State University 73,889.2 369.4 349.2 -20.3 73,868.9 (20.3) (0.03) Northeastern Illinois University 37,748.1 188.7 234.4 45.7 37,793.8 0.12 Northern Illinois University 93,189.5 465.9 431.6 -34.4 93,155.1 (34.4) (0.04) Western Illinois University 52,629.3 263.1 264.5 1.4 52,630.7 0.00 Southern Illinois University ** 204,151.8 1,020.8 891.3 -129.5 204,022.3 (129.5) (0.06) Carbondale 145,503.0 724.6 618.4 -106.2 145,396.8 (106.2) (0.07) Edwardsville 58,648.8 296.2 272.9 -23.2 58,625.6 (23.2) University of Illinois *** 662,083.3 3,310.4 3,422.8 112.4 662,195.7 0.02 Chicago 306,363.0 1,531.8 1,500.1 -31.7 306,331.3 (31.7) (0.01) Springfield 23,622.1 118.1 118.4 0.3 23,622.4 Urbana/Champaign 332,098.2 1,660.5 1,804.3 332,242.0 0.04 * FY2016 Set Aside is based on a 0.5% reallocation of the final FY2015 budget level. SIU Admin is allocated on a pro-rated basis to each campus, SIU SOM is included with the Carbondale Campus. UI Admin is allocated on a pro-rated basis to each campus

Results for FY16 Assuming a .5% funding set-aside and level GRF Funding: Variance in funding allocations due to performance ranged from +.18% to -.11%. The actual funding amount variance ranged from +$143.8K to -$106.2K.

Performance Funding Model (Public Universities) The model effectively balances the competing goals of increasing completions while rewarding institutions for improving the success of underserved populations. All steps are identical at each university, and each institution’s formula is calculated independently The model accounts for each institution’s unique mission by adding a weight to each measure. Funds are distributed on a pro rata basis according to each institution’s formula calculation. The formula calculation for each institution will change each year based on annually updated data. The model is not prescriptive in how to achieve excellence and success (what, not how). IBHE Presentation

FY16 Capital Improvements Capital renewal funding provides critical support to protect the state’s capital investment. Improving campus facilities helps schools attract, recruit, and retain students. Support for library projects, and science labs, and other campus facilities address multiple goals of the Illinois Public Agenda. Last Year, the Board approved a new capital project list for FY15 and indicated support for Illinois Jobs Now! projects. Unfortunately, there was no Capital Bill in FY15, and the FY16 project list is nearly identical to the FY15 list. The only exceptions are for those projects that are either self-funded by the institution or removed from institutional priority lists. To date, nearly $1.1B in Illinois Jobs Now! higher education capital funds have been released. We estimate the current the deferred maintenance backlog to be in excess of $3.5B.

FY 16 Capital Budget Recommendations The FY 2016 IBHE Capital budget recommendations total approximately $1.6 billion and closely reflect the Board’s FY 2015 recommendation project list. Estimated project costs have been updated by universities to reflect cost escalation and various changes in scope or other features of the project. The recommendations continue to support the release of funds for the FY 2010 Illinois Jobs Now! capital projects. The recommendations include: $350 million for capital renewal funding, historically the Board’s top priority. Funding for 31 renovation and construction projects at public universities and IMSA. Funding for the ICCB’s top-ranked 31 requested community college projects. $48M for escalation costs and emergencies.

Summary The FY16 Higher Education Budget Recommendation focuses funding on the goals of the Illinois Public Agenda. This year we are not using a step budget approach. Instead we will be recommending a budget that represents a “Maintenance” level of funding. As in previous years, the recommendation also allocates a portion of the funding to colleges and universities based on performance.

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HECA and State Matching Grant Programs The Higher Education Cooperation Act (HECA) was designed to promote effective use of resources though cooperation among institutions, to achieve an equitable distribution of education services, and to develop innovative concepts and applications. The HECA Grant Program was first administered by the Board of Higher Education in 1972 with funding last through the end of fiscal year 2008 (38 years).   During that time, HECA grants were awarded to hundreds of public and private higher educational institutions across Illinois to promote institutional cooperation and to provide funding for innovative educational activities.  Funding for HECA grants declined from a high of $10.3M in 2004 to $0.0 in 2009. The State Matching Grant Program offered incentives for Illinois colleges and universities in the competition for federal research grants and contracts. Allocations were determined by successful performance in prior year research and development and were to used to acquire federal matching funds for these projects. Funding for the State Matching Grant Program declined from a high of $9.5M in 2005 to $0.0 in 2009.