Smaller state schools insist they're weathering economic storm

As the largest and most exclusive of the state's public schools, the University of Illinois has unique stature. That position may have lent the institution a false sense of stability when it comes to dealing with shortfalls in state funding, competitors insist.

Contrary to U of I Interim President Stanley O. Ikenberry's statement last week that smaller Illinois universities "don't have as many options" in dealing with the state's funding crisis, officials from Northern, Eastern and Illinois State universities all say they're weathering the increasingly difficult economic storm just as well as, if not better than, the Champaign-Urbana school. And while Southern Illinois University officials admit times are tougher than ever, they also cite flat tuition and dwindling enrollment as factors.

"U of I, because of its size, yes, they have a lot of resources," NIU Spokesman Brad Hoey said. "But if you look at the school, they've had to resort to furlough days and layoffs for employees. We haven't had to do that yet."

Ikenberry's comments came Monday after a talk at the Commercial Club of Chicago, where he told regional business leaders that the school may be owed as much as $700 million from the state by year's end, threatening its "entire financial underpinning." He expects to finish the fiscal year at the end of June with $335 million in missing payments from the state - roughly 55 percent of U of I's total appropriation.

By cutting faculty, staff and administrators, instituting a hiring freeze and trimming administrative costs, the university was able to save $87 million, he said.

Student tuition, which trustees raised by 9.5 percent last month, now covers half the academic budget.

With the state paying the other half, Ikenberry described a "weakened position to attract and retain top faculty," increasingly worried students and parents, and drained cash balances and suspended repair and maintenance work.

Yes, the situation is indeed pretty bad, other universities say.

According to Comptroller Daniel Hynes' office, the state is behind more than $700 million in payments to state colleges. More than half of that is to the U of I.

But despite missing millions of dollars apiece from the state, Northern, Eastern, Southern and Illinois State have not had to resort to layoffs or furlough days for employees. Yet.

EIU in Charleston is still owed nearly 40 percent of its $48 million 2010 state appropriation, director of business services Paul McCann said.

"We think it's going to be very close," he said of making payroll over the summer. "We think we're going to make it through until tuition starts coming in."

New legislation passed last week will grant colleges the ability to borrow up to 75 percent of what they're owed by the state, with a maximum interest rate of 9 percent. While the legislation had the public support of a majority of the state's public universities, few say they intend to borrow, at least in the immediate future.

Of the five schools contacted for this story, only SIU in Carbondale said it would definitely take out loans to replace the missing state funding.

SIU President Glen Poshard has said the school may borrow as much as $80 million to help make payroll over the summer.

As of this week, the school was still waiting on about $74 million of its $200 million appropriation.

"We know we are going to be good stewards of the funds. And we've managed to hang in there through a few weeks from the end of the fiscal year," said Rod Sievers, assistant to the chancellor.

Still, Sievers said, it's touch and go for the school. With dwindling cash flow, layoffs and furlough days for employees are possibilities down the line.

"We go at this month by month as we try to continue our mission. July and August we think we'll make payroll because of the borrowing bill," he said. "In September, tuition money will take us to a certain revenue. Beyond that we'll just see how it goes. I don't think students have felt any pain yet."

SIU is the only one of the five schools not to raise tuition next year.

Northern, Illinois State, U of I and Eastern have all raised tuition between 6 percent and 9.5 percent.

"If we're flat funded (from the state next year), we're essentially the only university to take a budget cut," Sievers said. "But we did not feel we should make the students pay."

Eastern would "just as soon not do any borrowing," McCann said, though the university plans to "at least get into position where we will interview and establish a line of credit."

Officials at ISU in Normal don't expect it will need to borrow, either, spokesman Jay Groves said. "We've always been very frugal," he said. "Our debt isn't so large."

University President Al Bowman signed on in support of the legislation as a sort of "just in case," since the state legislature will be out of session as the summer progresses, Groves said.

"Our demand is very strong," Groves said. "Our tuition is very strong. I believe we'll be OK."

This year, anyway.

With the $2 billion federal stimulus package - previously used by the state to plug funding holes - now gone, Ikenberry said he expects next year to be even worse. This year's deficit will carry forward and the cost of borrowing will compound the problem, he said.

"Ordinarily we don't have a liquidity problem. But if in effect we're making an interest-free loan to the state, that pretty well exhausts our liquidity," Ikenberry said. "That takes a very difficult problem and begins to make it unmanageable. At some point down the road, we'll simply not be able to make payroll. That's the bottom line."

As of Monday, NIU was still missing nearly $40 million of its $107 million appropriation, Hoey said.

While Hoey acknowledges that the school is in a tough position, he insists neither Northern - nor the other "smaller state universities" Ikenberry referenced - are in entirely uncharted waters.

Since 2002, higher education state funding has shrunk steadily. For Northern, funding has decreased by $11 million.

The DeKalb school has conserved in recent years by instituting a four-day summer workweek, adopting a long-term hiring freeze and asking most departments to cut down on travel.

"The first real hit that occurred was after 9/11. The economy tanked then," Hoey said.

"I think that the other state schools, unlike U of I, we're used to being a little bit further down on the pecking order in terms of state money. That doesn't make it any less painful."