President's Pension and Budget Statement

February 7, 2011


No Illinois meteorologist can go wrong predicting snow and cold in winter. Sadly, the state’s budget woes have become almost as predictable, and 2011 appears to be no exception.

The cash flow from the State of Illinois to NIU to meet our Fiscal Year 2011 operating budget is a trickle. The MAP grant funding that so many of our students rely on to fund their college educations remains uncertain. The pension plans upon which university and state employees depend for their retirement years are once again under attack. In addition, last month, promised funding for infrastructure improvements was called into question in a stunning Appellate Court decision.

There are reasons for optimism, however, both on the calendar (where spring lurks around the corner) and in Springfield, where the legislature recently took one of the necessary steps to put its financial house in order. Lawmakers approved a temporary income tax hike that will allow the state to better meet its obligations. More work remains, but it is a promising demonstration of resolve.

To keep you up-to-date on developments on all of these fronts, University Relations is launching State Pension & Budget Update, an online resource with the latest news about steps the General Assembly is planning to address Illinois’ budget woes as lawmakers begin FY2012 budget discussions. There you also will find reports about new legislative proposals that might affect employee and annuitant health care and pension programs.

Here is a synopsis of the current state of affairs on these key issues:

Pension Reform

This is shaping up to be the biggest issue facing the state, taxpayers and state employees.
State employees faithfully and regularly contributed 8 percent of our gross earnings to the SURS pension plan during our tenure here at NIU. We are not eligible for Social Security credit during our service under the SURS system.

Unfortunately, political leaders in state capitols throughout the nation have underfunded public pension plans for years, and now a real crisis is upon us. Unfortunately, Illinois is not alone in facing this issue, as many states are encountering huge pension obligations with no way to meet future funding requirements.

The General Assembly approved SB3514 in January, 2011, legislation that granted approval to the Governor to borrow monies to fund the state’s $3.7 billion pension obligation for the current fiscal year. However, even with that payment, the state remains more than $30 billion behind in payments to its five retirement systems.

NIU continues to work hard to impress upon legislators the importance of full funding for employee pension plans. Those efforts will be more important than ever this spring. HB 146, introduced by a suburban legislator recently, would replace existing pension plans for current state employees with the new pension plans approved last year for employees hired after Jan. 1, 2011.

General Fund Appropriations - FY2011 

Once again, we face a serious cash flow issue in terms of reimbursements from the State of Illinois to NIU. Since the July 1 start of the 2011 fiscal year, we have received approximately 20% of state payments towards our FY2011 appropriation.

As alarming as this outstanding debt to NIU is, we are hopeful that the spring will once again bring a steady upswing in revenues for the state and that the pace of those reimbursements to the university will improve significantly. Recall that as the end of the 2010 fiscal year approached, the state was able to meet nearly all of its responsibility to NIU.

In the meantime, however, we have no choice but to continue operating under the same budget constraints that have been in place for most of the last two years.

  • A hard hiring freeze for new and vacant appointments, except for critical hires, primarily  on the academic side, that are required to help us effectively carry out our primary mission of educating students.
  • All departments on campus must continue to seek ways to reduce spending and to find ways to delay purchases, contracts and appointments
  • Travel will be approved on a very limited basis
  • Maintenance will be largely restricted to health- and safety-related projects

Careful adherence to those rules for the last two years has allowed us to weather difficult financial times while continuing to provide a first rate education to our students and positioning NIU to excel in an increasingly competitive marketplace. I know that I can count on your assistance to ensure that success continues.

As I mentioned above, the 96th General Assembly wrapped up its session by passing an income tax increase effective Jan. 1, 2011. Senate Bill 2505 raised the personal income tax from 3 to 5 percent and instituted a corresponding increase in the corporate income tax, not including the personal property replacement tax.

This will generate up to $6 billion in new revenues to the state annually, and I remain hopeful this new revenue will eventually resolve some of the state’s cash flow issues. However, as many have pointed out, this increase is part of the solution, but not a resolution to Illinois’ fiscal dilemma.

MAP Grant Funding

NIU students were due to receive $12.2 million in MAP Grant funding in October -- money, which would have flowed directly to the university in the form of tuition revenue. While students saw their tuition bills credited by NIU, acknowledging the state’s MAP payment in October, the state has yet to provide funds to NIU or the other public universities to offset that credit. Furthermore, that $12 million represents the fall semester obligation only; spring semester MAP funds are due to universities in early March.

MAP money is an essential form of financial aid for students who are in the greatest need. For many students, it is the difference between being able to pursue a degree or ending their formal education. More than 5,600 NIU undergraduate students received MAP grant funding last year, with 70 percent receiving the maximum award of about $4,500 – an amount most of those students simply cannot make up through other sources.

These issues have created serious gaps in NIU’s operating revenues. We continue to voice our concerns in Springfield to ensure that MAP support – crucial for both our students and the university – remains in place and returns to historic levels.

As I noted above, we will provide frequent updates on these issues on the State Pension & Budget Update website, and I will be communicating with the campus community on a regular basis as the budget process begins again in earnest.

Unfortunately, we have all become familiar with operating in this environment. As sad as that is, it has steeled us for the tough times ahead. I remain resolute in my belief that NIU will emerge from all of this a stronger and better institution, and that we will make the changes necessary to flourish and ensure NIU’s vibrancy into 2020 and beyond.

John G. Peters