House Higher Education Appropriations Committee (3-10-11)
Senate Appropriations II committee (3-9-11)

Testimony by John G. Peters, President

View PPT slides shown with testimony (PDF)

Higher Education is in an era of tremendous change and uncertainty.  In terms of student success and fiscal sustainability, the public university model of the 20th century no longer fits.

Nationally, fewer than half of the students who enter college today finish with a degree or credential. Those who do finish take longer, pay more and are saddled with too much debt.

What’s more, in Illinois, the financial model that supported our public universities for generations has eroded dramatically.

Our students are changing, too.

A growing number bring considerable experience and diverse backgrounds to the classroom. They are transfer students, military veterans, and second-career adults. Many of them balance schoolwork with jobs, commutes to campus and family commitments. Our undergraduate enrollment mix is changing, and in the years to come, it will require us to further augment academic support services.

It is this shifting landscape that provides the backdrop for the next decade. At this moment, I think it is fair to say, the number of changes confronting us, and the magnitude and speed of those changes, is perhaps greater than at any other time in the past 50 years.

That is why I announced a new initiative at NIU earlier this year….. Vision 2020.

It will determine which strategic goals should be most important to NIU as we enter this competitive new era . . . one in which society and government will place a premium on efficiency and productivity.

We are actively engaged in examining various productivity and outcome measures, including course completion rates, the number of graduates we produce each year, the number of students we retain and the average time it takes to earn an NIU degree.

The Vision 2020 process will help NIU evolve into an even more efficient, fiscally sustainable institution less dependent on the State of Illinois.

Of our 23,500 enrolled students, 92% come from Illinois and over 85% of the NIU alums who graduated since 1993 have remained in Illinois…..NIU alums earn more than $3.8 billion in income annually, contribute $114 million in Illinois income tax and create an additional $8 billion in GDP for the Illinois economy every year.

NIU’s impact as a strategic regional anchor in northern Illinois goes far beyond the figures I just gave you, however.  NIU has received and leveraged more than $110 million in federal, state and local funds over the last 18 months to build a broadband network to provide serves to 533 anchor institutions in northern Illinois including universities, community colleges, schools, police and fire departments, public health agencies, hospitals and physician clinics.  This includes a recent FCC grant to connect 85 rural hospitals throughout the state to regional medical centers and sharing health services.  Bringing high speed broadband services to underserved areas will create hundreds of jobs and spur economic development for both large and small business.

Our faculty has also been active in obtaining external funding for their research.  In FY2010 the university brought in $72.3 million in external funding, significantly greater than our average annual external funding for the past ten year period ($52.9 million). 

NIU continues to assist working adults attain their educational aspirations.   People who find themselves unemployed as a result of a company lay-off, bankruptcy or closure due to NAFTA may qualify for federal funds to help them return to the classroom and learn new skills. 

Furthermore, NIU is a leader in helping people with Associate of Applied Science (AAS) degrees obtain bachelor’s degrees.  We’ve rolled out five baccalaureate completion degrees that build on the AAS and partnered with community colleges to deliver these degree programs closer to where students live and work. 

Another new initiative at NIU is geared towards professionals who are considering changing careers to become teachers…..we now have a specially designed MA in Teaching with specializations in elementary education and health education for people seeking their initial certification as teachers. 

I could go on and on about the changes NIU faculty, staff and students are undergoing in an effort to become more innovative and entrepreneurial…

We are a great institution and yes, Illinois is a great State.  But today, as a State and as public Higher Education, we are faced with major challenges--challenges that, if we fail adequately to address, will result in irreversible damage to the very fiber of our society.  NIU understands the financial crisis the state is facing, and we are committed to continue to assist the state in enacting viable solutions that maintain the core of our mission and the integrity of our services.  Therefore I offer three very clearly defined areas that will make a difference and help preserve our quality, affordability, and access:

I.  NIU is a public university…..we are state-assisted with an annual operating budget of approximately $438 million in FY11, of which $100.8 million is appropriated from the state and $141 million is derived from tuition revenues.  The balance of our annual operating budget constitutes restricted or dedicated funds for bond revenue operations, grants, contracts or student activities.  Virtually half of our operating budget is restricted for specific purposes and unavailable to provide us with reallocation opportunities.  In FY2011, the university received less appropriated money than it did in FY1999.  The state cash flow delays are potentially devastating to our operations and our attempts to maintain quality programs and services.   Therefore we desperately need our state appropriation to be forthcoming in a timely and predictable manner.  That has not been the case over the last two fiscal years.  Timely payments would indeed make a significant difference. 

II.  Our second major area of concern relates to the retention of tuition.  In fact, one of the key  reasons we are able to keep our doors open and our students in class progressing towards degrees is that in 1996 the General Assembly provided statutory authority to the public universities to hold their tuition dollars locally.  Previous to that, public universities were forced to send tuition funds to Springfield for re-appropriation, sometimes very late in the year in which they were collected.  Enrollment fluctuations resulted in students having difficulty obtaining full class schedules, as teachers were unable to be hired given the delay in receiving the funding.  Frequently, the state would hold back some level of a public university’s tuition funds; and not all the tuition funds were necessarily returned in a timely manner to the universities.  Maintaining control and use of tuition revenue has been and will remain crucial in order to manage our institutions now and in the future.  I want to thank this committee for your understanding of and appreciation for these key issues.  So far, I’ve reiterated that we need our appropriations paid in a timely and predictable manner, and we need to maintain our income funds locally.

III.  The third factor that will help us achieve greater efficiency and productivity can be termed relief from unfunded mandates and regulations. 

Committee members will undoubtedly ask me this morning why our tuition and/or fees have risen disproportionately to our state GR reductions.   I want to address this issue in more detail.

Declining state support, tens of millions of dollars of unfunded mandates and increased regulation and compliance, and escalating operational costs have resulted in the burden falling on students and their families through higher tuition and fees. 

Since FY2002, NIU has absorbed an aggregate of $91.9 million dollars worth of unfunded mandates including annual Group Health Insurance contributions, Medicare payments, Illinois Veterans and National Guard Grant payments, along with MIA/POW Scholarship grants, sprinkler systems in our residence halls, minimum wage hikes and campus security enhancements required by federal and state laws.  Let me clarify that I am not opposed to these programs….indeed they are both needed and helpful to many Illinoisans; but when the state adopts these programs and doesn’t fund them, public universities are left holding the bag.

Utility costs have escalated over 126% since 1998.  We’ve lowered these costs through entering into energy saving performance contracts over the last 10 years that have resulted in an estimated cumulative savings of $20.2 million.

Since 2002, NIU has experienced a total of $15.3 million in state appropriated base reductions.  Simultaneously, the University has also experienced $15.8 million in internal reductions through operational efficiencies and program and service reductions/eliminations.  It is these internal reductions that we have reallocated to provide us with resources to partially address shifts in program and student demand, to help us meet unfunded mandates, annual cost increases, emergency maintenance and repairs and other related costs. 

Despite state funds decreasing over the last 10 years, our tuition and fees remain 11.1% below the statewide average for public universities tuition and fees.  Our instructional costs are 7.2% below the statewide average.  We’ve reduced our tenure/tenure track faculty over the last several years by 3.4%.  Truth in Tuition requires that students who enter the university as freshmen pay the same rate during their four plus years, as long as they remain consistently enrolled.  Therefore, in any given year, our tuition increases apply to just 28% of the total undergraduate enrollment. 

When we tried to set aside state funds to address our deferred maintenance needs, the state removed the funds from our appropriation line in FY2009. 

I am pleased to be able to report to you today that despite these cuts, our productivity has grown.  In 2001, we awarded 4,723 degrees and in 2010 we awarded 6,048, a 28% increase in 10 years.  And we’ve done so with fewer personnel….not filling 63 positions in FY11 and reducing non-personnel expenditures by almost $2 million. 

We’ve eliminated academic majors, minors and areas of specialization in our curricula since 2007 that generated approximately $1.8 million that we reallocated to other academic programs (some of which I listed earlier here today) that are more needed or in higher demand by our students.  

We’ve decreased equipment expenditures 13% across both state GR and Income Funds since 2007 despite market increases in the cost of equipment.

While I will not sit here in front of this committee and claim that NIU has achieved complete operational efficiency (but we are working towards that, I assure you), the lack of consistent state voucher payments, the increased regulation and unfunded mandates placed on NIU and other public universities all create obligations and inflexibility, inefficiency and bureaucracy that are inhibiting our ability to properly operate, manage and indeed become more entrepreneurial and less dependent on state funds. 

In closing, I want you to know that I appreciate your leadership and efforts on behalf of public universities and higher education and pledge to you that I will continue the efforts at NIU to enhance our operational efficiency and actively seek out entrepreneurial opportunities that will make us less dependent on state funding in the future. 

I ask your continued support for timely and predictable appropriation payments, maintaining tuition funds locally at each public university and relief from current and future unfunded mandates and regulations that inhibit our efforts to enhance operational efficiency.

I welcome your questions and comments.