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Waiting for Cash in Illinois

January 6, 2010

It’s easier to promise money than to pay it out. That’s the tough lesson being learned in Illinois, where revenue shortfalls have left public colleges with a backlog of $770 million in appropriations approved by lawmakers and still undelivered.

Faced with its own backlog of $436 million, the University of Illinois System announced furlough and hiring freeze plans Tuesday that would trim $82 million from its operating budget. The effort is designed to buy the university some time as officials wait for money that few believe will arrive in full before the end of the fiscal year, June 30. Though the 2009-10 fiscal year is already half over, the Illinois system has received just 7 percent of the funds the state appropriated to it for the year that began July 1.

Stanley O. Ikenberry, the university’s interim president, left the door cracked open -- very slightly -- for the possibility that pay reductions from furloughs could be reimbursed if the university collected a “material payment” from the state before July.

“Frankly, as we look at the financial position of the state of Illinois, I wish we could hope that would happen,” Ikenberry told reporters on a conference call Tuesday. “But that does not appear a practical reality.”

The furloughs would mandate four unpaid days for most employees, resulting in an average pay cut of about two percent. Higher paid administrators, including Ikenberry, would take 10 days, resulting in a cut of about 5 percent. Ron Zook, who draws a salary of about $1.5 million as the university’s football coach, would be subject only to the four day furlough, as would other major sports coaches at the university.

Employees making less than $30,000 a year would be exempt from furloughs, as would graduate assistants and those paid purely through grants and contracts. Civil service employees, who are unionized, would also not be included in the plan. The university will, however, seek personnel cost reductions with unionized employees under collective bargaining rules, Ikenberry said.

Backlog Turns Political Football

The funding backlog in Illinois has forced university presidents and other state agency heads to plead their cases to the state’s comptroller, who is charged with deciding which agencies are most in need of receiving the appropriated money that is available. In one such instance last month, Southern Illinois University prevailed on the comptroller’s office to hasten payments for fear it would fail to make payroll. The university received $17.1 million, about $1 million above what it said was needed to pay employees in January and February. Even with that allocation, however, the university is still owed $100 million from the state, according to officials.

“All day, every day, the comptroller’s office is addressing emergencies from entities across the state,” said Carol Knowles, press secretary for Comptroller Daniel Hynes. “When you have a backlog as phenomenally large as Illinois has of more than $5 billion, it makes it very difficult to address all the emergencies. And you have to weigh how bad all the emergencies are.”

The fight over funding in Illinois comes in the midst of a heated election year, which pits Hynes against incumbent Gov. Pat Quinn for the Democratic nomination. The state’s cash flow problems -- and who’s to blame for them -- have been the subject of political debate between the two candidates, who exchanged barbs in the wake of the University of Illinois’s furlough announcement Tuesday.

Al Bowman, president of Illinois State University, said he didn’t expect any real solutions to the cash flow problem before voters head to the polls Nov. 2.

“It’s going to take an awful lot of courage for legislators and the governor to enact a significant tax increase of some kind,” Bowman said. “I think it’s politically naive to think that would happen before the general election.”

Illinois State has received only about 15 percent of its appropriated funds, creating a shortfall of $30.8 million as of Tuesday, Bowman said. The university has thus far been able to draw down reserves to sustain operations, he said. As for furloughs, Bowman said that mimicking the University of Illinois’s strategy would only generate about $500,000 -- a figure far short of the backlog.

“It just doesn’t make a lot of sense [to mandate furloughs],” he said.

The University of Illinois’s furloughs of 11,000 employees are expected to generate $17 million, which would address only about 4 percent of the $436 million backlog. The lion’s share of the $82 million that Illinois plans to generate will come from $20 million in reserves and reduced expenditures of $45 million, which will be realized in part by freezes on hiring and administrative restructuring, officials said.

Echoing Bowman’s comments, Southern Illinois's president, Glenn Poshard, noted that furloughs wouldn’t do much to address the financial problem.

“The savings yielded from any furlough or layoff plan simply cannot make up for the $100 million owed the university by the state of Illinois,” he said in an e-mail to employees Tuesday. “Are furloughs and layoffs a real possibility next budget year? They may be, but we will not be rushed into that decision as a result of delays in state reimbursements.”

 

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