Decline in state support likely to continue

dollar signsThe American economy is gradually improving, but it’s too soon to stop worrying about Illinois’ grave financial circumstances — and the effect on higher education funding.

That was the message from campus administrators and economic experts at a town hall meeting on the university’s budget Monday in Student Center West, sponsored by Chancellor Paula Allen-Meares.

Another budget town hall meeting will be held today, 1 to 2:30 p.m., in the Illinois Room, Student Center East. All members of the campus community are invited.

“As a result of the state’s continuing financial challenges, it appears that public higher education will face yet another year of declining state support,” Allen-Meares said.

The state is about $9 billion behind in paying its bills, said David Merriman, professor of economics and public administration and associate director of the Institute of Government and Public Affairs.

As of last week, the state owed the U of I $494 million of its contracted payments. The direct state appropriation for operating costs for this fiscal year is $667 million.

“It’s a really significant problem not to be able to pay your bills — when you literally don’t have enough in your checking account to pay for the services you’ve contracted for,” Merriman said.

“Each year, the state has made its payments [by Dec. 31], said Frank Goldberg, vice provost for resource planning and management, who presented an overview of the campus budget process.

“The fear is, one of these days, that won’t happen.”

Two significant clouds loom on the horizon, Merriman said: the state’s pension liability and the possible end of the income tax increase passed in 2011 and set to expire in 2015.

“The situation will be really bleak even if the tax increase stays,” Merriman said. “If the tax increase expires, nothing will make up for that.”

If the General Assembly does not pass pension legislation by June 1, he said, bond ratings that have already been “downgraded and downgraded and downgraded” will continue to drop.

Merriman briefly outlined the most likely pension changes for state employees:

• increased employee contributions (“probably close to a certainty”)

• increased retirement age to 67

• requiring retirees to choose between an automatic cost of living adjustment or health benefits

• shifting more of pension costs to universities and school districts

• increasing income tax rates.

The town halls are moderated by provost Lon Kaufman, vice chancellor for academic affairs, who said additional forums will be held when next year’s state budget has been finalized.

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