Sequestration puts pressure on UI budget

University Board of Trustees

Walter Knorr, right, university chief financial officer, talks with UIC student trustee Ken Thomas. Photo: L. Brian Stauffer/UIUC News Bureau

Pressures on the university’s budget will continue to increase in the coming year.

That was the forecast from Walter Knorr, university vice president and chief financial officer, at the March 7 U of I Board of Trustees meeting in Urbana.

Knorr said sequestration, across-the-board cuts designed to reduce the federal budget by $85 billion, could cost the university as much as $60 million in lost research funding next year.

So far the impact has been minimal, Knorr said, but that could change as specific funding reductions are announced.

“It will be some time before we know the full magnitude of the cuts,” said U of I President Bob Easter.

The National Institutes of Health, for example, has said it will cut current and future programs; the National Science Foundation has promised to continue current funding and cut future projects.

Knorr said the university will take a $2.3 million hit from a recent adjustment to the Medicare reimbursement rate.

Trustee Timothy Koritz, chair of the University Healthcare System Committee, said the UI Hospital could see a $15 million loss in revenue because of changes in Medicaid reimbursement. The state has already filed a challenge to the rate change, Koritz said.

The state’s financial problems continue to contribute to the university’s financial insecurity, Knorr said.

Recently, the state was a record-setting $525 million behind in promised payments and the university annually carries over an average of about $300 million. The current backlog is $494 million.

Gov. Pat Quinn proposed a nearly 5 percent cut to higher education next year, which could mean a loss of at least $32 million in the university’s operating budget and a return to inflation-adjusted 1965 funding levels.

Knorr said university officials are touting the U of I’s “diversity of revenues,” hoping to receive a better bond rating and escape the shadow of the state’s financial reputation.

“Of eight cylinders,” he said of the university’s varied funding sources, “certainly seven are firing.”

Board chair Christopher Kennedy noted that the $300 million owed annually by the state was close to the revenue goals outlined earlier in the meeting by new U of I Foundation president and CEO Thomas Farrell — providing the potential to blunt some of the financial challenges.

Farrell told trustees his goal is to increase gift totals to $450 million and the endowment to $1.5 billion in the next 10 years, bringing the university in line with peer institutions.

“We can help create results that can fuel the overall operations,” Farrell said.

Kennedy said he was disappointed with Quinn’s proposed cuts to higher education.

“It’s hard to look at the state budget and conclude anything other than they think education is for the wealthy,” Kennedy said.

• Mike Helenthal is assistant editor of Inside Illinois, the newspaper for the Urbana-Champaign campus.

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