from Cary Nelson, AAUP President (and longtime CFA member) and Howard Bunsis, AAUP Treasurer

The State does have a fiscal problem, and it has been solving the problem in the short term by delaying payments to vendors, and now the State is delaying the appropriation for higher education.

Moody’s downgraded the State of Illinois debt in December of 2009. Fitch, another ratings service, gave Illinois an A rating on 12/30/2009, and put the state on a watch list for a possible downgrade as well.

The reason for Illinois’s fiscal problem is that income tax receipts have been lower than expected. The size of the problem for the 2010 budget is $2 billion, which is approximately 7% of the State’s General Fund budget.

Looking further in the future, there has been talk of budget holes in the $12-$13 billion range. The current governor wants to raise the income tax rate on those earning more than $250,000 per year, and a democratic candidate for governor wants to implement a progressive income tax system (instead of the current flat tax system). Every Republican candidate for governor is against a tax increase.

What is the response to this?

1. What is the State likely to do? The State appropriation is only 16% of the total revenue source for the UI system. There may be a 6% reduction in the appropriation. The appropriation is only 16% of the UI system’s revenue, so in terms of total revenues, the 6% reduction will reduce overall UI revenues by less than 1%. This reduction is not large enough to lead to furloughs.
2. The UI administration, in its budget documents, at times implies that the State appropriation funds the entire academic mission at the UI, which overstates reality. Administrators often argue that “this” money can only be used for “this,” and “that” money can only be used for “that.” However, the reality is that the UI system is one system, not a General Fund only system or a State Appropriation only system. That is why an analysis must focus on the health of the entire system, and not some component of the system that the administration claims is out of money.
3. The State is not considering eliminating the entire appropriation; they are considering delaying payments to the UI system. These payments are going to be repaid at some point. Note that the rating agencies did not rate the State bankrupt or junk; they gave the State “A” ratings, which is the 3rd highest rating for both Moody’s and Fitch. If the rating agencies believed that the higher education appropriation would NEVER be paid back, then the rating would have been much lower (such as the Baa2 rating given to the State of California).
4. What about the current cash flow problem caused by the delay of payments? Michigan faced this exact situation about 18 months ago, when the State delayed 2 months of the annual higher education appropriation. In Michigan, like Illinois, the state funds between 15% and 30% of the public universities’ total revenues (note: this percentage is over 65% in California). Not one public institution in Michigan asked the employees to give back salary money, nor did the administrations at these schools give back their salaries. All that happened was that the universities used their existing cash reserves to deal with the short term problem, and then were made whole when the full payments were made about 6 months later (it was 6 months from the time a payment was delayed to when it was repaid in full by the State). Now, is Michigan in worse shape than Illinois? Absolutely.
5. What should the UI do in response to a short-term cash flow problem?
6. a. The first thing would be to use existing reserves. The Moody’s viability ratio measures how many months of reserves an institution has in relation to total expenditures. If we omit the UI Foundation (which is a very conservative approach), the UI system had approximately 12% or 2 months of reserves as of June 30, 2008. The standard recommendation is to have between 5% and 15% of reserves. Note that these reserves are 12% of total expenses. Therefore, a reduction in a few months of the state appropriation should easily be handled from current cash reserves, which are significant.

b. If the administration claims they have no cash reserves, they can borrow short term money to guide them through this period. Borrowing money is not a long term solution, but this is a short term cash flow problem. The UI system still has a very strong credit rating.

c. Any reduction in spending should not come from the employees, but from administrative costs and administrative spending.

d. The reserves of the UI Foundation should be used to help with any short term cash flow problem. The UI Foundation has over $1 billion in assets; any temporary shortfall can be borrowed from the Foundation, and then repaid when the State pays the appropriation. It is not advisable to use Foundation dollars, but since they will be repaid in a short time, it is a solution that is preferred to reducing the pay of current employees.

e. The last option, after the above three have been exhausted, would be to ask the UI system’s employees to accept a temporary reduction in pay. When the administration gets the appropriation back from the State, then the pay reduction should be paid back to the employees, with interest. Let’s be clear: the 6% decline in the annual appropriation may be a permanent reduction. However, this small reduction is not nearly large enough to support any furlough. Consider this: if the UI system is receiving a temporary decline in the appropriation, then any reduction in pay should be temporary and should be fully refunded.

Scorching new letter to the editor by CFA Executive Committee member:

Before we implement furloughs that will cause considerable hardship, we should reduce the costs of activities outside the research and teaching missions of the university.

We continue to increase administrative positions, for example, often at high salaries, even as cuts undermine these missions.

How can we implement furloughs fairly if it comes to that? First, acknowledge that these are substantial wage cuts following several years with tiny or no raises. We have fallen further and further behind. Now wages – along with travel, research, and other funds – are being reduced. Cuts in academic units continue to diminish the quality of undergraduate and graduate education.

Second, acknowledge the vast salary gaps between faculty and the proliferating number of highly paid administrators. The university’s plan to exempt workers earning less than $30,000 and assess a small number of top administrators a higher number of furlough days is a modest effort in this direction. If the number of impacted administrators were increased, it would be possible to exempt a greater number of the lowest paid.

This crisis draws our attention to some misplaced priorities and a conversation that is long overdue. We should reduce our bloated administration and the charity we practice toward private corporations in the research park. We cannot afford the costly corporate policies implemented over the past decade.

The human costs could be reduced if we invested our limited resources where they are needed most – in teaching and basic research, not huge administrative salaries and support for private corporations.

JIM BARRETT

CFA President Megan McLaughlin has requested a meeting with State Reps. Jakobsson and Rose and Sen. Frerichs to discuss the proposed tuition benefit cut. The meeting is currently being arranged via email because – in other cutback news – Prof. McLaughlin’s office telephone is scheduled to be removed.

Watch this space for more!

Unfortunately, this is a valid question for workers at the University of Illinois. The News-Gazette reports that legislation has been introduced to get rid of the fifty percent tuition waivers that Illinois employees can use for their children if they work here for seven years or more. They write:

State law allows employees who have worked for one of the Illinois’ public universities for seven or more years to receive a 50 percent waiver of their children’s tuition costs.

Employees would lose that benefit if legislation (HB 4706) introduced earlier this month by state Rep. Dave Winters, R-Rockford, is eventually signed into law.

“I think a lot of the universities have been using this as part of their compensation package,” said state Rep. Naomi Jakobsson, D-Urbana. “Taking away a part of their offer is not something I can support.”

Randy Kangas, director of the UI system’s office for planning and budgeting, said 942 of these tuition waivers were issued in fiscal 2009, totaling $3,981,600 of revenue the university never realized.

Most of those, 722 waivers, were issued for students at the Urbana-Champaign campus, erasing $3,254,800 that would have been added to the campus’ budget.

UI officials are saying they will need time to discuss the bill with state representatives before they develop any particular position.

Jakobsson and UI spokesman Tom Hardy said they had not spoken with Winters to determine his motive, and Winters did not return several calls from The News-Gazette to his offices on Friday. But Jakobsson said there might be a better way if it is a budget issue.

“If we stop giving legislative scholarships, it would add more than” the $4 million, Jakobsson said.

Every year, each of the state’s 177 legislators are permitted to issue up to eight years’ worth of full tuition waivers to students wishing to attend any of the state’s universities. The only prerequisite is that the student live in the legislator’s district.

The program has drawn scrutiny over the years – from The News-Gazette and other news organizations – after some legislators were found to have been giving the scholarships to children of political contributors. A bill introduced by Jakobsson to kill the program was defeated in 2003.

Eliminating the program “would be a better way to find $4 million,” Jakobsson said. She added that she opts not to dole out the tuition waivers.

A bit miffed, I tweeted:

University of Illinois officials want to take away employee benefit of tuition waivers for our children

And linked to the News-Gazette story. Janet Stemwedel, Associate Professor of Philosophy at San Jose State University and also known as the ever-clever Dr. Free-Ride of Adventures in Ethics and Science, picked up on the story and wrote a blog post herself:

Some universities (public ones and private ones) offer tuition waivers to family members of their employees. Where they are offered, tuition waivers are a part of the compensation package that is usually meant to be a counterweight to a salary that is lower than one might have liked. Health insurance and pensions (where they exist) work this way, too. If the benefit is not offered as part of the compensation package, the potential hire might (or should) sit down and calculate what those additional costs (to buy insurance, save for retirement, pay for a child’s college education) will be, and whether it is plausible to cover them on the salary being offered.

Tuition waivers may not be a big deal for potential employees who have no children (and have no intention of having children), but for those who do, they may be part of the calculation of whether one offer of employment is better or worse than another. They might also be a data point in sussing out whether a university is a family friendly work environment.(emphasis mine)

I think her point about the tuition waivers helping to create a family friendly environment is an important one. Illinois prides itself on creating a good environment for families — they have a great dual career program, are generous with their tenure rollbacks, and in my experience treat parents and non-parents, dual hires and regular hires equally. This is part of the reason getting rid of these waivers would be such a big mistake for Illinois.

And finally, Chad Orzel, Assistant Professor in the Department of Physics and Astronomy at Union College who writes at Uncertain Principles weighed in on the topic, because of a comment on Dr. Free-Ride’s post regarding whether waivers are fair to folks without kids:

It takes no time at all for the “Tuition benefits are unfair to people without kids” argument to pop up in comments. This is, as always, pretty stupid, because the same logic leads to thinking that health insurance benefits are unfair to people who don’t become catastrophically ill. Tuition benefits are basically kid insurance– it’s a commitment to employees of an educational institution to compensate for lower salary, guaranteeing that even though they are not being paid as much as they might earn elsewhere, should they have children, they will be able to provide those children with a good education.

And that’s the real problem, here. In a sense, the current employees of the University of Illinois have already “paid into” the system– they have worked for less for the last several years, and planned their investments, with the understanding that their children would be provided for. In the absence of the benefit, they might have chosen to work elsewhere, and they certainly would have handled their finances differently.

….

This general class of problem is not unique to academia, of course. You see the same thing in the business world– businesses who have traded generous benefits for lower salaries, who find themselves strapped for cash, and start attacking the benefits of their employees (or, worse yet, their retirees). This was a big part of GM’s problems, for example. Sadly, the solution always seems to end up screwing the employees, who have less money and power.

….

In the general case, I have essentially zero sympathy for managers and administrators who paint their institutions into this kind of corner. They made the choice to buy employees off with generous benefits that they didn’t think would end up costing them anything, and while it looked great on the balance sheet in the short term, it’s blown up in their faces long-term. They deserve to sweat and squirm for a bit, but they should not be able to renege on their commitment to their employees. (emphasis mine)

So, what do you think of the possible repeal of our tuition waivers for our children? What should we be doing about it?

The News-Gazette outdoes itself in its December 10 editorial salvo against University of Illinois faculty presuming to inject themselves into their corporate-dominated Board of Trustees.

The editorial evokes a Churchill barb. It stumbled over the truth (faculty’s centrality to concepts of “shared governance” distinguishing universities from other institutions and propelling them to world leadership), but picked itself up and hurried on as if nothing had happened. Leave aside its apparent unawareness of faculty representation on trustee boards in other states. If the core mission of a university is teaching and research, a faculty presence on the Board of Trustees offers insight from those who actually perform those functions. Even when the editorial dismisses faculty as mere employees, it shortchanges evidence that the expertise of worker representatives on corporate boards (mandated in many OECD countries) can contribute to an efficient and cooperative corporate culture.

The News-Gazette is in good company. Ousted trustee David Dorris declared that “The last thing we need is a faculty member on the board.” The last thing? How about trustees who misuse their insider status or whose qualifications had more to do with their campaign contributions to Governor Blagojevich than their educational contributions? The citizens of Illinois, along with UIUC community members cast as asylum inmates by their local newspaper, have much to gain from Rep. Jakobsson’s and the Campus Faculty Association’s proposed reforms, and much to lose from taking seriously the News-Gazette’s superficial treatment of this issue.

– Mark Leff

[published in an edited version in today’s News-Gazette, i.e. without the clever “inmates” reference to the N-G’s own editorial of Dec. 10 – ed.]

The CFA Proposal to Select and Diversify the Composition of the University Board of Trustees has two main elements that have been incorporated into the pending legislation, HB4688:
1. Inclusion of faculty as Trustees and
2. Establishing a Trustees Selection Task Force TRUST Force) to receive and review nominations and make recommendations to the Governor. Membership on the TRUST Force would include the chairs of the three campus senates, three acknowledged leaders in education from outside the University of Illinois and four additional persons with impeccable integrity. The credentials of all members of the TRUST Force should be made public to substantiate their requisite experience for this important role.
This call for change embodied in the CFA’s proposal is perhaps best stated in former University of Illinois President Stanley Ikenberry’s thoughtful essay entitled “Uncertain and Unplanned: The Future of Public Higher Education”, Policy Forum, vol. 17, Institute of Government Public Affairs, University of Illinois, Champaign, 2005. Ikenberry wrote, “Public college and university governing boards need to reflect the diversification in ‘publics’ to which they must now be accountable and responsible. A fresh vision of public university governing structures, consistent with public interest, consistent with the emergence of new stakeholders, and reflective of a clarified ‘state-public university partnership’ or ‘social contract’ needs to be crafted.”
A prime reason for inclusion of faculty on the Board of Trustees is the knowledge they would bring to the table. Higher education is faced with complex problems and wonderful opportunities. Faculty are arguably the constituency that is most familiar with both. As the U of I goes forward it would be a shame, if not foolish, not to include that expertise in the governance of the institution.
In addition, faculty grants contribute more money to the university than State appropriations, yet faculty have zero say in university governance.
Some of the best arguments in favor of having faculty representation on the U of I Board of Trustees also include what has taken place without such representation:
1. Failure to request and obtain appropriate resources from the State of IL over decades, even in times of economic prosperity (source: report of the North Central Commission on Higher Education)
2. Failure to educate IL legislators and IL citizens on the merits and activities of the U of I so that they would champion funds for the University
3. Interference with appointments and ‘questionable’ awarding of contracts
4. Admissions scandal
5. Politicization of the Board – Pay to Play: Recent past Trustees contributed more than
$585,000 to former Governor Blagojevich
6. Transfer of university property to the U of I Foundation that was subsequently sold to donors at below market value
7. Contracts that negate U of I policies. Examples: Contracts with Triple Canopy, Blackwater, and the Academy on Capitalism
8. Silencing dissent
9. Golden parachutes to ‘team players’
10. Increases in tuition while at the same time approving tens of millions of dollars to the Research Park .
11. Imposition of a Fourth Mission on the university, “Economic Development”, arguably, at the expense of the university fulfilling its traditional three missions: teaching, research and service.

– Stephen Kaufman

Your [News-Gazette]December 10 editorial chiding state Rep. Naomi Jakobsson for proposing faculty representation on the U of I Board of Trustees greatly misrepresents the role of our University’s faculty. I doubt you would publish such an editorial about a proposal to add doctors to the governing board of a hospital. You certainly would not show such disdain for the doctors staffing that hospital, likening them, as you did in this case, to inmates of an asylum. Faculty set curricula and work to pass on the special knowledge of their field to their students. Trustees and administrators do not, and indeed cannot, tell faculty how to do this.

As with any great university, members of the U of I’s faculty already play a major role in the administration of the academic enterprise. Were they mere employees, faculty would not fund the organization in which they work. In reality, more than a third of the money coming to the University is brought to our community and state by research grants obtained by members of the University’s world class faculty. Direct State appropriations, on the other hand, amount to less than eighteen percent of the University’s budget; this year, the State has failed to supply even that small share of the money needed to run the University. It will be left to the faculty to shield students from that failure.

In your editorial you say “shame on state Rep. Naomi Jakobsson”, but in fact, the shame is on you: The many members of the University faculty living in the community you claim to represent and the readers who buy your paper all deserve editorial opinions that are at least minimally informed.
-Peter Loeb

CFA’s proposal to reform the UI Board of Trustees has been introduced (in slightly altered form) by Naomi Jakobsson as HB4688!

This proposal, which the CFA had been working on for months BEFORE the “clout” scandal broke, seeks to establish a “TRUST force” made up of representatives from various constituencies – faculty and others – to select a BOT with an interest in the University’s core mission: education and research.

And more!

In recent days, University of Illinois administrators and spokespeople have made statements suggesting that graduate students are threatening to go on strike because they are not being given the raise they have requested at a time when “other employees of the university did not receive any raises at all this year” ( http://www.provost.illinois.edu/geo_negotiation_notes.html) .

I believe it is important for the university community and greater public to be aware of a very different perspective. In fact, some top university administrators, including Richard Herman and Chet Gardner (who ran the now defunct Global Campus, which will never recoup the millions of dollars the university invested in it), have received extremely generous raises. It is also worth noting that even though university administrators argue that they cannot afford to pay graduate student employees a living wage, the university paid attorneys $400,000 to represent it at the panel investigating the use of clout for university admission.

The reason graduate student assistants are threatening to strike is that the university administration has failed to negotiate in good faith with the graduate student union. For example, whereas the graduate student union presented the administration with a proposal on the first day of negotiations, university administrators did not present a counter proposal until 4 days before the old contract expired, and their proposal called for a 3 year wage freeze.

Howard Berenbaum

[Submitted to the News-Gazette this morning by one of our Executive Committee members – ed.]

As a member of the Campus Faculty Association at the University of Illinois I support the Graduate Employees Organization (GEO) and their strike for a better contract:

In recent years we’ve heard a lot from the U. of I. administration about their goal of creating better jobs for Illinois. Now, in the worst economic downturn since the 1930s, University leaders seem committed to lowering the wages and working conditions of some of their hardest-working employees. Despite the administration’s sketchy figures, most graduate teaching assistants make below the university’s own minimal figures for what it costs to live in Champaign or Urbana. Good jobs for Illinois?

The University has been starved for state funds for more than a decade. Staffing has been reduced, buildings neglected, equipment is out of date and there are not enough janitors to clean the classrooms properly. Students sit in classrooms with broken furniture and trash on the floor. Most faculty members work more than 60 hours a week, and we are about to be told to take unpaid furlough days. Meanwhile, the administration pours millions into public relations, consulting firms, stadium sky-boxes, bonuses for disgraced administrators and ill-advised gambles like the Global Campus.

Driving down the wages and raising the tuition of the teaching assistants, who provide nearly a quarter of instruction to U of I undergraduates, might make for a good corporate bottom line — but is not going to encourage the state legislature to better fund the University. It’s not going to improve undergraduate education, or draw excellent graduate students to Illinois.

Susan Davis
Professor
Urbana-Champaign

In the event of a grad employee strike next week, GEO is requesting that faculty show support by canceling classes. For those who feel they cannot do that, or can only cancel some, CFA is helping find alternate venues. Arrangements depend upon date and time, class size and other needs, and availability, so we can make no guarantees. The information [here attached as a “comment”] has been sent to all CFA members, but we can also assist others.