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					    UA Fellows Program
Seminar on Strategic Planning
      and Budgeting
         February 1-2, 2007
    Day 1 Overview
•    Introductions and Workshop Goals
•    Overview of University Organization
•    Strategic Planning & Management
      – Strategic Planning Defined
      – Key Terms and Concepts
      – Strategic Planning Process
•    Strategic Planning at the U of I: Planning Parameters
      – Environmental Assessment
      – U of I Mandates
•    Strategic Planning at the U of I: Process, Timeline, and Highlights
      – Strategic Planning Process and Timeline
      – Highlights from U of I Strategic Plans: Stages 1-3
•    Ensuring Execution at the University of Illinois
      – Plan Development and Execution FY06 – FY08
      – FY08 Budget Request
      – Five Year Resource Scenarios
•    Day 1 Wrap-Up
                                                                           Page 2
Introductions & Workshop Goals




                                 Page 3
Introductions
Presenter:
• Dr. Doug Vinzant
       Associate Vice President for Planning & Budgeting
       338 Henry Administration Building
       (217) 333-6600
       dvinzant@uillinois.edu

Also Presenting:
• Dr. Dan Layzell
       Assistant Vice President for Planning & Policy Analysis
       338c Henry Administration Building
       (217) 333-6600
       dlayzell@uillinois.edu

•   Dr. Randy Kangas
       Assistant Vice President for Budgeting
       321b Henry Administration Building
       (217) 333-0398
       rkangas@uillinois.edu
                                                                 Page 4
Workshop Goals

• Develop understanding of strategic planning and
  management concepts, terms, and processes, and their
  application at the University of Illinois (Day 1)

• Develop understanding of budgeting/resource allocation
  concepts, terms, processes, and trends at the University
  of Illinois (Day 2)

• Discuss mechanisms for creating stronger linkages
  between planning and budgeting at the University of
  Illinois (Days 1 & 2)



                                                             Page 5
Overview of University Organization




                                  Page 6
UA Organizational Chart
        Secretary of the                                                                                  BOARD OF TRUSTEES                                                     Exec. Assistant to the President
       Board of Trustees,                                                                                                                                               Exec. Assistant to the President for Development
   Secretary of the University                                                                                                                                          Special Assistant to the President for the Global
                                                                                                                                                                                        Campus Partnership
                                                                                                                PRESIDENT
       University Counsel                                                                                                                                               Executive Director for Governmental Relations
                                                                                                                                                                           Director, University Equal Opportunity
                                                                                                                                                                           Executive Director of University Audits
Executive Director for University                                                                                                                                                 University Ethics Officer
           Relations




                                                   Chief Financial Officer                                    Vice President for            Vice President for Planning and                  Vice President for Technology
                                                       (Comptroller)                                          Academic Affairs                      Administration                            and Economic Development


                                                                                                                                                                                                 Illinois VENTURES, LLC
                                                                                 Institute of Government & Public Affairs                                                                        U of I Research Park, LLC
                                                                                      President’s Leadership Program                                                                          Office of Technology Mgt (UIC)
                                                                                                  MUCIA                                                                                      Office of Technology Mgt (UIUC)
                                                                                   University Outreach & Public Service
                                                                                              University Press
                                                                                    University-wide Student Programs




                                                                                                                                                   Associate Vice President for
     Senior Associate Vice President for                     Associate Vice President for                    Associate Vice President for                                                         Associate Vice President for
                                                                                                                                                   Administrative Information
            Business and Finance                           Facilities Planning and Programs                   Planning and Budgeting                                                              University Human Resources
                                                                                                                                                      Technology Services


                                                                                                                                                                                                   Compensation and Benefits
             Business Services                                      Capital Programs                                                                Administrative Computing
                                                                                                               Planning and Budgeting                                                                 Employee Relations
             Financial Services                                         Utilities                                                                  Application and Data, Support
                                                                                                                  Decision Support                                                            Policy Administration & Compliance
                Real Estate                                                                                                                                 and Devlopment
                                                                                                                       CARLI                                                                   HRIS and Enterprise Wide Systems
     Business & Financial Serv. (UIC)*                                                                                                                 Computer Operations
                                                                                                                                                                                              Staff Organization and Development
     Business & Financial Serv. (UIS)*
    Business & Financial Serv. (UIUC)*



        * Maintains dotted line reporting to the Chancellor at their respective campuses.                                                                              Note: Organizational Chart updated as of February 2007.

                                                                                                                                                                                                                                 Page 7
UOPB Organizational Chart
                                                                                                           Vice President for                      Vice President for
                                                                Chief Financial Officer
                                                                                                           Academic Affairs                    Planning and Administration
                                                                    Walter Knorr
                                                                                                                  tbd                                Stephen K. Rugg




                                                                                                    Associate Vice President
                                                                                                                                                            Administrative Aide Teresa Howard
                                                                                                    for Planning & Budgeting
                                                                                                                                                               Staff Secretary Tara Smith
                                                                                                       Douglas H. Vinzant



                                                               Assistant VP Strategic                                              Executive Director
                     Assistant VP & CARLI                                                                                                                                                                                                           Assistant VP Budget
                                                                 Planning & Policy                                                 Decision Support
                      Executive Director                                                                                                                                                                                                              Randy Kangas
                                                                      Analysis                                                        Linda Bair
                       Susan Singleton
                                                                    Dan Layzell

                                                                                                                                    Project Director
       Director CARLI                                           Resource & Policy                                               Advancement Technology                                                                         Director Institutional                 Budget Planning
                                    Administrative Assistant                                                                                                   Administrative Support
        User Services                                                Analyst                                                        Andrea Ballinger                                                                           Studies & Analysis                        & Analysis
                                       Cheryl A. Brown                                                                                                            Diane Peacha
 Kristine J. Hammerstrand                                         Tyler Kearney                                                                                                                                                    Barb Welge                          Jo Menacher
                                                                                                                                                                                                                                                                        Andy Sestak
                                                                                                                                                                                                                                                                        Linda Meyer
     Library System                   Associate Director                                                                                                                                                                                                               Andrea Hoey
       Coordinators                  CARLI Data Services                                                                                                                                                                     Assistant Director (open)                 Sandy Street
    Mary Ellen Farrell                Catherine I. Salika                         Business Coordinator                                                                                                                             Kevin Knott
                                                                                                                                  Technical Architect                        Data Architect
     E. Paige Weston                                                                 Lisa Courtney                                                                                                                                 Siew Szetho
                                                                                                                                  Michael Wonderlich                         Mark Cumbow                                                                            Director Information
  Jennifer H. Masciadrelli                                                                                                                                                                                                         Pam Lowrey
   Mary Kay Sutherland                                                                                                                                                                                                              El Gentry                            Services
    Jessica C. Gibson                 Gordon J. Fellows                                                                                                                                                                           Jonathan Laird                        John Evans
     Lorna J. Engels                   Anne S. Hudson
                                                                                                                                                                                                  Data Designers
                                       Kathy K. Chang            Business Architect                                                                      Technical Analyst
       Amy Maroso                                                                                   Support Services                                                                                Nick Arend
                                                                    Aaron Walz                                                                               Vacant                                                               Staff Secretary
                                                                                                                                                                                                    Bill Failey
                                                                                                                                                                                                   Chris Stoops                    Terry Smith
      Secretary III                                                                                                                                                                                                                                                    Mark Anderson
                                        Director CARLI            Functional Area                                                                                                                                                                                       Nathan Wilds
   Rebecca Blackburn
                                     Electronic Resources          Coordinators                          User Support                                                                            ETL Developers                                                       Kristopher Smith
                                       Thomas J. Dorst              Beth Ladd                             Polly Kroha                                      BI Specialist                        Kiran Avadhanula
                                                                 Michelle Bergman                        Marcia Tarvin                                     Ruth Wieties                          Udaya Marreddy
      CARLI Web                                                    Mark Pollard                          Buddy Strube                                                                           Guru Ramamurthy
    Edward M. Schell                                               Jim Clennon                                                                                                                                                                                    Administrative Secretary
                                       Library Systems                                                                                                                                                                                                                Angie Rhodes
                                          Coordinator
                                       David H. Hamilton                                                                                                  Implementation                        Data Quality Analyst
                                                                                                    Communications                                          Coordinator
     Director CARLI                                               Business Analyst                                                                                                                 Jennifer Selk
                                                                                                       Vacant                                               Deb Coggins
   Business Financial                                             Amanda Bodine
        Services                                                ITPC Project Support
                                     Assistant Director             Lisa Fogarty
    Connie D. Walsh
                                   CARLI Systems Services                                         Sr. Project Managers
                                       Brandon Gant                                               ITPC Project Support                                  Application Developer
                                                                                                     Heather Hafner                                         Raman Tyagi
       Accountant
                                                                                                      Lisa Kuechle
      Diane E. Day                 Christopher G. Saunders     Requirements Analyst
                                        Todd A. Pavik            Heather Hafner
                                     Christopher E. Delis
                                         Patrick Zurek
    Sr. Administrative
  Information Systems
        Consultant                      Director CARLI
    Bernard G. Sloan                 Collection Services
                                     Elizabeth C. Clarage
                                                                                                                                                                                                     Note: Organizational Chart updated as of February 2007
                                                                                                                                                                                                                                                                                   Page 8
Strategic Planning and Management




                                Page 9
  Strategic Planning - Defined

   • Many different approaches to strategic planning
   • Strategic Planning – “a disciplined effort to produce fundamental
     decisions and actions that shape and guide what an organization (or
     other entity) is, what it does, and why it does it”
   • Strategic Planning – a process used to establish strategic intent



                                 Key Takeaway: “Strategic
                                 planning is a set of concepts,
                                 procedures, and tools designed
                                 to help leaders, managers, and
                                 planners think, act, and learn
                                 strategically.”




Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition.   Page 10
   Strategic Planning - Benefits

    •      Benefits of Strategic Planning
           1. “Promotion of strategic thinking, acting, and learning, especially
              through dialogue and strategic conversation among key actors”
           2. “Improved decision making”
           3. “Enhanced organizational effectiveness”



                                  Key Takeaway: Strategic planning
                                  helps organizations deal with
                                  changing environments. “It can help
                                  them build on strengths and take
                                  advantage of major opportunities
                                  while they also overcome or minimize
                                  weaknesses and serious challenges.”




Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition.   Page 11
Strategic Planning - Key Terms


•   Guiding Values
     – The fundamental principles and behaviors that embody how the planning unit
       and its people are expected to operate. Guiding values reflect and reinforce the
       desired culture of the planning unit.
•   Mission
     – The overall function of the planning unit – what it is trying to accomplish. A
       mission statement clarifies an organization’s purpose, or why it should be doing
       what it does.
•   Vision
     – The desired future state of the planning unit. The vision describes where the
       planning unit is headed, what it intends to be, and/or how it wishes to be
       perceived in the future.
•   Statement of Strategic Intent
     – A brief synopsis of what the planning unit intends to achieve through its
       strategies and how it plans to go about achieving them.
•   Environmental Assessment
     – An analytical technique by which the planning unit assesses the key external and
       internal factors that are or will have an impact on the development and execution
       of the planning unit’s strategic plan, including demographic, educational,
       economic/fiscal, social, and political factors.


                                                                                          Page 12
Strategic Planning - Key Terms (continued)
•   Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
     – An analytical framework within which the planning unit evaluates its internal
       (strengths and weaknesses) and external (opportunities and threats)
       environment and the related implications for the strategy development and
       execution.
•   Strategic Issue
     – A fundamental policy question or critical challenge affecting a planning unit.
       Strategic issue description should phrase the issue as a question, identify factors
       that make it an issue, and articulate the consequences of not addressing the
       issue.
•   Strategic Goal
     – A future condition or performance level that the planning unit intends to attain.
       Goals are the ends that guide the actions.
•   Strategic Thrust
     – The specific actions, activities, or conditions that enable or contribute to the
       successful attainment of strategic goals. As such, strategic thrusts are directly
       related and subsidiary to strategic goals.




                                                                                           Page 13
  Strategic Planning - General Approach
                                           Vision, Mission, and Goals




                    Where You Are                                                       Where You Want
                                                                                               to Be
                   Mission and mandates
                                                                                       Mission and mandates
                   Structure and systems
                                                                                       Structure and systems
                      Communications
                                                                                          Communications
                   Programs and services
                                                                                       Programs and services
                      People and skills
                           Budget
                          Support
                                              Strategic Issues                            People and skills
                                                                                               Budget
                                                                                              Support




                                                     How to Get There
                                                          Strategic plan
                                                        IT and HR plans
 Strategy Formulation                                   Communications                                Strategy Implementation
                                                       Hiring and training
                                                 Restructuring and reengineering
                                                       Budget allocations




Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition. P. 7.                          Page 14
  Overview of Strategic Planning (SP) Process

                  Review Mandates


                 Mission & Purpose
                                                                 Key Takeaway:
           Environmental Assessment                                     Though presented in a linear,
                                                                        sequential fashion, the strategic
                   SWOT Analysis                                        planning process is iterative.
                                                                        Steps may be repeated as
                                                                        “groups continuously rethink the
              Identify Strategic Issues                                 connections among the various
                                                                        elements of the process, take
               Strategy Formulation                                     action, and learn on their way to
                                                                        formulating effective strategies.”

                 Strategy Execution


              Strategy Reassessment

Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition. P. 61.              Page 15
  SP Concepts - Review Mandates

   • “Before an organization can define its mission and
     values, it must know exactly what it is formally and
     informally required to do (and not do) by external
     authorities.”

   • “Formal requirements are likely to be codified in laws,
     regulations, ordinances, articles of incorporation,
     charters, and so forth.”

   • Informal requirements can be embodied in norms or
     expectations.



Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition. P. 97-98.   Page 16
  SP Concepts - Mission


   • A mission statement “clarifies an organization’s purpose, or
     why it should be doing what it does.”

   • Benefits of a clear mission statement:
          –   Focuses discussions on what is truly important
          –   Clarifies strategic intent, which can lead to better performance
          –   More consistent, effective leadership
          –   May lead to fewer conflicts, especially involving resource allocations
          –   Helps define an organization’s strengths and weaknesses




Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition. P. 102-106.   Page 17
  SP Concepts - Vision
   •    A vision statement is “a description of what the organization will look like
        after it successfully implements its strategies and achieves its full potential.”

   •    A comprehensive vision statement (or vision of success) may include:
          –   An organization’s mission
          –   Its basic philosophy and core values
          –   Its basic strategies
          –   Its performance criteria
          –   Its important decision rules
          –   Its ethical standards                                         Key Takeaways:
                                                                            •   While a mission statement
                                                                                includes why an organization
                                                                                should be doing what it does, a
                                                                                vision statement “clarifies
                                                                                what it should look like and how
                                                                                it should behave as it fulfills its
                                                                                mission.”
                                                                            •   A mission statements serves as
                                                                                the foundation for the vision
                                                                                statement.


Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition. P. 102, 237.                 Page 18
SP Concepts - SWOT Analysis

• Assessing the environment is a key step in the strategic
  planning process. SWOT Analysis is a framework for
  organizations to evaluate both their internal and external
  environments.

                                         trengths
   Internal Environment
                                         eaknesses

                                         pportunities
  External Environment
                                         hreats



                                                               Page 19
  SP Concepts - Strategic Issues

   • “A strategic issue is a fundamental policy question or critical challenge
        affecting an organization’s mandates, mission and values, product or
        service level and mix, clients, users or payers, cost, financing, structure,
        processes, or management.”

   •    Identifying strategic issues is one of the most important and potentially one
        of the most difficult steps in the planning process. “Virtually every strategic
        issue involves conflict over what will be done, why it will be done, how and
        how much of it will be done, when it will be done, where it will be done, who
        will do it, or who will be advantaged or disadvantaged by it.”

   •    Strategic issue description should:
         – Phrase the issue as a question
         – Identify the confluence of factors that make it an issue (mission,
            mandates, SWOT, etc.)
         – Articulate the consequences of not addressing the issue



Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition. P. 153, 159.   Page 20
  SP Concepts - Strategic Issues

   •      Strategic issues arise in 3 situations:
          1. “They can arise when events beyond the control of the organization
             make or will make it difficult or impossible to accomplish basic
             objectives acceptably and affordably.”
          2. “They can arise when technological, cost, financial, staffing,
             management, or political choices for achieving basic objectives are
             changing or will soon change.”
          3. “They arise when changes in mission, mandates, or internal or external
             factors suggest present or future opportunities to
              1. Make significant improvements in the quantity or quality of
                  products or services delivered
              2. Achieve significant reductions in the cost of providing products or
                  services
              3. Introduce new products or services
              4. Combine, reduce, or eliminate certain products or services
              5. Otherwise create more public value”




Bryson, John M. Strategic Planning for Public and Nonprofit Organizations: 3 rd Edition. P. 153, 159.   Page 21
SP Concepts - Use/Sources of Data

•   Numerical data and performance metrics are needed in
    comparative analysis and benchmarking exercises.

•   2 words of caution:
    1. Performance metrics should be developed after the strategic
       issue has been framed. This prevents the use of metrics simply
       because they are readily available or easily measured.
    2. Good comparative data sources are sometimes difficult to find
       for a given metric. Understanding the limitations of the data
       sources is essential.




                                                                    Page 22
SP Concepts - Use/Sources of Data

• The following list includes many potential sources of
  data. The quality and reliability of the data varies and
  limitations should be understood before the data are
  used in a comparative analysis or benchmark.

AAUDE – Association of Universities Data Exchange      IPEDS – Integrated Postsecondary Education Data
AAUP – American Association of University Professors      System (National Center for Education Statistics)
ARL – Association of Research Libraries                ISI – Institute for Scientific Information
AUTM – Association of University Technology            NACUBO – National Association for College and
   Managers                                               University Business Officers
CAE – Council for Aid to Education                     NAS – National Academy of Science
CAUSE – Association for Managing and Using             NMSC – National Merit Scholarship Corporation
   Information Systems in Higher Education             NSF – National Science Foundation
CDS – Common Data Set                                  NRC – National Research Council
TheCenter – University of Florida – Top American       National Study of Instructional Costs and
   Research Universities                                  Productivity (University of Delaware)
COGR = Council on Governmental Relations               US News & World Report
CUPA – College and University Personnel Association


                                                                                                         Page 23
Strategic Planning at the U of I:
   Key Planning Parameters




                                    Page 24
   Environmental Assessment:
   Demographics

    • Illinois will experience slight population growth in coming years.
    • As with the rest of the U.S., Illinois’ population will become more
      diverse and the Hispanic population will grow faster than any other
      segment.
    • The proportion of African-American students at UIC and UIUC grew
      slightly after a period of decline, while the proportion of Hispanic
      students has generally grown at all three campuses in recent years.
      Pressure from University stakeholders to enhance diversity among
      students, staff, and faculty will continue.
    • The over 50 population will grow rapidly. This aging population will
      put increasing pressure on social services and health care and may
      view higher education as less of a priority in the future.
    • A significant proportion of the University’s tenure/tenure-track faculty
      are age 55 or over creating the potential for large numbers of
      retirements in the near future.

http://www.uillinois.edu/president/strategicplan/                            Page 25
   Environmental Assessment:
   Higher Education
    •     U.S. competitiveness in higher education participation, completion, and
          attainment, while still strong, is slipping relative to other developed and
          developing nations.
    •     The college age population will grow nationwide, but this growth will vary
          greatly among regions. The West, Southwest, and Southeast will
          experience growth that will exceed capacity in public higher education,
          although in general the Midwest will not.
    •     A larger percentage of women are attending higher education than men and
          the gap is increasing.
    •     Competition from proprietary institutions and other non-traditional
          educational providers in the marketplace for students (both nationally and
          internationally) has greatly increased in recent years.
    •     Growth in faculty compensation at private institutions has surpassed public
          universities, and the intense competition for faculty will continue.
    •     Relatively flat incomes at the lower income brackets in recent years will
          have implications for tuition and financial aid policies particularly with regard
          to promoting access for low income and first-generation students.
    •     Rapid technological innovation has led to a need for lifelong learning that
          will allow individuals to continuously adapt and update skills. On-line
          instruction has grown rapidly in the last 10 years as it has gained
          mainstream acceptance due to increasing internet access and innovations
          in instructional technologies.
http://www.uillinois.edu/president/strategicplan/                                         Page 26
   Environmental Assessment:
   Economy & Budget
    •     The economic value of higher education to the individual – especially those
          with post-baccalaureate degrees – continues to grow.
    •     The U.S. economy will continue to grow, but at a slower rate. Health care
          costs continue to grow at a more rapid rate than general inflation and
          earnings which has an impact on both the national economy and
          governmental spending at all levels.
    •     The state’s fiscal situation, while somewhat improved, faces continued
          challenges in the coming years. Health care and pension obligation costs
          are expected to continue rising rapidly and will likely outpace any state
          revenue growth realized resulting in continued constraints on “discretionary
          spending” in the state budget (e.g., higher education).
    •     The state has greatly increased its debt burden in the last four years
          creating a reluctance among state policymakers to fund additional capital
          improvements. At the same time, the University must increasingly rely on
          internal sources for funding capital projects which in turn has contributed to
          increased debt service levels.
    •     The University has become more reliant on multiple revenue streams and
          state policymakers may interpret this trend as meaning the University can
          more easily absorb reductions or at least flat funding in the general
          appropriation.
http://www.uillinois.edu/president/strategicplan/                                          Page 27
   Environmental Assessment:
   Research, Technology, & Econ. Development
    •     Federal R&D spending has slowed significantly in recent years and this pattern is
          likely to continue in the near term due to the slowing economy and other significant
          pressures on the federal budget (e.g., defense, homeland security).
    •     The bedrock of economic development through research and technology
          commercialization are top quality science and engineering faculty and students.
          Intense competition for science and faculty and students nationally and internationally
          coupled with stagnant state and federal funding will create serious challenges for
          major research institutions such at the University of Illinois as they attempt to
          maintain and enhance the quality and competitiveness of their research programs
          and technology commercialization endeavors.
    •     Land grant and other major research universities are increasingly expected to have
          technology transfer as a key part of their overall economic development mission. The
          University’s efforts in this area have grown considerably in recent years although
          many technical and competitive opportunities (and challenges) remain.
    •     Global interest in renewable energy sources will continue to grow in the future due to
          the overall increase in demand and continued concerns about the cost and supply of
          fossil fuels and other traditional energy sources. The University has an opportunity to
          take a leadership role in energy research and development given its proximity to
          traditional (e.g., coal, nuclear) and renewable (e.g., biomass, wind) energy sources
          and its fundamental strengths in science and engineering disciplines.




http://www.uillinois.edu/president/strategicplan/                                               Page 28
   Environmental Assessment:
   Political Landscape
    •     Higher education issues have traditionally been state concerns, but
          Congress also has become much more interested in issues related to
          higher education’s affordability and public accountability.
    •     Growing public concern over affordability and recent legislation (e.g., “Truth
          in Tuition”) will make major increases in tuition challenging to achieve.
    •     Congress is also interested in an array of issues concerned with Homeland
          Security, which will have implications for privacy and student issues.
    •     The “P-16” education continuum has been truncated in the minds of many
          state policymakers and no longer includes higher education; there is,
          however, a significant focus on issues related to K-12 education and its
          financing.
    •     While the University enjoys a broad base of support within the General
          Assembly, the dominance of other issues facing the state legislature (e.g.,
          health care, pensions, K-12 education) make it difficult to advance the
          University’s (or higher education’s) interests.
    •     There is growing interest at both the state and national levels in creating
          complex data systems that would provide policy makers and the general
          public with detailed information on student progress through the P-16
          educational pipeline and beyond to the work place.

http://www.uillinois.edu/president/strategicplan/                                      Page 29
   U of I Mandates

    Federal and State statutes that relate to creation and mission of the University
       of Illinois:

    •     Created as a Land Grant institution – Morrill Act of 1862
    •     University of Illinois Act created the University of Illinois and established the Board of
          Trustees; the Trustees Act sets forth powers, responsibilities, and membership of the
          Board – 1867 and 1873
    •     U of I Agricultural Experiment Station created by Hatch Act of 1887
    •     Board of Trustees w/ support of Illinois General Assembly created the Engineering
          Experiment Station in 1903
    •     Cooperative Extension created by Smith Lever Act in 1914
    •     Illinois Senate passed S.R. 296 establishing economic development as fourth mission
          of the U of I (in addition to teaching, research, and service) in 2000
    •     UIC, UIS statutes
    •     U of I Hospital Act

                          Key Point: U of I Act and U of I Trustees Act
                          created the University and established its
                          mission.
http://www.uillinois.edu/president/strategicplan/                                                  Page 30
   U of I Mandates (Continued)

    Legal requirements that pertain to State of Illinois entities including
      State universities:
    •     Open Meetings Act                         •   State Universities Civil Service Act
    •     Freedom of Information Act                •   University of Illinois Revenue
    •     Governmental Ethics Act                       Bond Financing Act for Auxiliary
    •     State Officials and Employees                 Facilities
          Ethics Act                                •   University of Illinois Revenue
    •     State Auditing Act                            Bond Act
    •     Illinois Procurement Code                 •   Illinois Educational Labor
                                                        Relations Act
    •     Architectural, Engineering, and
          Land Surveying Qualifications             •   Legislative Audit Commission –
          Based Selection Act                           University Guidelines
    •     State Property Control Act
          Key Point: As a State entity, the University is subject to
          regulations/oversight by the State of Illinois and must abide by
          the State Constitution and State statutes.
http://www.uillinois.edu/president/strategicplan/                                         Page 31
   U of I Mandates (Continued)

    Summary of U of I and Trustees Act provisions establishing our
      mission:
           • Teaching – identifies courses of instruction
              “agriculture and the mechanic arts, and military tactics, without
                excluding other scientific and classical studies” (110 ILCS 305/7)
              “shall offer instruction in such branches of learning as are related to
                agriculture and the mechanic arts, and as are adapted to promote a
                liberal and practical education in the several pursuits and
                professions of life, without excluding other scientific and classical
                studies, and including military tactics” (110 ILCS 310/6)
           • Research
              “support scientific research and development” (110 ILCS 305/7)
           • Service (cooperative extension service)
           • Economic development (110 ILCS 305/7)
              “manage medical research and high technology parks”
              encourage “the improvement and development of the State’s
                economy.”
           • Hospital (110 ILCS 330)

http://www.uillinois.edu/president/strategicplan/                                   Page 32
 Strategic Planning at the U of I:
Process, Timeline, and Highlights




                                     Page 33
 Strategic Planning at the U of I

• B. Joseph White became President of the University in
  January 2005. Immediately thereafter, he initiated a
  comprehensive University-wide strategic planning process.


• Purpose of Strategic Planning Process: Establish high
  aspirations, set priorities, and provide leadership to achieve
  goals over a 10 year horizon




                                                              Page 34
    U of I Strategic Planning Process



Stage 1            •    University of Illinois Strategic Planning Framework           Completed

                   •    University of Illinois at Chicago
                   •    University of Illinois at Springfield
                   •    University of Illinois at Urbana-Champaign
Stage 2                                                                               Completed
                   •    University Administration
                   •    U of I Alumni Association             Support Organizations
                   •    University of Illinois Foundation

Stage 3            •    Schools, Colleges, and Major Administrative Units             Completed




 http://www.uillinois.edu/president/strategicplan/                                            Page 35
  U of I Strategic Planning Timeline

        Strategic Leadership                           Strategic Leadership                 Final SP Framework       Draft Stage 2
              Summit I                                       Summit II                            (Stage 1)       Plans Completed *




          March 2005                                       June 2005            July 2005       August 2005         October 2005

                                                                   Draft SP Framework to BOT


                                           Final Stage 2                              Presentation of Stage 2
        Strategic Leadership                                                                                      Final Stage 3 Plans
                                        Plans Submitted to                                Plans to BOT
             Summit III                                                                                               Completed
                                             President




         November 2005                  January 2006         February 2006                      April 2006            June 2006

                                                            Final Stage 2                   Draft Stage 3 Plans
                                                            Plans to BOT                       Completed **


* Stage 2 Strategic Plans: University Campuses and Support Organizations (UA, UIAA, UIF)
** Stage 3 Strategic Plans: Schools, Colleges, and Major Administrative Units                                                           Page 36
Stage 1 Strategic Plan Highlights:
Background

The University of Illinois is…
• One university with three campuses sharing a common
  name, mission, governing body, and unwavering
  commitment to academic excellence
• An organization that is:
   – Academically decentralized
   – Financially centralized




                                                        Page 37
Stage 1 Strategic Plan Highlights:
U of I Mission



   The University of Illinois will transform lives and serve
   society by educating, creating knowledge, and putting
   knowledge to work on a large scale and with excellence




                                                           Page 38
Stage 1 Strategic Plan Highlights:
U of I Vision

  To create a brilliant future for the University of Illinois in
  which the students, faculty, and staff thrive and the
  citizens of Illinois, the nation, and world benefit, a future
  in which the University is the recognized leader among
  public research universities in:
      • Teaching, scholarship, and research
      •   Engagement and public service
      •   Economic development
      •   Arts and culture
      •   Global reach
      •   Athletics


                                                                   Page 39
Stage 1 Strategic Plan Highlights:
U of I Strategic Intent




   Build the leading 21st century public university system.




                                                              Page 40
Stage 1 Strategic Plan Highlights:
U of I Strategic Goals

• Strategic Goal #1: The University of Illinois will achieve
  and be recognized for both academic excellence and
  extraordinary education and development of our
  students.
• Strategic Goal #2: The University of Illinois will be the
  recognized higher education leader in innovation, quality,
  and service.
• Strategic Goal #3: The priorities of the University of
  Illinois will reflect the most urgent needs of the state, our
  communities, and the world.
• Strategic Goal #4: The University of Illinois will have
  the resources (people, money, and facilities) required for
  excellence.


                                                              Page 41
Stage 2 Strategic Plan Highlights:
Five Key Priorities
Five key priorities emerged from the stage 2 strategic plans:

    1. Develop UIUC into the nation’s preeminent public research university.
    2. Develop UIC into the nation’s premier urban public research university.
    3. Position the U of I Medical Center and health sciences colleges for the
       next quarter century.
    4. Develop UIS into one of the nation’s top five small public liberal arts
       universities.
    5. Successfully launch the Global Campus to offer a high quality, highly
       affordable and accessible U of I education to tens of thousands of
       Illinoisans and others unable to spend an extended period of time on
       one of our campuses.


   Realizing these priorities will be dependent upon the effective execution of
    strategies at all levels of the University. In December 2006 a working group
    was established to develop a reporting approach encompassing key
    indicators of progress and achievement for each of the five key priorities.
                                                                                   Page 42
Stage 3 Strategic Plan Highlights:
Key Challenges

• Organizational Challenge: Each campus has a unique
  range of academic and administrative units at different
  levels of organizational development and with different
  sets of competitors
   – How does each campus build a sustainable competitive
     advantage through the plans developed by these units?


• Fundamental Questions in Stage 3 Planning Efforts
   – How do we make great colleges and programs even better?
   – How do we advance good colleges and programs to greatness?




                                                                  Page 43
Stage 3 Strategic Plan Highlights:
Scope

• University of Illinois at Urbana-Champaign
   – 19 Academic Units
   – 7 Administrative Units


• University of Illinois at Chicago
   – 16 Academic Units
   – 8 Administrative Units


• University of Illinois at Springfield
   – 6 Academic Units
   – 3 Administrative Units




                                               Page 44
Stage 3 Strategic Plan Highlights:
Making Great Colleges Even Better

• UIUC – College of Business
   – Undergraduate Programs: Build excellence by attracting a high-
     achieving and diverse student population through proactive and
     personalized recruitment practices, offering innovative Honors programs
     and international experiences, and providing smaller and more intimate
     classroom environments

• UIUC – Colleges of ACES, Applied Health Sciences, Engineering,
  Fine and Applied Arts, Liberal Arts and Sciences, GSLIS, Medicine
  and Social Work; Beckman Institute and NCSA
   – Illinois Informatics Initiative: Invent the information environments of the
     future and educate those who will build and use them

• UIC – College of Nursing
   – Collaborative for Learning Excellence: Link scholarly excellence to
     healthcare and workforce development
   – Institute for Healthcare Innovation: Translate innovation to practice



                                                                                   Page 45
Stage 3 Strategic Plan Highlights:
Moving from Good to Great

• UIC – College of Liberal Arts and Sciences
   – Retain, Restore, and Renew
      • Build on traditional pockets of excellence plus other under-
        valued strengths
      • Take advantage of opportunities for growth in
        interdisciplinary areas
      • Stem and reverse erosion of facilities and faculty


• UIS – College of Liberal Arts and Sciences
   – Create a Master Plan for the Arts: Address both gaps in the
     curriculum and the construction of state-of-the-art facilities




                                                                       Page 46
Stage 3 Strategic Plan Highlights:
Success Factors for Achieving Greatness
• The following themes recur throughout stage 3 plans at all campuses
  or are represented in many of the plans of a specific campus as
  success factors for achieving greatness:
   – Enhance faculty and staff salary competitiveness (All campuses)
   – Approach emerging opportunities with innovative, high-impact research
     that will advance education, improve health, accelerate the creation of
     knowledge through informatics, and address energy and sustainability
     (UIUC)
   – Create new knowledge at the interfaces and overlaps of disciplines and
     translate discovery to application (UIUC and UIC)
   – Engage with the people, communities, and institutions of Chicago and
     other great cities of the world in ways that transform lives (UIC)
   – Implement programs, projects, and activities that engage the local and
     regional communities, while having national and international impact (UIS)
   – Enhance global experiences and perspectives in the curriculum (All
     campuses)
   – Seek new revenue streams and increase operational efficiency to ensure
     that the necessary resources are available for execution and goal
     achievement (All campuses)
                                                                            Page 47
Ensuring Plan Execution at the
     University of Illinois




                                 Page 48
    Strategic Plan Development & Execution:
    FY06 to FY08 (and Beyond)

Timeline                         FY 2006                               FY 2007                                  FY 2008


                                                                                                               Execution*
Process                       SP Development                           Execution
                                                                                                   •      Allocate
                                                                                                          Resources
U of I Specific           •    Develop Stage 1,                 •    Allocate Resources                    –    FY 2008 Annual
Initiatives / Actions          2, 3 strategic plans                    –   FY 2007 Annual                       Budget
                                                                           Budget                               Allocation
                                                                           Allocation                      –    FY 2009 Budget
                                                                       –   FY 2008 Budget                       Request
                                                                           Request
                                                                •    Track Performance                    Progress Report*

                                                                                                   •      Make Annual
                                                                                                          Report to BOT and
                                                                                                          the University
                                                                                                          community


* Execution and Progress Reporting will be an ongoing part of the strategic plan implementation process
                                                                                                                          Page 49
FY08 BOT Operating Budget Request

• Strengthen Academic Quality                                     $ 70.1 M
  1) Campus Strategic Initiatives                       $28.8 M
       UIC        $13.0 M
       UIS        $ 1.9 M
       UIUC       $13.9 M
  2) Competitive compensation                           $41.3 M
          (4% merit, 0.5% compression/recruit/retain)
• Address Facility Operations Needs                               $ 6.3 M

• Meet Inflationary and Other Cost Increases                      $ 24.6 M

  Total                                                           $101.0 M




                                                                             Page 50
Resource Scenario - Uses of Funds
FY08 to FY12
                                                                                 University of Illinois
                                                                            Five Year Plan -- FY 2008-2012
                                                                                 (Dollars in Millions)
 SCENARIO #1 : FULLY FUND CAMPUS STRATEGIC PLANS + CLOSE SALARY GAP + COST INCREASES
 Uses of Funds                                                                                                                                                           Total Need
                                                                                     FY 2008            FY 2009            FY 2010         FY 2011           FY 2012     FY 2008-12
    Operating Budget Increments
    I. Strengthen Academic Quality
            University Strategic Initiatives 1                                                                                                                           $      -
                                                2
            Campus Strategic Initiatives                                            $      62.1        $      62.1        $      62.1      $     62.1        $    62.1   $    310.5
            Faculty & Staff Competitive Compensation3                               $      35.4        $      36.4        $      37.4      $     38.4        $    39.5   $    187.1

    II. Meet Inflationary and Other Cost Increases
        O&M New Areas                                                               $        1.3       $        1.5       $          1.5   $      1.5        $     1.5   $      7.3
        Facility Maintenance Support                                                $        5.0                                                                         $      5.0
        AFMFA                                                                       $        8.4       $        7.7       $          7.2   $      1.2        $     1.2   $     25.7
                                                4
            Supplemental Financial Aid                                              $        4.3       $        4.9       $          5.7   $      6.6        $     7.8   $     29.3
            Inflationary and Other Cost Increases 5                                 $      20.4        $      21.1        $      16.5      $     17.5        $    18.5   $     94.0

    Total -- Incremental Operating Needs                                            $     136.9        $     133.7        $     130.4      $   127.3         $   130.6   $    658.9
    1
        Includes support for Global Campus and University Advancement Technology project.
    2
        As identified in campus strategic plans. Also includes some base budget increases to support campus strategic initiatives.
    3
     Cost to bring faculty salary average up to bottom of the top one-third of each campus' peer group average + peer group average annual salary increase
    for all faculty and staff.
    3
        Increases in financial aid, under current BOT guidelines, due to 9.5% general tuition increases, AFMFA.
    5
        Includes payroll costs, utility price increases, University IT support.




                                                                                                                                                                                    Page 51
Resource Scenario - Sources of Funds
FY08 to FY12
                                                                         University of Illinois
                                                                    Five Year Plan -- FY 2008-2012
                                                                         (Dollars in Millions)
SCENARIO #1 : FULLY FUND CAMPUS STRATEGIC PLANS + CLOSE SALARY GAP + COST INCREASES
                                                              FY 2007           FY 2008           FY 2009            FY 2010           FY 2011           FY 2012           FY 2008-12
Sources of Funds                                               Actual            Goal              Goal               Goal              Goal               Goal              Goal
   State (1.5%/Year)                                         $    12.8         $    10.6         $    10.8          $    11.0         $    11.2          $   11.5          $     55.1
   Tuition                                                        27.4              36.8              40.9               45.1              50.5              56.1               184.8
       UIC                                                         8.8              11.1              12.1               13.3              14.5              15.9                66.9
       UIS                                                         2.3               1.7               1.8                1.8               2.0               2.2                 9.4
       UIUC                                                       16.3              24.0              27.0               30.0              34.0              38.0               153.0
   AFMFA                                                           7.4               7.4               7.7                7.2               1.2               1.2                24.7
   Other Revenue Sources                                                                                                                                     20.0                20.0
   Subtotal -- Incremental Revenue                                 58.1              59.8               64.4              68.3               73.9            93.6               304.6
   Leadership & Faculty (1.0%)                                     27.7              11.7               12.4              13.1               13.9              13.9                 65.1
   Total -- Sources                                          $     85.8        $     71.5        $      76.8        $     81.4        $      87.9        $    107.5        $      369.7

   Income Fund-Enrollment
   Differentials and Technical Adj.                                 26.0
   Total -- Sources of Funds                                 $    111.9        $     71.5        $      76.8        $     81.4        $      87.9        $    107.5        $      369.7

   NET -- Sources & Uses                                                           ($65.4)           ($56.9)            ($49.0)           ($39.4)            ($23.1)            ($289.2)

   State Funded Benefits
   POB                                                             61.9
   Total with POB                                            $    173.8        $     71.5        $      76.8        $     81.4        $      87.9        $    107.5        $      369.7

   State: Actual includes special legislative add-ons, Health Payment, GRF only.
   Tuition: Fees not included, Total of Tuition and AFMFA.
   AFMFA: Gross revenue before financial aid offsets.
   Private Benefactors:Assumes increments from Compact
   Leadership & Faculty: 1.0% Reallocation program annually, assumes revenue growth each year.
   POB: Planning and Budgeting forecast under current assumptions for pensions and health benefits trends.

   Academic Excellance Fee for Faculty Salary gap, UIC $2.75 million, UIS $.34 million, UIUC $22.3 million, four year phase in, including inflationary Increases in FY 2010 and beyond.    Page 52
    Reporting Approach - Guiding Principles

•    Guiding Principles for Measuring and Ensuring Progress:
      –   The reporting approach will be comprised of key indicators of progress and achievement (both
          quantitative and qualitative) for each of the five priorities.
      –   The reporting approach will also include relevant contextual information to promote appropriate
          interpretation of these indicators.
      –   The reporting approach will be a macro-level tool for demonstrating accountability to the BOT and
          other stakeholders on an annual basis regarding progress and achievement in each of the five
          areas. As such, this approach will complement (not supplant) other, more detailed management
          reporting systems under development at campuses to support and inform strategy execution at the
          school, college, and department level.
      –   The process for developing and implementing the reporting approach and related metrics will be
          highly collaborative and transparent.
      –   The metrics established to demonstrate progress and achievement in addressing the five priorities
          will be results-focused and limited in number while at the same time seeking to provide a balanced
          picture of the context within which strategy execution occurs.
      –   The metrics will be based on well-established data and other information sources where possible
          to maximize credibility and minimize additional workload.
      –   The metrics will reflect industry norms and standards where feasible in order to enable
          benchmarking and peer comparisons.

•    First progress report in July 2007.
                                                                                                            Page 53
Reporting Approach - Working Group

UIC:                                 UIUC:
   – Russell Betts, Vice Provost        – Dick Wheeler, Dean,
     for Planning and Programs            Graduate College; Vice
   – Robert Mrtek, Professor of           Provost for Strategic Initiatives
     Medical Education                  – Martha Gillette, Head of
   – Al Pate, Executive Assistant         Biological Sciences
     to the CEO, Healthcare             – Bruce Vojak, Associate Dean
     System                               for External Affairs, College of
UIS:                                      Engineering
   – Harry Berman, Provost           University Administration:
   – Marya Leatherwood,                 – Doug Vinzant, Associate Vice
     Associate Vice Chancellor and        President for Planning and
     Director of Enrollment               Budgeting
     Management                         – Dan Layzell, Assistant Vice
   – Ed Wojcicki, Associate               President for Strategic
     Chancellor for Constituent           Planning and Policy Analysis
     Relations                          – Tyler Kearney, Resource and
                                          Policy Analyst

                                                                          Page 54
Day 1 Wrap Up




                Page 55
Review of Workshop Goals

• Develop understanding of strategic planning and
  management concepts, terms, and processes, and
  their application at the University of Illinois (Day 1)
• Develop understanding of budgeting/resource allocation
  concepts, terms, processes, and trends at the University
  of Illinois (Day 2)
• Discuss mechanisms for creating stronger linkages
  between planning and budgeting at the University of
  Illinois (Days 1 & 2)




                                                             Page 56
References
•   American Marketing Association
    (http://www.marketingpower.com/mg-dictionary-view3602.php?)


•   Bryson, John M. Strategic Planning for Public and Nonprofit Organizations:
    3rd Edition.


•   University of Illinois Strategic Plan Website
    (http://www.uillinois.edu/president/strategicplan/)




                                                                             Page 57
       University of Illinois
Budget Process, Trends and Outlook

           February 2, 2007




                                 Page 58
Day 2 Overview

     I.      Demographics

     II.     Trends in State of Illinois Operating Budget

     III.    University of Illinois Operating Budget

     IV.     Tuition and Affordability

     V.      Federal $ and Research at the U of I

     VI.     Priority Setting Exercise

     VII.    Budgeting Basics

     VIII.   Changes in Public University Funding Model

     IX.     FY 2008 Budget Outlook




                                                            Page 59
I. Demographics




                  Page 60
Two Budget Monsters Holding Hands in the Closet




                Health Care             Aging
                                                  Page 61
Life Expectancy


                            White                      White
                            Male                      Female                          % of pop. > 65     #
  1900                         48.2                            51.1                            4.0%    3.1 M

  1936                         62.0                            67.0                            6.6%    7.0 M
   OASDI enacted 1935, took effect 1936, benefits at age 65.
  2004                         75.0                            87.2                           12.4%    35.0 M

  2040 est.                    81.0                            92.0                           24.0%    80.0 M
Sources: Bureau of Census, Social Security Admin Reports and Congressional Reports.



                                                                                                             Page 62
 Health Care Spending % of GDP 2003

        Total* spending on health per person at PPP†, 2003.
16%


14%


12%


10%


8%


6%


4%



  Source: OECD, Economist 6/18/05. *Private and public. †Adjusted for purchasing-power parity ‡2001 §2002

                                                                                                            Page 63
  Health Care Spending % of GDP in the USA
  1975 - 2020

19%


17%


15%
                                                                                ~77 million “baby boomers” start
                                                                                hitting 60 years of age in 2006
13%


11%


9%


7%
          1975           1980            1985            1990   1995   2000   2005    2010       2015     2020
                                                                                             Projected
      Source: www.oecd.org/dataoecd/44/18/35044277.xls

                                                                                                               Page 64
Increase in Health Insurance Premiums
Compared to Other Indicators, 1988-2006

20%
             18.0%
18%
16%
                        14.0%                                                                                     13.9%
14%                                                                                                     12.9%

12%                                                                                             10.9%
        12.0%                                                                                                             11.2%
10%                                                                                                                               9.2%
                                              8.5%                                       8.2%
8%
                                                                                                                                         7.7%
6%                                                                               5.3%

4%
2%
                                                                    0.8%
0%



                   Health Insurance Premiums                         Workers' Earnings                      Overall Inflation

      Source: The Kaiser Family Foundation Employer Benefits 2006 Annual Survey, TIAA-CREF Institute Quarterly.



                                                                                                                                                Page 65
 Example: Compounding Effect of Health
 Care Cost Increases

160%

140%

120%

100%

80%

60%

40%

20%

 0%
       Year 1   Year 2   Year 3   Year 4   Year 5   Year 6   Year 7   Year 8   Year 9   Year 10

                    Tax Revenue       Health Care 10%        Health Care 8%


                                                                                            Page 66
Other Monsters

         • Federal Deficit

         • State Debt

         • OASDI – Social Security

         • Illinois Pension Systems

         • Changes in Economy




                                      Page 67
U.S. Federal Deficit
Adding $1.61 Billion per day Approx. $29,000 per American

        Gross Deficit in Trillions
 $9.0
 $8.0
 $7.0
 $6.0
 $5.0
 $4.0
 $3.0
 $2.0
 $1.0
 $0.0
            1960                1970   1980     1990        2000   2006 est.


                                                                               Page 68
 State of Illinois
 State-Supported Principal Outstanding
 End-of-Year FY 1996-2007 (Dollars in Billions)



$30.0
                                                                                                                    $26.988   $27.010
                                                                                                          $26.626
                                                                                                $26.019
                                                                                      $25.051
$25.0


$20.0


$15.0
                                                                            $12.697
                                                               $11.361
                                                    $10.314
        $9.004     $9.200     $8.888      $9.192
$10.0


 $5.0


 $0.0
        1996       1997       1998        1999       2000       2001        2002       2003     2004      2005      2006      2007*

                    General Obligation             State-Issued Revenue                Locally-Issued Revenue
        * CGFA Estimate
        Sources: Governor’s Office of Management and Budget, MPEA, ISFA, and RTA.
                                                                                                                                   Page 69
Cumulative OASDI Income Less Cost,
Based on Present Law Tax Rates
and Scheduled Benefits




                                     Page 70
State Funded Retirement Systems
Projected Contributions
FY 2006 – FY 2045 (Dollars in Billions)

 18
                                                                           15.82
 16
 14                                                                12.65
 12
                                                           10.09
 10
                                                    8.03
  8
                                          6.41
  6                            5.18
                       4.24
                3.5
  4
  2    0.97
  0
       2006    2010   2015    2020       2025       2030   2035    2040    2045
                                      Fiscal Year
                                                                                   Page 71
                                 Pension Reforms Mirror 1995 Plan’s Structure
                                 State Owes Approx. $38 Billion to Pension Systems



                                 21.00%
State Contribution as % of Pay




                                 16.00%




                                                                                                           Current Plan Provisions Current Funding Plan

                                 11.00%                                                                    All Plan Changes and Restructuring
                                                                                                           Governor's Reform Recommendations




                                 6.00%
                                      06

                                             08

                                                    10


                                                           12

                                                                  14


                                                                         16

                                                                                18

                                                                                       20


                                                                                              22

                                                                                                     24


                                                                                                            26

                                                                                                                   28

                                                                                                                          30


                                                                                                                                 32

                                                                                                                                        34


                                                                                                                                               36

                                                                                                                                                      38

                                                                                                                                                             40


                                                                                                                                                                    42

                                                                                                                                                                           44
                                    20

                                           20

                                                  20


                                                         20

                                                                20


                                                                       20

                                                                              20

                                                                                     20


                                                                                            20

                                                                                                   20


                                                                                                          20

                                                                                                                 20

                                                                                                                        20


                                                                                                                               20

                                                                                                                                      20


                                                                                                                                             20

                                                                                                                                                    20

                                                                                                                                                           20


                                                                                                                                                                  20

                                                                                                                                                                         20
                                                                                                           Year



                                                                                                                                                                            Page 72
Relative Labor Costs Among Major
Auto-Producing Nations
(in dollars per hour)




 $35
         $33.00


 $30


 $25
                       $22.50         $22.10
                                                    $20.20         $19.40
 $20                                                                             $18.60



 $15


 $10
                                                                                                $8.40

                                                                                                               $5.20
  $5
                                                                                                                        $2.70
                                                                                                                                $0.90
  $0
       Germany          U.S.         France         Japan        Canada          U.K.          South          Taiwan   Mexico   China
                                                                                               Korea
       Source: U.S. Office of Trade and Economic Analysis, Roland Berger Strategy Consultants, WSJ 6/10/04.
                                                                                                                                        Page 73
Relative Illinois Economic Performance
Illinois Per Capita Personal Income as % of US
1995 to 2005


110%


109%


108%


107%


106%


105%


104%
       1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005



                                                                               Page 74
More Bad News Comes Everyday




                               Page 75
II. Trends in State of Illinois
     Operating Budget




                                  Page 76
State of Illinois
General Fund Appropriations – FY 2007


                    State By Sector                                                    Sources of General Revenue Fund

                                                                                                     Other Sources
                              Other                                                                     11.4%
                              5.7%                       Human
             Public Safety                               Services                        Lottery &
                6.2%                                      20.2%                           Gaming                                  Individual
                                                                                           4.7%                                  Income Tax
     Higher
                                                                                   Public Utility                                   31.3%
    Education
      8.6%                                                                            3.8%




                                                                                  Federal Aid
                                                                                    17.1%

                                                                                                                                  Corporate
 Healthcare and                                                 Elementary/                                                      Income Tax
    Family                                                      Secondary                                                           6.0%
   Services                                                       28.8%
    30.5%
                                                                                                                     Sales Tax
                                                                                                                      25.7%




                                                                          $25.7 Billion
 Source: Illinois State Budget, FY 2007 as introduced.
                                                                                                                                               Page 77
State of Illinois
General Fund Appropriations – FY 2007

                               State                                                                            Higher Education
                             By Sector                                                                             By Sector

                              Other                                                                                All Other     SURS
                                                       Human                                                                                   Community
                              5.7%                                                                                  7.1%         3.1%
             Public Safety                             Services                                                                                 Colleges
                6.2%                                    20.2%                                                                                   13.8%

     Higher
    Education
      8.6%



                                                                                                                                                           Student Aid
                                                                                                                                                             18.0%




 Healthcare and                                                Elementary/
    Family                                                     Secondary                          Public
   Services                                                      28.8%                          Universities
    30.5%                                                                                        58.0%




                         $25.7 Billion                                                                                   $2.2 Billion
 Sources: Illinois State Budget, FY 2007 as introduced, Higher Education final budget.

 Note: For Higher Education by sector, the Health Insurance redirection of $45 million has been moved from Public Universities to All Other.
                                                                                                                                                                   Page 78
State Tax Appropriation
Changes by Agency

       In Constant 2006 Dollars (CPI)
75%
                                                                                                                      Human Services
60%                                                                                                                                    56.8%

45%
                                                                                                                           Elem/Sec    38.6%
30%                                                                                                                                    28.4%
                                                                                                                               State Average
15%

 0%
                                                                                                                              Higher Educ
-15%                                                                                                                                 -17.4%
                                                                                                                                     -26.0%
-30%
                                                                                                                             All Other
-45%


 FY 2002 to FY 2007 excludes the $45 million payment to CMS from Universities for Health Insurance.
 Health Insurance moved from CMS (included in All Other) to Human Services in FY 2006 and adjusted back to FY 2004.
 Source: Illinois State Budgets.



                                                                                                                                         Page 79
Cumulative Change in State Tax Appropriation
by Higher Education Sector

       In Constant 2006 Dollars (CPI)
120%


100%


80%

                                                                                                                                                              SURS   65.5%
60%


40%

                                                                                                                                                                    24.1%
20%
                                                                                                                                                                ISAC
 0%
                                                                                                                                                 Community Colleges
                                                                                                                                                                  -15.5%
-20%                                                                                                                                                              -22.6%
                                                                                                                                                     Universities
-40%
    FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07
   FY 2002 to FY 2007 excludes the $45 million payment to CMS from Universities for Health Insurance.
   Due to the changes in SURS funding from General Funds to State Pension Fund in FY 2005, for comparison purposes SURS funding includes the State Pension.
   Source: IBHE (Final FY 2007 Budget as signed by the Governor).




                                                                                                                                                                      Page 80
State Tax Appropriation
Changes by Agency


         In Constant 2006 Dollars (CPI)
50%

                                                                                                                          Elem/Sec 38.6%



25%




 0%



                                                                                                                                     -17.4%
                                                                                                                       Higher Educ
-25%



  FY 2002 to FY 2007 excludes the $45 million payment to CMS from Universities for Health Insurance.
  Health Insurance moved from CMS (included in All Other) to Human Services in FY 2006 and adjusted back to FY 2004.
  Source: Illinois State Budgets.

                                                                                                                                       Page 81
III. University of Illinois
    Operating Budget




                              Page 82
University of Illinois
Budget by Source of Funds



                  FY 1980                                             FY 2007
                Auxiliaries                                                      State
                                        State           Auxiliaries
                 11.3%                                                          Taxes
   Hospital/                           Taxes             12.9%
                                                                                19.3%
   Medical                             44.5%    Hospital/
    9.3%                                        Medical
                                                                                         Payments
                                                 9.4%
                                                                                         on Behalf
                                                                                          10.5%

   Grants/
  Contracts
                                                                                 Tuition
   24.8%                                              Grants/
                    Tuition Payments                 Contracts             AFMFA 14.6%
                     5.5% on Behalf                   33.1%                 0.2%
                              4.6%

               $641.7 Million                                    $3,691.2 Million

                                                                                               Page 83
University of Illinois
Share of State Tax Appropriations


   5.0%


   4.5%                                                                                      $1,171.6M



   4.0%

                                                                                              $485.9M
   3.5%


   3.0%

                                                                                      2.7%   $685.7M
   2.5%


    FY02 - FY07 excludes $45 million reduction to Universities for Health Insurance




                                                                                                 Page 84
University of Illinois
State Tax Support as a Percent of Budget


60%

55%

50%

45%

40%

35%

30%

25%

20%


 Source: Budget Summary for Operations.
 Note: Excludes payments on behalf.

                                           Page 85
University of Illinois
GRF/EAF Appropriations for FY 1998 – FY 2007
(Dollars in Thousands)


           In constant 2006 CPI dollars
$920,000

                                                                                        Health Insurance and Rescission

$870,000



$820,000



$770,000



$720,000



$670,000



$620,000



$570,000
             FY 1998         FY 1999      FY 2000   FY 2001   FY 2002   FY 2003   FY 2004   FY 2005     FY 2006    FY 2007

                                                                                                                          Page 86
DIRECT STATE TAX APPROPRIATIONS (GRF/EAF)
FY 1990 – FY 200 (Dollars in millions)



         In Constant 2006 CPI Dollars
 $50                                                                                            Original Appropriation
 $25
  $0
 -$25
 -$50
 -$75
-$100
-$125
-$150
-$175
                                                                                                     Spending Authority
-$200
  90

  91

  92

  93

  94

  95

  96

  97

  98

  99

  00

  01

  02

  03

  04

  05

  06

  07
FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY

FY
   Spending Authority: FY02 – FY07 adjusted for Health Insurance obligation of $24.9 million.
                                                                                                                          Page 87
STATE TAX APPROPRIATIONS PER STUDENT FTE
FY 1990 – FY 2007 (Dollars in millions)


           In Constant 2006 CPI Dollars
    $0
 -$500
-$1,000
-$1,500
-$2,000
-$2,500
-$3,000
-$3,500
-$4,000
-$4,500
-$5,000
-$5,500
    90

    91

    92

    93

    94

    95

    96

    97

    98

    99

    00

    01

    02

    03

    04

    05

    06

    07
  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY
   FY02 – FY07 adjusted for Health Insurance obligation of $24.9 million.

                                                                            Page 88
GRF & Income Fund
(Dollars in Millions)




           In Constant FY 2006 Dollars (CPI)
$1,200
$1,100
$1,000
  $900
  $800
  $700
  $600
  $500
  $400
  $300
  $200
  $100
    $0
    90

           91

                   92

                           93

                                   94

                                           95

                                                   96

                                                           97

                                                                    98

                                                                           99

                                                                                  00

                                                                                         01

                                                                                                02

                                                                                                       03

                                                                                                              04

                                                                                                                     05

                                                                                                                            06

                                                                                                                                   07
  19

         19

                 19

                         19

                                 19

                                         19

                                                 19

                                                         19

                                                                  19

                                                                         19

                                                                                20

                                                                                       20

                                                                                              20

                                                                                                     20

                                                                                                            20

                                                                                                                   20

                                                                                                                          20

                                                                                                                                 20
                                                        GRF                                   IF
         FY02-07 GRF Adjusted for Health Insurance and Rescissions.
                                                                                                                                        Page 89
GRF + Benefits
(Dollars in Millions)



         In Constant FY 2006 Dollars (CPI)
$1,600
$1,500
$1,400
$1,300
$1,200
$1,100
$1,000
  $900
  $800
  $700
  $600
  $500
  $400
  $300
  $200
  $100
    $0
      1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

                                               GRF                 Benefits   IF
      FY02-07 GRF Adjusted for Health Insurance and Rescissions.
      Benefits includes the Health Insurance payment.
      FY04 benefits excludes one time pension bond proceeds.
                                                                                            Page 90
INCOME FUND + STATE TAX APPROPRIATION
PER STUDENT FTE FY 1990 – FY 2007
(Dollars in millions)




         In Constant 2006 CPI Dollars
 $50                                                                                            Original Appropriation
 $25
   $0
 -$25
 -$50
 -$75
-$100
-$125
-$150
-$175
                                                                                                     Spending Authority
-$200
   90

   91

   92

   93

   94

   95

   96

   97

   98

   99

   00

   01

   02

   03

   04

   05

   06

   07
 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY
   Spending Authority: FY02 – FY07 adjusted for Health Insurance obligation of $24.9 million.
                                                                                                                          Page 91
INCOME FUND & STATE TAX APPROPRIATION PER FTE
FY 1990 – FY 2007
(Dollars in millions)




           In Constant 2006 CPI Dollars
$5,000
                                                                                                         Income Fund
$4,000
$3,000
$2,000
$1,000
     $0
-$1,000
-$2,000
-$3,000
-$4,000
-$5,000
                                                                                                 State Tax Appropriations
-$6,000
    90

    91

    92

    93

    94

    95

    96

    97

    98

    99

    00

    01

    02

    03

    04

    05

    06

    07
  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY
   FY02 – FY07 State Appropriations adjusted for Health Insurance obligation of $24.9 million.

                                                                                                                            Page 92
State & Tuition Pay for Instructional Function
Expenditures by Function FY 2005

        (Dollars in Millions)
$600
                                                                                                       State Approps                         Tuition                Non-State

              $50.6
$500



$400
             $219.3


                                                                                   $485.1
$300
                                                                                                                        $495.7



$200                             $16.5
                                                   $60.6
                                                                     $20.7                            $234.7
             $264.5              $82.8
                                                   $66.3             $64.9                                                                                                   $216.7
$100
                                                                                                                                                              $75.0
                                 $99.9                                                                                                     $45.7
                                                   $80.0             $78.3         $71.8
                                                                                                      $42.8              $41.9             $15.4              $15.2
                                                                                                                                           $18.6              $18.3
  $0
              io n               M                es)                  rt            h              rv ic
                                                                                                         e               al                es              h ip s               y
        ru ct               O&                rari                 p po         earc                                edic             rv ic             o ws               ilia r
   Inst                                rt (Lib                 l Su          Res           bli c Se               rM            t Se               Fell               Au x
                                                           on a                          Pu                l/Ot
                                                                                                               he             en               ps/
                                   ppo              it uti                                           pita                St ud            rshi
                            i c Su             Inst                                             Ho s                                ho la
                         dem                                                                                                     Sc
                     Aca
                                                                                                                                                                                      Page 93
University of Illinois
Total Debt by Type

         Dollars in Millions
$1,400
                                                                                                              $1,322.2

                                                                                                   $1,202.2
$1,200
                                                                                        $1,131.0
                                                                             $1,098.7
                                                                  $1,018.1
$1,000

                                                         $803.1
 $800
                                                $692.4

 $600

                                     $422.2
            $387.0         $385.5
 $400


 $200


   $0
           1997           1998       1999       2000     2001     2002       2003       2004       2005       2006

                      AUX           COP       Internal   Health System        Other        UIC S. Campus

                                                                                                                    Page 94
Big Ten University and Foundation Endowments
FY 2006
(Dollars in Billions)



  $6.0          $5.7

                       $5.1
  $5.0

  $4.0

  $3.0
                                 $2.2
                                              $2.0
  $2.0                                               $1.7
                                                             $1.5
                                                                         $1.3       $1.3           $1.3
                                                                                                               $1.0
                                                                                                                             $0.8
  $1.0

  $0.0




                                                                                  na
                                                            ue




                                                                                                   s




                                                                                                                         a
                         ta
            n




                          e


                       sin
                        rn




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                                                                                                             at
                       at




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          ga




                      so




                                                          rd




                                                                                ia
                    ste




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                    on




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        hi




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                 we




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                in


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              th




             W
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            O




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           or




                                                                                                 ic
          N




                                                                                              M
    Source: NACUBO Endowment Study FY 2006.


                                                                                                                                    Page 95
Total Endowment-Equivalent Adjusted for Student FTE Enrollment
Universities with more than $20M in Federal Research in Rank Order
(from Lombardi Report 2002)

                                                              Harvard off-scale
                                                    $18       at $31.1 Billion

                                                              Michigan
                                                               Stanford
                                                    $16            Minnesota
                                                                                                                                                                                 Private (N=39)
                                                                                                                                                                                 Public (N=80)
                                                    $14                    Berkeley
Adjusted Total Endowment-Equivalent (in Billions)




                                                    $12                               Ohio State
                                                                                         Northwestern

                                                    $10
                                                                                              Chicago

                                                    $8                                                    UIUC
                                                                                                              Texas

                                                    $6                                                                     Iowa       UIC
                                                                                                                                                     Arizona State
                                                    $4                                                                                                                      Oregon State
                                                                                                                                                                               Colorado

                                                    $2
                                                                     12 Private              12 Private                  12 Private                12 Private         12 Private             12 Private
                                                                     8 Public                8 Public                    8 Public                  8 Public           8 Public               8 Public
                                                    $0
                                                          0                           20                     40                         60                       80                   100                   120
                                                                                                                      Rank Among All 119 Research Universities

                                                                                                                                                                                                          Page 96
2004 Adjusted Total Endowment-Equivalent
Based on The Center’s Methodology UIUC – Peer Institutions
(Dollars in Billons)



 $21.0
                                    Endow Asset Market Value    Endow-Equiv Annual Giving
                                    Endow-Equiv State Appn      Endow-Equiv Tuition and Fees
 $17.5

                                                               UIUC
 $14.0


 $10.5


  $7.0


  $3.5


  $0.0




                                                                                               Page 97
2004 Adjusted Total Endowment-Equivalent
Based on The Center’s Methodology UIC – IBHE Peer Institutions
(Dollars in Billons)




$12
                                                                              Endow Asset Market Value   Endow-Equiv Annual Giving
                                                                              Endow-Equiv State Appn     Endow-Equiv Tuition and Fees
$10

                                                                                UIC
 $8


 $6


 $4


 $2


 $0




   2004 annual giving data was not available for Wayne State. We used 2001 data as a proxy for 2004.
                                                                                                                                        Page 98
IV. Tuition and Affordability




                                Page 99
University of Illinois
Maximum Award vs. Tuition and Fee Rates
$14,170
                                                                                                                                UIUC Engineering
$13,170
$12,170
                                                                                                                UIC Engineering
$11,170
$10,170
                                                                                                                        UIUC
 $9,170                                                                                                                                                $8,877
                                                                                                                                               UIC
 $8,170
                                                                                                                                              UIS
 $7,170
 $6,170
 $5,170
                                                                                                                                              MAP
 $4,170
 $3,170
 $2,170
 $1,170
       90

                  91

                             92

                                      93

                                                 94

                                                           95

                                                                       96

                                                                              97

                                                                                     98

                                                                                            99

                                                                                                   00

                                                                                                          01

                                                                                                                 02

                                                                                                                        03

                                                                                                                               04

                                                                                                                                      05

                                                                                                                                              06

                                                                                                                                                *
                                                                                                                                             07
     FY

                FY

                           FY

                                    FY

                                               FY

                                                         FY

                                                                     FY

                                                                            FY

                                                                                   FY

                                                                                          FY

                                                                                                 FY

                                                                                                        FY

                                                                                                               FY

                                                                                                                      FY

                                                                                                                             FY

                                                                                                                                    FY

                                                                                                                                            FY

                                                                                                                                           FY
          Note: UIS excludes $300 Capital Scholar instruction fee.
          *Entering Freshmen Guarantee Tuition rate.

                                                                                                                                                     Page 100
      Need Based Student Aid as Percent of the
      State Higher Education Budget FY 2005

24%                                                                                   24%




20%                                                                                   20%




16%                                                                                   16%


                 12.7%

12%                                                                                   12%




8%                                                                                    8%


                                                             National Mean 4.9%

4%                                                                                    4%




0%                                                                                    0%
                                    SC




                                                            S
                                                 A




                                                           V




                                                           A
                                                            S




                                                          SD
                                                 C




                                                           R




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                        J
                       N


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                                                 D




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       IL




                     CO
                                   CA




                                                         LA
                                    RI




                                                           M
       IN




                                                IA




                                                          ID
        T




                                                     E




                                                           E



                                                           Z


                                                           L
        Y




                                     H




                                                 Y




                                                 K




                                                           H




                                                           D




                                                           K
                                                            I
                                                          FL
      PA




                                                 E




                                                           T
                                               CT
                      A




                                     I




                                                 I




                                                           Y
      TN




                                   TX




                                                           T
                      N




                                                          H
                                   W




                                               M




                                                         M
                                                          K
      V




                                               V



                                               N




                                                     D
                                                         O




                                                         A



                                                         N


                                                         N



                                                         A


                                                         A




                                                         G
                                   W
                     M


                     M




                                               M
                                               M




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                                                         U
                                                         N




                                                         A
                     W




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                                                         N




      Source: Chronicle of Higher Education.
                                                                                  Page 101
  Guaranteed Tuition Program
  (UIUC Example*)


                        $7,500
Academic Year Tuition




                        $7,000
                                                                        No Guarantee

                        $6,500

                                                                                                     Guarantee
                        $6,000



                        $5,500
                                      0                 1                  2                 3   4        5      6
                                                                                          Year
                                 *Estimated tuition levels beginning with 04-05 Academic Year.


                                                                                                                     Page 102
Guaranteed Tuition Program
“Truth In Tuition”


•   Illinois legislation to provide predictability for college education costs
    to parents.

•   Provides an incentive to graduate in 4 years.

•   Affects undergraduate programs only.

•   Tuition rate for program set for 4 years for each in-coming cohort.

•   Does not include fees or room and board.




                                                                             Page 103
  Tuition & Fee Sticker Comparisons
  General Student By Cohort (FY 2005)

$12,000
                             UIUC                Minnesota                 Michigan
$11,500

$11,000

$10,500

$10,000

 $9,500

 $9,000

 $8,500

 $8,000

 $7,500
                             FY05                                     FY06            FY07   FY08

    FY 2008 Tuition projections assumes 6.0% increases for Michigan and Minnesota.
                                                                                                    Page 104
INCOME FUND PER STUDENT FTE
FY 1990 – FY 2007
(Dollars in millions)




         In Constant 2006 CPI Dollars
$8,000
$7,500
$7,000
$6,500
$6,000
$5,500
$5,000
$4,500
$4,000
$3,500
$3,000
   90

   91

   92

   93

   94

   95

   96

   97

   98

   99

   00

   01

   02

   03

   04

   05

   06

   07
 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY

 FY
                                        Page 105
INCOME FUND AND STATE TAX APPROPRIATION PER FTE
FY 1990 – FY 2007
(Dollars in millions)




           In Constant 2006 CPI Dollars
$5,000
                                                                                                         Income Fund
$4,000
$3,000
$2,000
$1,000
     $0
-$1,000
-$2,000
-$3,000
-$4,000
-$5,000
                                                                                                 State Tax Appropriations
-$6,000
    90

    91

    92

    93

    94

    95

    96

    97

    98

    99

    00

    01

    02

    03

    04

    05

    06

    07
  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY

  FY
   FY02 – FY07 State Appropriations adjusted for Health Insurance obligation of $24.9 million.

                                                                                                                            Page 106
 University of Illinois
 Average Compounded Annual Increases
 FY 1990 – FY 2007



8.0%
                7.4%

7.0%

6.0%

5.0%

4.0%
                                                                      3.2%                              3.3%
                                                                                         2.9%
3.0%

2.0%
                                           1.3%
1.0%

0.0%
         General Undergraduate     State Appropriations (GRF)   State Appropriations +    CPI   State Appropriations (GRF)
              Tuition Rate                                      Undergraduate Tuition            plus Payments on Behalf
                                                                       Revenue
       CPI: Consumer Price Index, BLS
       Tuition Average of Lower and Upper Division
                                                                                                                       Page 107
 University of Illinois
 MAP Supplemental Financial Aid Expenditures
 FY 2000 - FY 2007


       Dollars in Millions
                                                                                                $27.2M
$30


$25                                                                                   $21.2M

$20                                                                         $17.6M
                                                                  $16.2M
                                                        $13.9M
$15


$10


 $5                                           $2.2M
        $792K                $623K
 $0
       FY 2000               FY 2001          FY 2002   FY 2003   FY 2004   FY 2005   FY 2006   FY 2007*

      *FY 2007 Budget, does not include AFMFA Aid.



                                                                                                      Page 108
      University of Illinois
      Half the Full-time Undergraduate Students Pay Less
      than Sticker Price Fall 2005


                Chicago                                      Springfield               Urbana-Champaign
                                                       36%                                           14%
                                                                                 54%
                                      32%
                                                                           36%
                                                                                                                12%
46%




                                                                                                             20%
                                   12%                6%
                     10%                                            22%



                                                 $0                        $2,000 – Less than Full Tuition
          Students Who Pay
                                                 $1 - $1,999               Full Tuition & Fees


  Based on Fall 2005 Full-time Undergraduates.
                                                                                                              Page 109
 University of Illinois at Urbana-Champaign
 Financial Aid and Educational Costs by Quintile
 Illinois Mean Income by Quintile
 Estimated from Fall 2002 Data
 Dependent Undergraduate Students that Applied for Financial Aid for FY 2003

                                                                                                                                          Ratio:
                                                                         Federal      Institutional                 Ratio: Net        Tuition+Fees
                        Mean      Number of    Tuition and   Room &     and State     and Private                  Cost / Mean       less Aid / Mean
                       Income     Students        Fees        Board     Gift Aid 2      Gift Aid 4    Net Cost       Income              Income



 Quintile 1             $14,499      2,173         $6,704      $5,906      $6,928            $2,459      $3,223         22.2%                  0.0%



 Quintile 2             $35,913      2,412         $6,704      $5,906      $4,950            $2,112      $5,548         15.4%                  0.0%



 Quintile 3             $59,327      3,322         $6,704      $5,906      $1,846            $1,443      $9,321         15.7%                  5.8%



 Quintile 4             $86,409      3,789         $6,704      $5,906        $600              $971     $11,039         12.8%                  5.9%



 Quintile 5            $163,800      2,869         $6,704      $5,906        $392              $741     $11,477           7.0%                 3.4%

 Total
 Undergraduate
 HDCT 28,243                                                                                          Average            14.6%                 3.0%

2 Parent Income Ranges: Parent income was used for dependent student tables.
3 Federal and State Gift Aid: Includes all Federal and State grants, scholarships, and waivers, including PELL and MAP.
4 Inst. and Private Gift Aid: Includes all inst. and private grants, scholarships, waivers, and fellowships, including SEAL and UIUC Tuition Grant
5 Source: Census Bureau


                                                                                                                                           Page 110
  Example: Illinois vs. Northwestern
  Pell + MAP Maximum Award
  Provide Full Tuition & Fees


$35,000
                                                                            Northwestern        $33,567

$30,000

$25,000


$20,000

$15,000
                                                                                      UIUC
                                                                                           69.3% $9,882
$10,000
                                                                                            $9,018
                                                                                     PELL + MAP
 $5,000


    $0
      1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
          MAP: Monetary Award Program, Illinois Need Based Financial Aid

                                                                                               Page 111
                                College Financial Aid
                                Illinois Family Income Quintiles (2005)
    $0                $28,599             $50,001                         $74,437       $106,220

              1                  2                          3                       4              5

                                              Program Eligibility by Income
                                         (Assumes a family of four, one in college)
                                     $34,000          $52,000

*        PELL/SEOG                    Full          Partial
                                             $44,000      $63,000

*    MAP                                       Full         Partial

                                             $44,000        $63,000

*    U of I MAP                                Full             Partial
     Supplemental Aid
                                                                   $66,000

*        Work study


     Federal Loans (Subsidized for incomes below $80,000, unsubsidized no income limits)

     Merit/Talent Based Scholarships/Waivers All Incomes
                                                                                                       $130,000
     Federal Tax $3,000 Deduction
                                                                                                       $130,000

     Federal Deductibility of Student Loan Interest up to $130,000

     Education IRA – No Income Limit (No taxation on Capital Gains, $2,000 addition per year)




                                                                                                                  Page 112
University of Illinois
Example of Net Tuition Payments



          1) Easily in top Quintile of family incomes
          2) FY 2005 Tuition will not change for four years.
          3) Includes:
              Deduction of student loan interest
              Tax free treament of canceled student loan
              Tax free earnings Coverdell ESA
              Qualified tuition program (QTP)
              Early distributions on IRA w/o penalty
              Savings bond interest exemption
              Tax free educational benefits from employer
              Business deductions for self employed
              Illinois reduction for 529 contributions
          4) Tax Deduction, Federal and State

                                                               Page 113
University of Illinois
Example of Net Tuition Payments
Assumes Family of 4, one in college


                                                    FY 1995                   FY 2005
                                             Nominal       Adjusted           Nominal
                                                        (CPI Adjusted)
                                           $    35,184 $        45,000        $ 45,000
          UIUC
          Tuition                          $       2,900 $         3,709      $ 6,014
          Fees                                       920           1,177        1,484
          Total                            $       3,820 $         4,886      $ 7,498

          Estimated Deductions:
          Pell                                      2340           2,993        4,050
          MAP                                       3800           4,860        4,471
          Insitutional Aid                             0             -          2,407

          Coverdell Education IRA/529/Other 3          0             -            -
                                       4
          Tuition and Fees Deduction                    0            -             -
          Federal Hope Tax Credit                       0            -             -
          Total Aid                        $       6,140 $         7,853      $ 10,928

          Net Tuition and Fees                $0              $0                $0
          Tuition & Fees as Percent of Income        0%                  0%           0%
                                                                                           Page 114
University of Illinois
Example of Net Tuition Payments
Moderate Family Income ($80,000 in FY 2005)


                                                      FY 1995              FY 2005
                                               Nominal       Adjusted      Nominal
                                                          (CPI Adjusted)
                                             $    62,549 $        80,000   $ 80,000
       UIUC
       Tuition                               $      2,900 $        3,709   $ 6,014
       Fees                                           920          1,177     1,484
       Total                                 $      3,820 $        4,886   $ 7,498
       Estimated Deductions:
       Pell                                               0          -         -
       MAP                                                0          -         -
       Insitutional Aid                                   0          -         -
       Coverdell Education IRA/529/Other 2                                     500
       Tuition and Fees Deduction 4                                          1,000
       Federal Hope Tax Credit                            0          -       1,500
       Total Aid                             $        -       $      -     $ 3,000

       Net Tuition and Fees                  $      3,820 $        4,886   $ 4,498
       Tuition & Fees as Percent of Income             6%             6%        6%



                                                                                      Page 115
University of Illinois
Example of Net Tuition Payments
High Family Income ($120,000 in FY 2005)


                                                      FY 1995                 FY 2005
                                               Nominal       Adjusted         Nominal
                                                          (CPI Adjusted)
                                             $    93,823 $      120,000       $ 120,000
      UIUC
      Tuition                                $      2,900 $        3,709      $   6,014
      Fees                                            920          1,177          1,484
      Total                                  $      3,820 $        4,886      $   7,498
      Estimated Deductions:
      Pell                                                 0         -              -
      MAP                                                  0         -              -
      Insitutional Aid                                     0         -              -
      Coverdell Education IRA/529/Other 3                                         1,500
      Tuition and Fees Deduction 4                         0         -            1,000
      Federal Hope Lifetime Learning Tax Credit            0         -              -
      Total Aid                              $        -        $     -        $   2,500
      Net Tuition and Fees                   $      3,820      $   4,886      $   4,998
      Tuition & Fees as Percent of Income                 4%             4%             4%


                                                                                             Page 116
V. Federal $ and Research at U of I




                                      Page 117
Total R & D Expenditures FY 2004
(Dollars in Millions)


$560
         19                                        National Ranking
$480

$400
               34
                    48
$320
                         53

$240

$160
                              130
 $80                                153
                                          177
                                                214 225
                                                        258 264 326
                                                                    340 365 429 437 444 453 523 528 549 567 593
   $0
                        ch




                        p.
      Co ke F na
              Br r n
                         y
               we l
                        h
                       sh




               Ch t
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                       E




                       U
                       C
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                     IU
                       C




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                   iro
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                     a
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                  EI
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                W
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             ug
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         ll
 Source: NSF
                                                                                                          Page 118
UIC Total Federal Obligations
(Dollars in Thousands)




 $170,000                                                                                                    40



 $145,000
             49                                                                          50            50
                                                                                 51             51
                                                                                                             50
                                                                   54      54
 $120,000


                           61                               61
  $95,000                                                                                                    60
                    65


  $70,000                                  69
                                  71
                                                     73                                                      70

  $45,000



  $20,000                                                                                                    80
            1980   1985   1990   1995     1996       1997   1998   1999   2000   2001   2002   2003   2004


                                       UIC Dollars                        UIC Rank

                                                                                                             Page 119
UIUC Total Federal Obligations
(Dollars in Thousands)



$250,000                                                                                               14

                                                                                                       16

            19                                                                                         18
$200,000
                   20
                                                                                                       20

                                                                                                       22
$150,000                                                      24
                                                                            25                         24
                          26     26                                  26
                                                 26   26
                                        27                                                             26
                                                                                   28     28
$100,000
                                                                                                       28

                                                                                                 31    30

 $50,000                                                                                               32
           1980   1985   1990   1995   1996   1997    1998   1999   2000   2001   2002   2003   2004

                                  UIUC Dollars                      UIUC Rank

                                                                                                       Page 120
U of I Total Federal Obligations
(Dollars in Thousands)



$430,000                                                                                                  3

                                                                 4
$380,000
                                                                                                          4

$330,000                         5                                               5
                                                                                                          5

$280,000                                 6
                          6                               6
                                                                                                          6
$230,000                                                                7
                   7                               7                                   7     7      7
                                                                                                          7
$180,000
            8
                                                                                                          8
$130,000


 $80,000                                                                                                  9
           1980   1985   1990   1995    1996      1997   1998   1999   2000   2001   2002   2003   2004

                                     UI Dollars                        UI Rank

                                                                                                          Page 121
FEDERAL GRANT AND CONTRACT
EXPENDITURES BY AGENCY
TOTAL UNIVERSITY - FY 2003

                                                           Financial Aid
                                          Defense              5.8%     Education
                                           8.9%                           3.8%
                                                                                    Other
                                Energy
                                                                                    5.4%
                                 5.4%


                           USDA
                           5.9%




                                                                                             HHS
                                                                                            36.3%
                             NSF
                            28.5%



                                         $ 519.4 Million
      Health and Human Services and the National Science Foundation represented almost 65% of the total federal grant and
                                              contract expenditures in FY 2003.
 Source: UFAS
                                                                                                                            Page 122
FEDERAL GRANT AND CONTRACT
EXPENDITURES BY FUNCTION
TOTAL UNIVERSITY - FY 2003


                                                       Scholarship Other
                                                          6.8%     0.3%
                                         Instruction
                                            2.8%

                            Public Service
                               10.2%




                                                                                   Research
                                                                                    79.9%

                                             $ 519.4 Million
                In FY 2003, 79.9% of the federal grant and contract expenditures were for sponsored research.

 Source: UFAS
                                                                                                                Page 123
VI. Priority Setting Exercise




                                Page 124
VII. Budgeting Basics




                        Page 125
Major Approaches to Budgeting



   •   Incremental Budgeting
   •   Zero Based Budgeting
   •   Planning, Programmatic and Budgeting Systems
   •   Performance Based Budgeting
   •   Formula Budgeting
   •   Responsibility Center Budgeting
   •   Initiative Based Budgeting




                                                      Page 126
Essential Questions in Public Budgeting


• Who gets how much?

• Who pays?

• “On what basis shall it be decided to allocate x dollars
  to activity A instead of activity B?” (Key 1940)

• A budget is a financial and political plan comprised of
  expenditures and the means of funding them (i.e., taxes,
  other sources of revenue, and borrowed funds).



                                                         Page 127
Revenue, Stakeholders, Accountability

                             Influence




                   Internal Stakeholders
                                           Accountability Mechanisms

Revenue Stream
                                           Accountability
                                           (i.e., Performance Metrics)
                   External Stakeholders




                              Influence


                                                                         Page 128
University of Illinois


                                                   Stakeholders

Revenue Source                       Internal                              External

State Appropriations    Employee Groups, Campuses,              IBHE, Governor, GOMB,
                        University Administration, BOT          Legislature (House and Senate)

Tuition                 Students & Families, Faculty & Staff,   IBHE, Governor, ISAC,
                        University Administration, BOT          Legislature, Congress

Grants and Contracts    PI’s, Administrators, Campus            Granting Agency, GOMB,
                                                                Governor, Ranking Agencies

Auxiliary Enterprises   Students & Families,                    IBHE, ISAC
                        Bond Holders

Hospital                Patients, Physicians,                   Legislative interests, IDPA,
                        Bond Administration                     Federal Auditors




                                                                                               Page 129
State Operating Budget Key Dates


 • Spring - U of I Budget request developed
 • July - BOT reviews preliminary budget request
 • September - BOT approves U of I budget request
 • December or January- IBHE recommendations
               submitted to the Governor
 • February - Governor’s budget recommendations
               submitted to the Legislature
 • May/June - Legislature acts
 • June/July - Governor signs appropriation bill




                                                    Page 130
TIMETABLE FOR OPERATING BUDGET REQUEST DEVELOPMENT
AT THE UNIVERSITY OF ILLINOIS
FY 2008 Budget Shown

                                                                                                                  BOT Reviews
             Departmental Prog. Review                                 Campus Program Review              President/Policy Council Review
                Enrollment Review
                                                                       OPB Salary, Inflation and                                                        BOT Approves
                                                                         Analytical Studies                   OPB Rec. Cont. Comp.                    Preliminary Request
                  AAMT Themes




    July 2005                               Oct. 2005      Nov. 2005          Jan. 2006                             April 2006                               July 2006

                                                                                                                                            AAMT Final Rec.

                                                                    IBHE                                                                    President/Policy
                                                              Recommendations                                                             Council Final Review
                                                              (Feb. in 07 Cycle)
                                                                                   Executive/Legislative Review
                            Program & Funding Priorities
                                 IBHE Staff Review                                        Governor IBHE Allocated
                                                                                                       Gov. Budget
                                                                                                                                                         Governor Acts
                                                                                           Budget
                                                                                                                                      Legislature Acts
                                                                                          Message Leg. Hearing




 July 2006                                                        Dec. 2006               Feb. 2007                                  May 2007
                                                                                                      Program & Funding Priorities             Preliminary
                     BOT Approves Final                                                                 Unavoidables Reviewed                Budget Summary
                           Request              Tuition/Income Fund Estimates                                                                    to BOT
                    Budget Request to IBHE       Estimate Unavoidable Costs
                                                                                                         AAMT Allocations
                         (September)
                                                                                                            BOT Reviews               Internal Allocations



                                                                                                                                                                         Page 131
VIII. Changes in Public University
           Funding Model




                                     Page 132
Public University Funding



              Traditional Land Grant Model


                          Low
          State                    =
                   +     Tuition       Quality
         Support        and Fees




                                                 Page 133
At the same time the State has reduced
public universities share of the budget,
the value of the college experience has
         increased dramatically




                                           Page 134
The Lifetime Expected Value of a Bachelor’s
Degree is Rising Compared to a High School Diploma
(in constant dollars)




                       $1.8

                       $1.5
 Dollars in Millions




                       $1.2

                       $0.9

                       $0.6

                       $0.3

                       $0.0
                                                       Men             Women
                                                             1980   2000
                              Source: Bureau of the Census
                                                                               Page 135
New Models




 •   Increase State Support?
 •   Increase Tuition Revenue
 •   Increase Aid?
 •
                                                 Quality
     Growth by Substitution                  =
 •   Growth of Endowment
 •   Reduce Size of Missions
 •   Resize Enrollments of the Institution
 •   Other




                                                           Page 136
IX. FY 2008 Budget Outlook




                             Page 137
FY 2008 Operating Budget


        • “Unavoidables”
            – Legal
            – Medicare
            – Worker’s Compensation
        •   Major Utility Issues
        •   Facility Renovation
        •   Faculty Salaries
        •   Strategic Planning Initiatives




                                             Page 138
Estimated FY 2008 Additional Costs
(Dollars in Millions)


 Illinois State Level Costs:
 Retirement Systems, Employee Health Benefits,
 Medicaid, Elementary/Secondary Education and
 ISAC funding.
                        University of Illinois Costs

          •   Salary Increases (3%)                    $27.60
          •   O&M New Areas                              1.30
          •   Utility Price Increase                    13.00
          •   Insurance/Liability/WC                     1.40
          •   Deferred Maintenance                       1.00
                                                       $45.10

                                                                Page 139
FY 2006 Faculty Salary
Competitive Standing among Peers
UIC, UIS and UIUC


                      UIC
   $120
   $100
   $80
   $60
   $40
   $20
    $0
          1st         11th                       22nd

                             $100
                                                               UIS
                             $80

                             $60

                             $40

                             $20

                              $0
                                    1st                        9th   14th
     $140
                                          UIUC
     $120
     $100
      $80
      $60
      $40
      $20
          $0
                1st                       17th          21st


                                                                            Page 140
Research I Universities
Gap between UIC, UIUC and Private Institution
Full-Time Instructional Faculty Average Salaries

          Constant Dollars ($1,000s)*
   $0

   -$5

  -$10

  -$15

  -$20
                                                                                                                           UIUC
  -$25
                                        Gap
  -$30                   1982                 2006          2015*

  -$35    UIC          -$8,100           -$24,500         -$34,200                                                        UIC
          UIUC         -$2,800           -$17,100         -$26,200
  -$40
         82     84      86       88      90          92   94     96         98       00   02   04   06   08      11       13      15
                                                                                                              Projected
                                                                     Year
         * Constant (FY 2006) dollars calculated using CPI-U. 2007-2015 projected.

         Source: AAUP; BLS.


                                                                                                                                       Page 141
      FTE On-Campus Enrollment per FTE Tenure-System Faculty
      Fall 1983 to 2006



                                                                                                                                                                            20.9 20.9
                       21                                                                                                                                            20.6

                                                                                                                                                              20.2
                                                                                                                                                       19.8
                       20
                                                                                                                                                19.3
                                                                                                                                         19.1
                                                                                                                                  19.0
Students per Faculty




                       19                                                                                                  18.7

                                                                                                                    18.2
                                                                                                      18.1
                                                                                          17.9 17.9          18.0
                       18                                                          17.6

                                                                       17.0 17.1
                       17
                                                                16.3
                                                         16.2
                                             15.9 15.9
                       16   15.7 15.7 15.7




                       15
                            83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
                                                                                                 Fall
                                                                                                                                                                                  Page 142
Institutional Support


  The scope of activities included in Institutional Support is
   defined by the Department of Education’s National Center for
   Education Statistics in their annual Institutional Post-
   Secondary Education Data System Survey. This definition is
   also widely used by NACUBO.

  Institutional support is the surrogate for institutional overhead
   in academic institutions; it includes expenditures for general
   administrative services, executive direction and planning, legal
   and fiscal operations, public relations/development and
   unavoidable costs such as medicare, workers compensation,
   public safety and environmental health and safety activities.




                                                                  Page 143
University of Illinois
Institutional Support
as a % of Total Expenditures


6.5%



6.0%



5.5%



5.0%



4.5%

                                                                                                                                          4.2%

4.0%



3.5%
    FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

   Source: Annual Financial Reports. Total expenditures reduced in FY 2004 to normalize large one-time increase in payments on behalf.

                                                                                                                                         Page 144
Recent Capital Budget Strategies



    • Multiple Missions          Multiple Sources
        –   Regular Capital (e.g. UIS classroom/office)
        –   Economic Development Funding (e.g. IGB; MRI)
        –   Special State Initiative (e.g. College of Medicine)
        –   Private Gifts (e.g. Siebel Center)
        –   Federal Funds (e.g. UIC Structural Biology)
        –   Internal Funds (e.g. OCC; Utilities)
        –   Auxiliary Funds (e.g. Recreation Centers)
        –   Operating Budget (e.g. Deferred Maintenance)




                                                                  Page 146
Capital Appropriations History All Higher Education
FY 1981 to FY 2007
(Dollars in Millions)




$400

$350

$300

$250

$200

$150

$100

 $50

  $0
  19 1
  19 2
  19 3
  19 4
  19 5
  19 6
  19 7
  19 8
  19 9
  19 0
  19 1
  19 2
  19 3
  19 4
  19 5
  19 6
  19 7
  19 8
  20 9
  20 0
  20 1
  20 2
  20 3
    04

  20 5
  20 6
    07
    8
    8
    8
    8
    8
    8
    8
    8
    8
    9
    9
    9
    9
    9
    9
    9
    9
    9
    9
    0
    0
    0
    0


    0
    0
  19




  20
                               Fiscal Year
                          UI                 All Other Public
                                                                Page 147
  U of I Capital Appropriations
  FY 1995 to FY 2007
  (Dollars in Millions)



$180
                                                                  $165.9
$160

                                                                           $140.1
$140


$120


$100

                                                  $80.7
 $80


 $60
                                                          $46.8
                                          $41.8
 $40
       $30.5              $27.8
                                  $21.1
 $20                                                                                $12.7
                  $0.0                                                                      $0.0   $0.0    $0.0
  $0
       1995      1996     1997    1998    1999    2000    2001    2002     2003     2004    2005   2006    2007

               Repair & Renovation                  Regular Capital                  Designated Projects

                                                                                                           Page 148
FY 2008 Capital Budget Planning
Strategic Issues


 •   Impact of “no capital” for FY 2005, FY 2006 and FY 2007
 •   Uncertainty for upcoming five-year period
 •   Continue to target special needs (economic development; health
     care)
 •   For the higher education budget submission
     –   Identify our total needs
     –   Target renovation/stewardship
     –   Recognize reality but don’t permit reduced request to become a self-
         fulfilling prophecy
 •   Continue approach to match private gifts
 •   Ongoing assessment of debt capacity




                                                                                Page 149
        University of Illinois
        Preliminary Capital Priority Request* FY 2008
        (Dollars in Thousands)




Priority                    CHICAGO                                                 SPRINGFIELD                                        URBANA-CHAMPAIGN                                       Priority
   1       Repair & Renovation                            $     8,331.8   Repair & Renovation                  $    687.4    Repair & Renovation                              $    12,450.8      1

   2       Deferred Maintenance                                 8,000.0   Deferred Maintenance                      125.0    Deferred Maintenance                                  12,000.0      2

   3       College of Medicine at Rockford Building            14,250.0   Brookens Library Renovation              8,000.0   Lincoln Hall Remodeling                               53,100.0      3

   4       Advanced Chemical Technologies Inflation Adj        20,000.0   Public Safety Building                   1,750.0   South Farms Realignment                               30,000.0      4

   5       Dentistry Modernization Code Compliance             20,000.0   Rehab Metal Buildings                    2,000.0   Electrical & Computer Engineering Bldg.               62,700.0      5

   6       Medical Sciences Building Modernization             20,000.0   Campus Infrastructure Improvements       3,000.0   Burrill Hall Remodeling                               35,000.0      6

   7       Advanced Pharmaceutical Research Pavilion           66,000.0                                                      Natural History Building                              62,700.0      7

   8       Stevenson Hall Classroom Modernization              19,300.0                                                      David Kinley Hall Remodeling                          15,000.0      8

   9       Douglas Hall Classroom Modernization                14,800.0                                                      Roger Adams Lab. Renovations                           1,100.0      9

   10      Lincoln Hall Classroom Modernization                14,800.0                                                      Repairs to UIUC Electrical Distribution System        19,200.0      10

   11      Health Sciences Teaching Learning Center                  -

                              TOTAL                       $   205,481.8                 TOTAL                  $ 15,562.4                       TOTAL                         $   303,250.8




   * Separate initiatives for economic development and Illinois Bill of Health will continue.




                                                                                                                                                                                          Page 150
"Expecting the world to treat you
fairly because you are good is like
expecting the bull not to charge
because you are a vegetarian."

Dennis Wholey (1937-)

                                      Page 151

				
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