Illinois State University President Aondover Tarhule said in the annual State of the University address Thursday that if the university does nothing, it will have a deficit next year that could grow substantially over the next three years.
Tarhule confirmed to reporters after the speech the three-year structural deficit could rise to $32 million, or about 6% of the general fund budget, at the end of that period. As president, he said he accepts "the challenge of safeguarding ISU's core mission."
"I am filled with confidence over Illinois State University's future. We have a long and proud history of adapting to change and emerging stronger from periods of disruption. This moment will not be different," said Tarhule.
A first installment on a series of measures to "proactively" deal with the projected crunch is a pay freeze for faculty and staff this year.
"What we are trying to do is to estimate what we need to do to avoid that deficit," said Tarhule. "Every time we give a salary increase of 1% it adds $2.6 million to our payroll. Those are exact numbers. So, imagine if we gave an increase of 2%, it just added $5.6 million to our payroll forever. When you are looking at a deficit, the last thing you want to do is tack on more deficit."
In his address, Tarhule noted state support for the university has fallen significantly in absolute and relative terms since 2002. He said the buying power of the state appropriation has fallen 45% in that period, adding that making up for that diminishing revenue by raising student tuition and fees is no longer a viable strategy.
State lawmakers and higher education experts have been working on a proposed funding formula for higher ed, but Tarhule said it remains anyone's guess when or if that will advance enough to pass the General Assembly and at what base funding level.
“As president, I firmly believe that simply weathering the current storm is not enough. ISU must thrive and position itself for long-term success in a rapidly changing world and we are taking necessary steps to do so,” said Tarhule.
ISU will not be able to continue to avoid enrollment declines that have forced substantial cuts at other institutions, said Tarhule — despite projected enrollment increases from the opening of a new College of Engineering, a 400-student expansion of the Mennonite College of Nursing, a rebranded School of Creative Technologies, and a new degree program in data science.
Experts have made much over demographic changes that are lowering the number of high school graduates and making entering college classes smaller for many institutions.
Western Illinois University enrollment, for instance, has fallen more than 42% since 2015. The 634-student entering class at Macomb this fall is only about 130 students larger than that of the private Illinois Wesleyan University in Bloomington. Western once was roughly 10 times larger than IWU.
Meanwhile, ISU had its largest first-year class ever and for years has successfully bucked the trend. Tarhule said ISU is not exempt from the tyranny of the demographic trend that will accelerate in 2025 when the smaller cohort of young people born during and after the Great Recession begins to graduate from high school.
He said it is difficult to know with any precision how much of a drop in enrollment ISU will experience, driven by a projected 30,000 drop in the number of Illinois high school graduates between 2025 and 2037.
"We are thinking 2-5% in the first year, but then it continues after that and becomes hard to estimate. But those are the numbers we are working with," said Tarhule.
A change in numbers of students also would have a larger financial impact on ISU than an enrollment decline alone would suggest.
"There's going to be more competition for fewer students," said Tarhule. "That's going to cause more tuition discounting. That's going to necessitate more money for financial aid, which are exactly the kinds of issues which are getting us in this difficult situation."
No program cuts or layoffs
Projections also suggest students who are graduating from high school will increasingly come from lower income families and other underrepresented categories of students that could require even more college financial support to succeed.
A university steering committee and task force and external consultants also will look for efficiencies and changes.
Tarhule said there will not be program cuts or layoffs. That does not technically rule out department mergers or consolidations. When queried, Tarhule said those won't happen either.
"No! There is a big difference where ISU is and a lot of other universities," said Tarhule. "You close or consolidate departments when you have too few students to make them worthwhile. That's not our problem. Our problem is on the cash flow side. Part of it is budgetary and part of it is just a function of the many, many years of disinvestment, so we have to find out how to make those expenses better align with the revenue that we are getting."
Many institutions have done deeper program reviews to make sure student numbers and resource allocations align. Tarhule said this process will not be that.
"Not as a first step," said Tarhule. "One of the biggest challenges we have is that we have a historical budget model. For many years we have allocated money based on history, not based on revenue, not based on expenses. I think the first thing we have to do is create a proper budget that is based on the revenues we have not on what was spent last year or the year before."
He said start-up costs for the College of Engineering are not contributing to the projected structural deficit.
"The fiscal model for the College of Engineering is to use some of our reserves we knew we had to get it started and then once the students begin to pay tuition we would continue to run the college from that tuition," said Tarhule.
Rising construction costs have forced halting the creation of a new residence hall. He said the pressure of that kind of price increase will not affect the conversion of the John Green Building for the College of Engineering, or a proposed STEM building.
“Those are two different scales and funded from two different types of revenues. With the College of Engineering, we have the possibility to get state money. We have a possibility to get federal money. The housing building can only be funded from fees and the money we generate," said Tarhule. "And the scales and the amounts are also different."
WGLT asked the president whether ISU is talking with Country Financial or another corporation about renting space for the College of Engineering.
"We are continuing to look at the best options for the College of Engineering and I will be taking a plan to the board of trustees for final last steps about funding for the College of Engineering," Tarhule replied.
The speech had a presence from protesters who held signs in front of the stage and pushed Tarhule over the war in Gaza and on campus diversity and inclusion during a brief public question period.
Tarhule also noted in his speech a recent study suggests ISU's economic impact to the larger community and region tops $1 billion a year.
