University volunteers for performance funding, but will it work?

The deal emphasizes enrolling state residents

The University of Illinois (U of I) system has volunteered to receive performance-based funding in an effort to offset the financial strains of a longstanding state budget impasse. 

The state Legislature has been locked in a budget stalemate with Gov. Bruce Rauner (R) since summer 2015. The U of I system has implemented a salary freeze for most employees since the previous fiscal year and cut non-instructional staff by about 3% between February 2015 and September 2016.

Now the system is proposing a five-year state funding agreement, under which the flagship university would be guaranteed between $662 million and $664 million each year beginning in 2018. In exchange, the system would have to meet several performance measures:

  • Ensure that state residents make up at least half of expanded undergraduate enrollment;
  • Keep tuition and fee increases below the rate of inflation for in-state students;
  • Admit at least 27,300 state residents as first-time or transfer students at the Chicago, Springfield, and Urbana-Champaign campuses;
  • Reserve one-eighth of state funding for financial aid;
  • Reserve at least $15 million in financial aid each year for underrepresented student populations; and
  • Maintain an 87% freshman retention rate for undergraduates and a six-year graduation rate of at least 72%.

In addition to guaranteed funding, U of I would receive exemptions from procurement control and property code acts, as well as the restoration of an act that secures debt financing for campus capital projects. Under the agreement, the state would also establish a fund for facility improvements and attracting and keeping faculty. 

How one university encouraged departments to meet performance targets

"We feel it's a comprehensive, pioneering compact between a state university system and the state at a time when we've been going from crisis to crisis with unpredictable budget outlooks," says U of I System President Timothy Killeen. "We need to get the system in gear."

The agreement relies on both parties to hold up their end of the bargain: If the state does not provide the agreed-upon funding, the university system would not have to abide by its performance standards for the next year. And if performance standards are not met, the Legislature can alter the amount of funding the system receives. Still, Killeen says it is important to remember the budget crisis the system currently faces. 

"I would ask the skeptic to think about what he or she might commit to in a five-year outlook, given the uncertainty that has prevailed over the last couple of years," Killeen says.

Other state institutions are considering U of I's performance-based funding model. In a statement, Eastern Illinois University President David Glassman said the school "acknowledges U of I's plan as very interesting, and we will be looking closely at how it is evaluated by the General Assembly and governor's office. We hope, at the very least, it will become a catalyst for dialogue leading to the stabilization of predictable state funding for higher education." Officials at Southern Illinois University, Western Illinois University, and Northern Illinois University have also expressed interest in the plan (Seltzer, Inside Higher Ed, 11/18; Strahler, Crain's Chicago Business, 11/7). 


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