New legislation proposes performance-based funding for U of I System

Killeen says pioneering initiative would preserve excellence, service to the state

CHICAGO – Legislation introduced Thursday would redefine the state’s long partnership with the University of Illinois System, providing predictable funding for university operations over the next five years in exchange for tangible performance goals that support Illinois students and serve the needs of the state.

President Tim Killeen outlined the proposed U of I Investment, Performance, and Accountability Commitment (IPAC) during Thursday’s meeting of the Board of Trustees, saying it is “arguably the most comprehensive higher education compact of its kind anywhere in the nation.”

 “The proposed IPAC agreement is an innovative way forward through the financial challenges facing both the U of I System and the state,” Killeen said. “It eliminates the year-to-year uncertainty that hampers planning, and provides the resources and accountability that will ensure our three universities remain springboards to success for students and a pipeline of talent for the state’s workforce.”

The board unanimously approved a resolution supporting the measure, which would be the first in Illinois history to incorporate public university performance standards into state statute.

Killeen said the U of I System proposed the shift to performance-based funding and worked with legislators to negotiate terms and draft House Bill 6623, sponsored by Rep. Michael Zalewski (D-Riverside), Sen. Bill Cunningham (D-Chicago), and a bipartisan coalition of co-sponsors from the U of I Caucus.

Under the proposal, the state would provide a fiscal year 2018 appropriation of $662 million, matching the U of I System’s last full appropriation in fiscal year 2015, and funding would increase by the rate of inflation during the each remaining year of the five-year pact. The proposed $662 million for the first year of the agreement is below historical state appropriation levels, which peaked at $804 million in fiscal 2002.

The state also would adopt regulatory reforms to improve efficiency across the System, such as exempting the System from state procurement codes that often increase costs and cause delays in purchasing. Officials say restrictive purchasing guidelines increase red tape and delay research, threatening to chase away top researchers who contribute to the System’s nearly $1 billion annual research portfolio.

A state-financed Illinois Excellence Fund also would be created to support investments in classroom and research facility improvements that help recruit and retain top faculty.

In return, the U of I System would commit to meet the following standards that serve the needs of students and the state, beginning in academic year 2017-18:

• Hold tuition and mandated fee increases for in-state undergraduates to no more than the rate of inflation, as measured by the federal Consumer Price Index.
• Set admissions thresholds to build on enrollment of Illinois undergraduates, who comprise more than 80 percent of this fall’s 55,700 undergraduates System-wide. During each year of the agreement, the U of I System would admit at least 27,300 Illinois residents as first-time students or transfers into undergraduate programs – 11,800 in Chicago, 1,500 in Springfield and 14,000 in Urbana-Champaign. The agreement also would require that Illinois students comprise at least half of all growth in on-campus undergraduate enrollments above academic year 2015-16 levels.
• Maintain a System-wide 87 percent freshman retention rate in undergraduate programs, which is well above the national average of 72 percent.
• Maintain a six-year graduation rate of at least 72 percent for first-time freshmen in undergraduate programs across the System. The national average is 60 percent.
• Use at least 12.5 percent of annual state funding – or $83 million during the first year of the agreement – to support need-based financial aid for in-state undergraduates. The amount would increase by the rate of inflation during ensuing years of the agreement.
• Commit an additional $15 million in financial aid to attract Illinois students from underrepresented minority groups and students from Illinois counties who are currently underrepresented at the U of I’s three universities.
• Provide an annual report on its website with key data on service to the state, including total undergraduate and graduate enrollment; enrollment of underrepresented minorities; and undergraduate, graduate and professional degrees awarded.

“This proposal would provide the U of I with much-needed, stable funding from the state legislature," Cunningham said. "But it would also create accountability. The funding would be tied to performance – and that is the kind of approach that is necessary given the state's difficult budget situation."

While IPAC would specify the U of I System’s annual funding during the five years of the agreement, appropriations would have to be approved each year by the legislature and governor. If the state failed to provide the funding specified under IPAC during its annual appropriations process, the System would not be bound by performance standards for the following year. Likewise, if the U of I System failed to meet any of the goals, the legislature could revisit the agreement and adjust funding for the following year.

“I fully support this creative, bold initiative and urge the General Assembly to positively consider this,” said Tom Cross, chairman of the Illinois Board of Higher Education.

Killeen said the need for appropriate and predictable state funding has been magnified by an ongoing budget impasse that has significantly reduced state support for the System’s universities in Chicago, Springfield and Urbana-Champaign. The uncertainty is causing talented Illinois students to pursue college education out of state, he said, as well as top faculty and staff to explore opportunities at peer institutions.

“As a graduate of the University of Illinois, I know the education and the experience provided there is special – and we can see how our inability to provide the predictable, appropriate funding the state’s universities and colleges need is only shortchanging our state,” Zalewski said. “I appreciate the proactive approach the university is taking here to identify concrete ways to move forward along with the commitment our state needs to make to support reaching those goals, and look forward to working with my colleagues to build on this partnership in 2017.”