Equity-Based Commission to Develop New Model for Public University Funding in Illinois

On August 24, 2021, Governor Pritzker signed legislation that will create a Higher Education Evidence-Based Funding Commission to evaluate higher education funding in Illinois. The Commission will make recommendations to the General Assembly and the Illinois Board of Higher Education (IBHE) on how to establish an adequate and stable equity-based funding model. This blog post includes information about previous higher education funding in Illinois and the new commission’s mission.

Higher Education Oversight and Funding in Illinois

In 1961, the Illinois legislature created the Illinois Board of Higher Education to coordinate the operations of various colleges and universities. The Board was responsible for planning and developing policies, administering grants and making operating and capital budget recommendations, among other duties. The IBHE “system of systems” included four university boards, the community college system, private non-profit institutions and private for-profit institutions. The University of Illinois and Southern Illinois University had their own boards, while the seven other universities were overseen by either the Board of Regents or the Board of Governors of State Colleges and Universities.

The Board of Governors was reformed under the Board of Higher Education’s Master Plan I that was implemented from 1965 to 1967. This plan included changing the Teachers College Board name to the Board of Governors of State Colleges and Universities and expanding liberal arts and professional programs at those colleges. The Board of Regents was established in 1967 to govern Northern Illinois University, Illinois State University and Sangamon State University. The reasoning behind the Board of Regents was to develop a full range of doctoral programs in the arts and sciences that would be governed separately from universities focusing on a much narrower range of functions.[1]

Higher education governance in Illinois was transformed in 1996. The Higher Education Reorganization Act of 1995 transitioned higher education in the State from a loose confederation of systems coordinated by the Illinois Board of Higher Education into a structure that eliminated the Board of Governors and Board of Regents such that each of the State’s nine universities had their own governing boards. The change was intended to provide greater autonomy to the individual boards of the universities and save money and reduce bureaucracy.

However, this governance structure has been viewed by education experts[2] as weakening the influence of the Board of Higher Education, making it more difficult to establish statewide goals and allocate resources strategically and creating an environment in which every university competes against the others for resources.

Public universities in Illinois are funded by the State of Illinois through General Funds appropriations, tuition and fees, other non-appropriated funds and restricted sources such as governmental gifts and contracts. Since FY2002, which was the peak year for public university operating funding, General Funds appropriations declined from $1.5 billion to $1.15 billion in FY2021.[3] That represents a decrease of almost 23% in nominal terms, or about 46% after adjusting for inflation. Like other areas of the State budget, increased pension and retiree healthcare obligations have crowded out operating funding for universities, with General Funds contributions to the pension fund for university and community college employees climbing to nearly $1.9 billion in FY2022 from $232.1 million in FY2002.

The changes in operating funding also do not factor in the negative impact of the State’s two-year budget impasse, when the State did not have a complete budget for FY2016 and FY2017. Funding in FY2016 fell to about 30% of the prior year’s level and the state’s average funding for higher education from FY2016 to FY2018 was $1.5 billion or 80% of the FY2015 funding level of $1.9 billion. The result was dwindling financial reserves, staffing reductions and program eliminations.[4] In 2017, Northeastern Illinois University interim President Richard Helldobler, blamed the budget crisis for falling enrollments, loss of faculty and declining confidence in Illinois’ public university system.[5] The Lumina Foundation in its report, “Illinois Postsecondary Investments,” reported that as State operating funding for public universities has declined, tuition has increased to make up the difference. The Board of Higher Education reported in their FY2021 budget recommendations that General Funds provided about 33% of public university revenue in FY2019, compared with 72% in FY2002; the remainder comes primarily from tuition and fees. The College Board reported in Trends in College Pricing and Student Aid 2020 that Illinois’ average tuition and fees for in-state students were the fourth highest in the U.S. in the 2020-2021 school year.[6]

Illinois has a performance-based funding model for higher education, but it only affects 0.5% of the State appropriation and has only been used twice for final appropriations. Thirty-five out of 50 states currently use a performance-based funding model, but they all differ widely from each other. For example, Indiana implemented its performance-based funding formula in 2003, which is reviewed and adjusted every two years. Their current model focuses on six metrics that include degree completion, graduation rate, student persistence and remediation success. Ohio also has a performance-based funding formula that allocates over 30% of their funds to higher education based mostly on course and degree completion.[7]

Over the years, and particularly since the State implemented a new evidence-based funding formula for K-12 education, stakeholders and legislators have been calling for a new funding formula for Illinois universities. For example, in 2018 the bipartisan Higher Education Working Group of the General Assembly and an IBHE-convened workgroup both considered the history of Illinois’ funding of universities and how other states fund higher education. The purpose of  the IBHE workgroup was to review the current performance-based funding formula and make recommendations on how to improve performance funding above the 0.5% level.[8] The IBHE has since also worked on a new strategic plan, which was finalized in June.

The Illinois Board of Higher Education’s Strategic Plan

The Illinois Board of Higher Education released its draft Strategic Plan in April 2021. The planning process for the strategic plan began in September 2020 after being delayed by the COVID-19 pandemic. It focuses on accomplishing the goals of growth, equity and sustainability. The Board, with the assistance of stakeholder groups, identified 25 strategies to accomplish the three goals. The equity goal is intended to close the gap for students who have been left behind; the sustainability goal is focused on the financial future of both students and institutions; and the growth goal includes investing in talent and innovation to drive the State’s economic development.

The strategies the Board identified for the equity goal include supporting the ongoing learning process for low-income families and students of color. It also focuses on implementing outreach, supportive programs and talent management for faculty, staff, administrators, trustees and working adults seeking continued education. Sustainability strategies include investing financially in the institutions and providing low-cost loans for students to cover tuition and fees. Lastly, the growth strategies include engaging with employers, aligning the State’s economic development and higher education strategies and encouraging high school graduates to stay in Illinois for postsecondary education.

The Illinois Board of Higher Education’s Strategic Plan is closely aligned with the Higher Education Evidence-Based Funding Commission law. The Strategic Plan calls for a new funding formula and specifically says IBHE’s preferred funding principles for an equitable, stable and sufficient funding system are “embodied in SB815.”[9]

While a first step toward moving higher education in Illinois in a new direction, fulfilling the Strategic Plan will require action in the coming months and years by stakeholders and the universities themselves in a number of other areas, including developing a full implementation plan.

The Commission on Equitable University Funding

Senate Bill 815 was introduced in the Illinois General Assembly in mid-February 2021 to create a Higher Education Evidence-Based Funding Commission to research criteria and approaches and recommend adequate, equitable, and stable funding for the State’s higher education institutions and agencies. The 30-plus members of the Commission will be legislators and others appointed by the Board of Higher Education and the Governor as well as representatives from the public universities and other stakeholder groups within the state. Administrative support to the Commission will be provided by the Board of Higher Education. The co-chairpersons of the Commission are permitted to invite experts to speak to the Commission. The bill instructs the members to analyze the State’s funding methods for higher education and publish a report with the Commission’s recommendations to establish an equity-based funding model for public universities. The recommendations are to be “specific” and “data-driven.” The bill also says the recommendations “must fulfill the principles established by the Board of Higher Education’s Strategic Plan.” The bill’s sponsors connected the bill to the Illinois Legislative Black Caucus’ Education and Workforce Development Pillar that was passed earlier this year.

The Commission’s members are to meet at least once per quarter beginning no later than October 15, 2021. The bill outlines other areas for the members of the Commission to focus on, including eliminating disparities for low income and first-generation college students, providing incentives for institutions to improve enrollment equity, promoting economic activity and innovation through the universities’ activities and supporting institutional efforts to retain and recruit university faculty and leaders. Legislative language says the Commission may additionally consider hold harmless provisions as part of its final recommendations.

Illinois’ public universities are a significant asset for residents and businesses, educating students to reach their full potential and providing the skilled workforce needed for a competitive and prosperous state. The Civic Federation will follow the work of the Commission over the next several years and provide updates as applicable, as it has the potential to significantly impact both the State budget and its future competitiveness.