Two pieces of information released this week – a letter to the state Higher Learning Commission and a bond rating update from Moody’s – offer a glimpse into the relative financial strength of Northern Illinois University as it continues to cope with the ongoing budget stalemate in Springfield.
In the letter to the HLC, NIU President Doug Baker informed the commission that, despite the hardships created by the state budget impasse, NIU plans to remain open for business. Earlier this month the commission had asked all universities in the state to respond to a series of questions about how they were coping with the lack of state support so far this fiscal year.
“Our current ability to maintain operations despite the lack of state funding support eight months into FY2016 is strong. Further, I’d like to note that we have not publicly, or privately, indicated that our institution will close or suspend operations in the immediate future,” Baker said in the letter.
Unfortunately, the same cannot be said for all universities across Illinois. One has already declared financial exigency (essentially bankruptcy) and this week cancelled spring break so that they can make it through the spring semester. Two others have announced plans for large scale employee layoffs and elimination of programs should the impasse continue.
NIU is not contemplating any such actions, Baker told the HLC. It has avoided such measures so far because over the last two years the university has undertaken a series of steps that make it less vulnerable than some other schools. Among those measures are:
- Significant cuts in spending for goods and services;
- Extremely conservative hiring practices, which have saved millions of dollars by temporarily leaving many vacant positions unfilled;
- Elimination of capital spending, except for projects directly related to the safety of the campus;
- Implementation of an entirely new budgeting process that has created greater financial clarity and allowed for tighter controls on spending.
At a town hall meeting on campus last week, NIU Vice President for Finance and Administration Al Phillips said thanks to those measures the university saved $15 million during the first half of the fiscal year. He believes similar savings can be found during the second half of the year.
Those measures should ensure operations through at least the fall semester, Phillips said last week. However, they are not long-term solutions.
“You can do that for a while, but at some point that won’t be enough without state funding,” he said. “There has to be some level of funding fairly soon or the entire higher education system in the state will be at risk.”
The measures Baker highlighted in his letter to the HLC also provided a silver lining to the news from Moody’s Wednesday. The bond rating agency downgraded NIU and two other Illinois universities by one step. The change means the university would pay slightly higher interest rates should it attempt to sell bonds. There are no plans to borrow at this time.
The moves were expected, said Phillips, due in large part to the tremendous uncertainty about the financial condition of the state in general. Those worries were exacerbated by the lack of state funding for public universities over the last eight months.
However, Phillips said, analysts from Moody’s came away impressed by all that NIU has done over the last two years to prepare itself for difficult times.
“Moody’s said the actions we have taken to date put us in a different category from other institutions around the state. More importantly, she noted that because we have found ways to save, and because of the new budgeting processes we have put in place, when we do get funding from the state we are positioned to succeed.”
“We will be a better institution when we come out on the other side of this,” he said.