NIU exploring options to reduce $18.5M budget deficit

DeKALB – Northern Illinois University leaders are looking to shore up an $18.5 million deficit stemming from the university’s fiscal 2023 budget, which officials said may loom over NIU for three years until it’s resolved.

The university’s fiscal 2023 budget exhibits a shortfall that officials attribute to a variety of factors, including the state budget impasse of 2015-2016, high inflation, the COVID-19 pandemic and declining enrollment.

George Middlemist, vice president of administration and finance and CFO at NIU, said the university community can rest assured knowing that there is a plan in place to address the budget deficit.

“The university is currently seeking out opportunities across campus to reduce the budget deficit with a goal of cutting it in half by June 30, 2024, and eliminating the deficit within three years,” Middlemist said. “As part of those efforts, we have identified potential new revenue sources. We are also working to identify potential expense reallocations and reductions to reduce the deficit.”

NIU’s current budget deficit is not a new issue, but the shortfall has been increasing for more than a decade.

Middlemist said there are several contributing factors to the university’s budget shortfall.

“The state budget impasse of 2015-2016 was a major factor,” Middlemist said. “In 2015, NIU’s state support was $91.1 million, but in the following year it was slashed to $26.4 million, a reduction of nearly $65 million. Although the funding was restored to $91.1 million in fiscal 2017, we were never made whole for the lost $65 million.

“State allocations also have not kept pace with inflation. When we adjust for inflation from 2015 until 2024, we would expect our state allocation to be around $121 million, or nearly $23 million more than the $98.6 million we received this fiscal year.

“The pandemic has also had a significant negative impact on NIU’s budget, as the institution saw declines in enrollment during this time as well as an increase in operating costs due to higher-than-normal inflation.”

Middlemist attributed part of the blame for NIU’s shortfall on the state for failing to adequately equip the university with revenue.

“This deficit has accrued over many years as our total required expenses have exceeded our total income,” Middlemist said. “The biggest culprit in creating our deficit has not been spending but, rather, declining state support for much of the past decade.

“To illustrate the impact of this, consider that in 2015, NIU’s state appropriation was just over $91 million. If you adjusted that figure upward each year to account for inflation, we would have expected to receive $121 million for fiscal 2024. Instead, we received $98.6 million – a difference of nearly $23 million.

“We have made a conscious choice not to try to fill that gap by raising tuition, which has increased only three times in the past eight years. NIU works diligently to cut costs, but there is a certain level of spending required to meet the needs of our students, continue investing in our employees and maintain our physical plant.”

Middlemist said there could be more than one way that the university turns to address the budget deficit going forward.

“One example of reallocating resources is optimizing course sizes to make sure that students have the options they need for course selection, but that we’re not offering multiple sections with low enrollment,” he said.

The university is working to replace its year-to-year budgeting process with a multiyear budgeting and planning process, which Middlemist said is hoped to help the university in investing its funding more strategically moving forward.

“As part of that effort, we have developed budget forecasting tools to better predict revenues and expenditures so we can be more strategic with our planning,” Middlemist said. “Historically, budgeting has been incremental, looking to fund institutional priorities with the incremental changes in our budget annually. This process, used by many organizations, does not allow for long-term strategic thinking.

“By moving to a multiyear budgeting methodology, the institution should be able to invest its funding more strategically.”

Middlemist said he believes the university has a solid plan in place to ensure that things go more smoothly in the budget-planning process moving forward, especially considering what staff has learned in the aftermath of revealing the fiscal 2023 budget shortfall publicly.

“NIU is working diligently to align budgets with revenue projections going forward,” he said. “Those efforts include finding new revenue streams, reducing spending and changing how money is allocated. We will work with campus stakeholders to adopt strategies that are academically responsive to the needs of our students, with a focus on being fiscally responsible.

“Given the number of external factors such as the state budget impasse, COVID-19 and rising costs, the deficit was years in the making. It will take time to bring down, and we believe these strategies will allow us to resolve the deficit over the next three years.”

The university’s fiscal 2025 budget may loom over the Finance, Audit, Compliance, Facilities and Operations Committee – at least for now. Early in the spring, however, university leaders will be appearing before appropriations committees in Springfield.

Officials said there still is much work to be done before the university’s fiscal 2025 budget can be put to a vote.