Letter to the Editor: NIU expenses and reserves misrepresented

By Lisa Freeman and Provost

As the President and Chief Academic Officer of NIU, we value financial transparency and responsible stewardship of public funds. In this context, we want to comment on the information presented in Monday’s article “21 percent of NIU funds spent on classes.” While we were not in the presentation given by Dr. Howard Bunsis of Eastern Michigan University, the article summarizing the event provides misleading information as it pertains to both NIU’s expenses and reserves.

First, Dr. Bunsis is quoted as basing his analysis on our 2016-17 state allocation of $48.3 million. That state allocation represented only a fraction of NIU’s total budget of approximately $400 million. When that full budget is taken into account, a more clear picture of priorities emerges.

NIU annually provides rigorous financial analysis to the federal government’s Integrated Postsecondary Education Data System, IPEDS. The most recent published report, for the 2015 fiscal year, found that 52% of NIU’s core budget goes to instruction, and another 12 percent to academic support such as advising. Other mission-related expenses – such as research, public service and student services– make up another 19 percent of the core budget. Administrative functions such as human resources and finance make up 10 percent of our core budget, with other miscellaneous expenses comprising 8 percent.

To give more meaning to those numbers, the careful control exercised by IPEDS allows meaningful comparisons to be made nationally. One such comparison was made by the American Council of Trustees and Alumni. They found that among NIU’s peers (large research universities), for every dollar spent on administration, universities spend on average $5 on instruction and academic support. NIU’s ratio is slightly better. NIU’s fiscal year 15 IPEDS data puts us at $6 for every dollar spent on administration.

Similarly, the article’s reference to a $100 million reserve fund creates the impression that the university has a kind of savings account that sits unused. NIU, like any organization, has a varying amount of cash on hand at any given moment. That cash doesn’t sit in a central account. Rather, it’s the sum total of all of the cash distributed across the multiple accounts and multiple units that make up the university. Some of that cash is tightly restricted, such as an external grant or an endowment that may only be used for a specified purpose. Some of that cash can be used more flexibly. At the start of the school year, the university may indeed have in excess of $100 million – which it then uses throughout the year to meet payroll, pay utility bills, purchase equipment, etc.

Years of experience have taught organizations that it is dangerous to let the amount of cash on hand fall too low – standard recommendations are to always have enough cash to cover three to four months of regular expenses. The prolonged budget impasse and enrollment challenges have forced NIU to spend down its cash, so that goal is to keep our cash on hand at or above two months of expenses – about $60 million. This practice is vital to the overall financial health of the university, particularly in times of unpredictable state funding.