Ep. 35: Why is tuition going up at Illinois universities?

Tuition at Illinois public universities has skyrocketed over the past 15 years, making college unaffordable for many families. Adam Schuster explains what’s causing this rise and what it means for future students.

Host: Hilary Gowins, Vice President of Communications
Guest: Adam Schuster, Vice President of Policy

This edition of The Policy Shop is by Adam Schuster, vice president of policy at the Illinois Policy Institute.

Higher ed, higher costs: In-state tuition at Illinois’ 12 public universities rose by an average of 49% from 2007-2022, adjusting for inflation. That’s compared to a mere 19% increase in the national average for public tuition over roughly the same time period.

What is driving up the cost of college in Illinois faster than elsewhere? Like so many other problems in Illinois, the pension crisis is a root cause. Spending on university pensions grew 510% since 2007 in real terms, crowding out state spending on universities themselves.  Higher education spending for everything other than pensions is down 23% as a result.

The average in state public tuition costs in Illinois are now the fifth highest in the nation and the highest in the Midwest.

“As the amount of money from the state budget began to decline, they left it up to universities as to how they would adapt to smaller appropriations,” Illinois State University President Emeritus Larry Dietz said. “Most increased tuition and/or fees rather than cut programs and services to accommodate student needs.”

“The truth is no one can have a good conversation about the state budget unless you begin to identify the place where the bulk of the money is spent. That’s been pensions.”

Pension problem: State Universities Retirement System (SURS) pension payments made up just 10% of the state’s higher education spending in 2007, if you count pensions and program spending together. Now they take 49% of those dollars. That’s caused spending on programs and operations to fall by $800 million in real terms.

Funding for SURS pensions will grow to consume 53 cents of every dollar spent by the state on higher education in 2023.

But SURS is far from solvent: It has less than half the money it will need to meet its obligations. That pension deficit is over $25 billion, up from $7.3 billion 15 years ago. An Illinois Policy Institute stress test found if a major recession hits without pension reform, SURS would be the first Illinois pension system to run out of money.

We should prioritize our state education spending so it benefits students, not allow pensions to eat the whole pie.

Parents and students foot the bill: Students native to Illinois pay 40% more than other Midwest students on average to attend the largest public universities in their respective states.

As the oldest of seven siblings, Ethan Fazio said tuition prices and financial aid were top factors when considering higher education and whether to stay in Illinois.

“I got a whole lot of other kids behind me for my parents to get through college, so I wanted to make the most financially responsible decision for myself and for my family,” said Fazio, a junior at the University of Illinois and a Mokena native. “I am fortunate to be an Illinois commitment recipient. But it’s daunting to think about tuition continuing to increase for the next generation of students.”

Fazio said without scholarships, he’s not sure he would be in school. He thinks tuition at Illinois’ public universities has grown too fast in recent years.

The irony of this whole situation is Gov. J.B. Pritzker announced his re-election bid with a campaign pledge that everyone at the state median income and below “ought to get to be able to go to college for free.”

The Illinois Policy Institute recently found that absent the pension crisis – or if the state still spent the same 4% of its budget on pensions it did in the 1990s, rather than more than 25% – Illinois could afford to give every undergraduate enrolled in public universities nearly $70,000. Instead, only a small fraction of students receive state tuition assistance, worth an average of just $3,000.

Only pension reform can solve this problem: While Illinois’ 2023 state budget includes increases in spending for university operations and a tuition assistance program for low-income students, it still leaves the state spending less on these priorities than it did 15 and 20 years ago. Worse, the state’s chronic budget deficits will return next year when federal pandemic aid expires, making recent increases potentially unsustainable.

Constitutional pension reform is the only way to free up resources to make higher education more affordable for all students, permanently. That can be done without harming the rightfully earned retirements of Illinois educators through a constitutional amendment that protects earned benefits but allows for changes to future benefit growth. Without such a change, Illinoisans face a future in which they are asked to pay more to receive less in services.

The Illinois Policy Institute developed a plan for “hold harmless” pension reform that would preserve benefits earned for work already performed, while allowing for modest reduction in the future growth of benefits, such as by replacing 3% compounding post-retirement raises with a true cost-of-living adjustment tied to inflation. The plan would save $2.4 billion the first year alone and eliminate pension debt over time, freeing up scarce resources for investments in higher education and other services.

Illinois politicians have so far failed to adopt such common-sense reforms necessary to stabilize the pension systems. Students lose now, but in the end, Illinois is robbing itself of its future.