Purdue announces initial solutions to address budget shortfall
WEST LAFAYETTE, Ind. - Purdue on Thursday (Jan. 21) rolled out initial targets to help it meet economic challenges while continuing to execute its strategic plan. The targets include making compensation more competitive, improving operations and becoming more energy efficient.
The university in November already had projected that it must take steps to avoid a projected $67 million budget deficit by 2013. In January, Purdue learned it would not receive $35.8 million of its state appropriations for the West Lafayette campus over the next 18 months.
The targets were announced at a forum on campus, which also will be available at the "Sustaining New Synergies" link on the Purdue home page. Final decisions about specific elements of the plan will form part of the university's operating budget that will be submitted to its Board of Trustees for consideration in April.
"I know we will emerge from these challenges as a more resilient and productive university," President France A. Córdova said. "We should also keep in mind that as challenging as these economic figures are, Purdue is operating from a position of knowledge and choice. We will not make compromises that will affect the value of our Purdue degree or the successful completion of our strategic plan."
$35.8 million cut in state appropriations for WL campus
To offset the reduction in state appropriations, the university plans to utilize $2.8 million in accumulated savings from energy conservation measures already taken and $7.5 million through strategically constrained hiring.
The university also will forgo using about $19 million of the federal stimulus funding previously allocated for renovation and rehabilitation. This will allow adequate funding to address critical needs during this period, said Al Diaz, executive vice president for business and finance, treasurer.
The remainder of the needed funds will be generated by recurring changes that also are designed to meet the $67 million deficit.
"The energy conservation measures will involve effort from all of us, every day," Diaz said. "Details will be announced next week."
For vacancies, the university has developed guidelines and is assessing unit plans for strategically constrained hiring. Requests to fill existing positions also will require approval by the president or the two executive vice presidents.
Reallocating resources while positioning Purdue for a more competitive future
The university also is seeking other sources of revenue and ways to reallocate resources.
"While we are seeing challenges within our general fund, our sponsored-research funding has more than doubled in the past decade," Córdova said. "Under the leadership of Richard Buckius, vice president for research, we have a plan to double our sponsored-research dollars to $600 million by 2014."
Purdue officials estimate the equivalent of six to 10 jobs for every $1 million of sponsored research.
"The $67 million deficit is caused by unavoidable cost increases, such as those for energy and benefits, as well our need for resources to assure competitive compensation," Diaz said.
The university so far has identified ways to reduce spending by $42 million to accommodate the predicted $67 million deficit.
About $27 million a year will come from employee benefits. The university currently spends about $156 million a year in benefits from general funds at the West Lafayette campus. Purdue retirement benefits are the highest amongst its peers while salaries are among the lowest.
"Our talented faculty and staff are part of what makes Purdue a preeminent university," Córdova said. "However, salaries and benefits comprise 70 percent of our general fund budget, and we must be competitive."
Two changes in benefits are "absolutely required," Diaz said. Purdue will reduce its contribution to retirement and change the percentage it pays toward employee heath care. The university also will evaluate benefit options for part-time employees.
To offset the university's changes in benefit contributions, it may provide credits that would allow individual employees to choose how to allocate their total compensation among salary, retirement and health care.
To save an additional $15 million, Purdue plans to make organizational and process changes. To do this, the university will re-evaluate its information technology governance structure, increase energy conservation, expand strategic sourcing and conduct organizational reviews.
"As we compare our energy consumption profile with our peers, we find we produce energy cheaply through our own plant but our consumption is high," Diaz said.
Purdue has already saved $3.5 million through expense control measures including supply contracts, tactical purchases and energy conservation. It is now implementing programs to save $500,000 through reduced lighting, temperature adjustments and electrical/electronic equipment cycling.
Overall planning to be done in-house
Consideration was given to bringing in an outside consulting firm to assist with the budget assessment process, and Purdue solicited input from the campus community.
"We thank the campus community for its thoughtful ideas and suggestions," Córdova said. "That input, coupled with the work of talented people dedicated to this project, has brought us to the conclusion that given the present circumstances we can manage the overall effort ourselves without hiring an external consultant. We may, however, bring in some very specialized outside help for targeted implementation in the future."
A task force of Purdue employees with specialized expertise has been assembled to assess systems, processes, procedures and operations to identify and implement initiatives with substantial merit. They will seek input from key people on campus. The members then will develop a business model for implementation.
The task force reports to Diaz and Randy Woodson, executive vice president for academic affairs and provost and co-chair of the Sustaining New Synergies effort. A steering committee, which was formed in November and includes faculty, staff and students, will continue serving as a sounding board for Diaz and Woodson.
"We will continue to look for ways to become more efficient and generate additional revenue," Diaz said. "Any savings we can make in other areas will help offset the impact on individuals."
Writer: Jeanne Norberg, 765-494-2084, jnorberg@purdue.edu
Source: Al Diaz, 765-494-9705, aldiaz@purdue.edu
Related informaton:
Sustaining New Synergies website
Slides from January 21 forum