April 8, 2004

Purdue President Martin C. Jischke made these comments Thursday (April 8) on the university's proposed fee increase and budget plan during a Board of Trustees Finance Committee session and public meeting.

President Martin C. Jischke's comments to the Finance Committee

This afternoon I will report on proposed fees for the coming academic year. I will also present a conceptual budget for 2004-2005.

At the conclusion of this presentation the public hearing portion of the meeting will begin.

Increasingly our nation's public universities, including Purdue, are being asked to do more. And it all comes at a price.

Our costs for technology, insurance, utilities and all associated expenses are rising. There are increasing demands on our salary budgets as we work to attract and keep the best people for our students and state.

At the same time universities are dealing with all these increased expenses, throughout the nation, state support as a percentage of the cost of higher education is slipping. According to the National Association of State Universities and Land-Grant Colleges, this year about 20 percent of state systems have made cuts that directly impact the quality of undergraduate education.

In 2003 the Indiana General Assembly and the governor displayed solid support for higher education. The biennial budget included a 3.8 percent increase for the West Lafayette campus this fiscal year, which is 2003-2004, and 3.1 percent for 2004-2005.

We deeply appreciate this support.

At the same time, we recognize that a large portion of the additional money being appropriated is targeted for specific new initiatives. These funds are not available for increased costs of continuing our existing activities.

We received no inflationary increase from the state for this year. Next fiscal year, we will receive an inflationary increase of one-half of 1 percent.

We appreciate this. But we also recognize it will not cover our increased costs.

These increase costs are reflected in the Higher Education Price Index, which has been rising sharply.

Purdue's undergraduate, resident fees were just less than $3,000 a year in 1993-1994. During this academic year they are $5,860.

But our fees this year adjusted for inflation by the Higher Education Price Index are substantially lower — $4,332.

The same is true with our nonresident fees.

In 1993-94 they were just over $9,000. Today, they are $17,640. But adjusted for the Higher Education Price Index they are $13,040.

In 2002-2003, after considerable discussion with students and leaders throughout the state and based on our strategic plan, Purdue initiated a $1,000 fee increase for new students. This was part of our strategic plan to take Purdue to the next level of academic excellence.

Last year three other Indiana universities also implemented $1,000 fee increases to new students.

Higher education continues to be a bargain for the taxpayers of Indiana at all our public institutions. And Purdue's tuition and fees compare favorably with other public universities in our state. This year tuition and fees at Ball State are $90 higher than Purdue. Tuition and mandatory fees at Indiana University this year are 11 percent higher than Purdue.

Our fees compare very favorably to our peers and Big Ten public institutions.

Purdue West Lafayette undergraduate resident fees this year are 12 percent below the mean and rank fifth among our 11 peer institutions. Our in-state fees rank eighth among Big Ten public institutions and 16 percent below the mean of the Big Ten publics.

Our non-resident tuition and fees rank eighth among our peers and 3 percent below the mean. In the Big Ten, our non-resident fees rank sixth among public institutions and 5 percent below the mean.

The lower line shows the percentage change of Purdue's West Lafayette enrollment. Our enrollment is being managed downward at the undergraduate level. The percent increase in undergraduate tuition at 2002-2003, shown by the dotted line, shows the start of the $1,000 increase for new students. The third line is the percentage change in total tuition and fee revenue.

Tuition increases have not adversely impacted enrollment and total revenue.

Many of our peer institutions receive a stronger share of state support than Purdue. Cornell and Illinois not only receive a higher proportion of state support, their tuition and fees are also higher.

At California-Davis, with tuition just dollars less than Purdue's, the relative share is 76 percent state and 24 percent students. In fiscal 2002, Purdue's relative share of students and state support was 50 percent support from the state and 50 percent from tuition and fees. This includes state budget line items such as Extension and the Agricultural Experiment Station.

More recent numbers show the relative share of students and state support running about 47 percent state and 53 percent tuition and fees.

Our regional campus resident tuition and fees also compare favorably with peers.

The Calumet campus is ranked fifth among 11 peers. At IPFW, we rank fifth among 14 peers. At North Central, we rank third among eight peers.

To maintain the quality of a Purdue education, to stay the course with our strategic plans, to continue offering top educational opportunities for our students while at the same time holding the line on costs, we are proposing a 4 percent increase for Indiana resident students next fall.

We are proposing a 6 percent increase for non-residents.

At West Lafayette, the 4 percent increase for resident students is $232 for the entire year — $116 per semester. For non-resident students, the increase is $1,060 for one year — $530 per semester.

Funds derived from the $1,000 special fee increase to new students will continue to be used only for strategic plan initiatives as initially proposed.

Our regional campuses are proposing similar tuition and fee increases. The IPFW and North Central proposals are 4 percent and 6 percent – the same as West Lafayette. Calumet is proposing a 4 percent increase for both resident and non-resident students. This is competitively beneficial at Calumet because of the proximity of the campus to Illinois.

The funds received from these increases will be used for compensation increases, student aid and unavoidable/mandatory costs.

The additional revenue from the proposed 4 and 6 percent fee increases would go directly into initiatives that impact our students.

The largest portion of these funds in West Lafayette would go to faculty and staff compensation. Our faculty salaries are running 9 percent below our peers. It is critical that we narrow this gap to recruit and retain the best people for our students and our state.

The next largest share of the funds goes directly to student aid. In West Lafayette, we are budgeting a 10 percent increase in student financial aid for fiscal 2005. We expect that consistent with our past pattern we will spend 50 percent of undergraduate student aid dollars addressing need and the other half for merit.

Among the initiatives that do not appear in this budget report are the Purdue Opportunity Awards. The focus of these awards is on Indiana students who face unusual personal challenges and financial hardships.

Beginning next fall, the Opportunity Awards will provide a full scholarship every year for one person in each of Indiana's 92 counties. This program consists of federal, state and Purdue assistance.

I would now like to present Purdue's conceptual budget plan for 2004-2005 as it describes the application of the fee proposal just presented.

As I said earlier, West Lafayette state operating appropriations for Fiscal 2005 will increase by 3.1 percent.

The largest percent increase among revenue sources comes from F&A Recovery due largely to grants and contracts for research. This is the result of very solid growth in our research program.

The net revenue change from state operating appropriations and debt service is $3.5 million. The total increased revenue from student fees is $34.1 million, including an adjustment due to accumulated, unbudgeted, non-resident tuition income of about $8 million.

Our interest revenue continues to be impacted by low interest rates.

On the West Lafayette campus we are proposing an internal reallocation of 2.3 percent of our existing resources, or nearly $8.8 million, toward highest priority initiatives.

Total new revenue and reallocations for Fiscal 2005 is $50.7 million.

How are we allocating that $50.7 million?

Mandatory cost increases are expected to exceed $3.1 million to cover plant expansion, repair and rehabilitation, utilities, and insurance costs. These are offset by debt service reduction.

More than $51.2 million is going to strategic plan initiatives – compensation and overarching initiatives along with investments in learning and discovery and engagement.

This is a breakdown of allocations of revenues from the new student fee increase of $1,000 started in 2002-2003. The largest amount, $3 million, goes toward increasing faculty numbers. Our strategic plans have resulted in the addition of 90 new faculty positions on the West Lafayette campus. Next fall we plan to add 56 more positions, bringing the total to 146. That is almost half way toward our goal of 300.

The second largest area at nearly $2.3 million is student aid. Faculty compensation to attract and keep the best people is next at $1.2 million. Also funded with these resources are initiatives in information technology, diversity and experiential learning, for a total of nearly $7.9 million.

Our single largest area in mandatory cost allocations is $1 million for emergency repair and rehabilitation, which is a rising concern. This does not meet our needs by a wide margin. But we felt we had to do something.

We are also experiencing continued increases in fuel, utilities and insurance.

Compensation increases and benefits is receiving 28.6 percent of strategic plan investments from new revenue and internal reallocations.

Each campus will have a 2 percent merit pool for salary increases for all groups. In cases of exceptional merit or market conditions, additional increases may be granted and funded through specific allocations and/or further reallocations.

In addition, funds will be allocated to cover the university's share of significant increases in health care benefits and costs. West Lafayette medical insurance alone is increasing $3.5 million.

Allocations of new revenue and internal reallocations for strategic plan overarching initiatives are also 28.6 percent of the total.

This includes the President's Capital Reserve. This is for strategic facility initiatives that are in the planning stage. Specific allotments will be made when initiatives are finalized.

New faculty lines, programmatic reallocations, information technology and libraries are also being funded through overarching initiatives. In addition, $200,000 is included for diversity.

Our allocations of new revenue and international reallocations for discovery form a long list.

Support for research receives the most funding at $2.7 million. This is new money we are receiving this biennium from the state to support research institutions — a very welcome development.

Our new biomedical engineering undergraduate program is receiving $1.25 million from the state. This is one-half of the state's $2.5 million allocation for biomedical engineering. The second half will appear among our initiatives for learning.

Discovery initiatives total more than $9.5 million, or 18.7 percent of the total allocations from new revenue and international reallocations.

Our allocations from new revenue and reallocation for learning will fill two slides.

Program reallocations top the list at $3.1 million. Institutional fee remissions, employment-related fee remissions and undergraduate aid based on need and merit are all receiving support.

The Indiana Top Resident Scholar Program is listed here. We not only want to keep our best university graduates in Indiana, we want to keep our best high school graduates in state.

You also see here the other half of the $2.5 million from the state for our undergraduate biomedical engineering program.

Continuing with learning, we have allocations to a number of areas including national academy hires, student experiential learning and study abroad. Total new allocations of new revenue and internal reallocations for learning are more than $10.3 million, which is 20.2 percent of the total new money available.

Finally, for West Lafayette, we have allowed nearly $2 million for engagement. This includes support for our Campaign for Purdue.

This is the end of the West Lafayette presentation.

To sum up, we are proposing to stay the course on our strategic plan and investments of the new student fee increase. We are proposing an internal reallocation of 2.3 percent. We are proposing a 2 percent merit salary pool. Significantly, we propose no increases for supply and expense budgets.

At West Lafayette this is the fourth year in a row that we have been unable to increase our supply and expense budgets.

This slide compares the Calumet campus, Fiscal Year 2004 and Fiscal Year 2005 budgets by revenue source. You can see that in both years the single largest source of funds is student fees.

The new student fee increase at Calumet will be used to support the Best and Brightest Scholarship program. This program is focused on attracting top high school graduates.

The Calumet internal reallocation is 3.7 percent. Allocations of new revenue and internal reallocations for compensation increases and benefits account for 27.7 percent of the total

Allocations for overarching initiatives include employee and institutional fee remissions and a technology reserve.

Goal number one in our Calumet strategic plan is to expand access to student learning and improve the level of student success. Four programs to accomplish this are sharing $1.8 million, which is 38.3 percent of the total new revenue and internal reallocations.

Goal two is to promote and support excellence of faculty and staff. This includes new faculty positions at a cost of $327,000.

Goal three is to support a high performance work and learning environment.

And goal four is to expand the university's role as a vital partner for positive change and economic growth in Northwest Indiana.

That concludes the Calumet presentation.

This slide compares the IPFW campus Fiscal Year 2004 and Fiscal Year 2005 budgets by revenue source.

Our IPFW campus received an increase in operating appropriations from the state of 5.5 percent. This significant increase is due to a change in the enrollment formula funding and $500,000 for the Northeast Indiana Innovation Center.

Student fees and tuition exceed the total state operating appropriations in both years, and again the margin is growing.

This slide shows how the new student fee increase will be used. At the top of the list are new faculty positions. These funds are being allocated to impact the quality of an IPFW education.

The internal reallocation at Fort Wayne is 2 percent.

More than 41 percent of our new revenue and internal reallocations at Fort Wayne will go toward compensation increases and benefits. Overarching initiatives will receive 8.7 percent. Allocations for overarching initiatives include employee and institutional fee remissions and a technology reserve.

Our first goal at IPFW is academic programs, which is receiving 24.7 percent of the strategic plan allocations of new revenue and internal reallocations. The largest single area is programmatic reallocations, followed by faculty positions.

Our second goal focuses on the campus environment.

Goal three is scholarly achievement, which includes $250,000 on Northeast Indiana Innovation Center research support. This is one-half the $500,000 the state has appropriated for the Innovation Center. The other half will appear in IPFW goal four.

Strategic plan goal four at IPFW is quality of life and includes the remaining funds for the Innovation Center.

Goal five is continuous improvement.

Total new allocations for strategic plan initiatives at Fort Wayne are $5.5 million.

That concludes our report on the Fort Wayne conceptual budget.

This slide compares the North Central campus Fiscal Year 2004 and Fiscal Year 2005 budgets by revenue source. As with our other campuses, student fees and tuition exceed state operating appropriations in both years.

The new student fee increase at Purdue North Central is focused on faculty, engagement and student scholarships. The total is $131,000.

The internal reallocation at North Central is 2.4 percent. Compensation increase and benefits will receive 61.6 percent of the total strategic plan allocations of new revenue and reallocations. Overarching initiatives will receive 0.7 percent.

In North Central's strategic plan, goal number one is students. Scholarships, technology and programmatic reallocations will receive nearly $84,000.

Goal two is academic programs. More than $245,000 is being allocated under this initiative.

Goal three is constituent relations.

Goal four is campus environment.

The total allocations of new revenue and reallocations for Strategic Plan initiatives at North Central is just more than $1 million.

This concludes the North Central presentation.

I believe that systemwide we have held the line on spending. Once again, we have little or no new money budgeted for supply and expense budgets on our campuses. We addressed unavoidable cost increases. We addressed compensation.

This budget stays the course on our strategic plan and initiatives to improve the quality of a Purdue education, and it includes internal reallocations at each of our campuses of at least 2 percent toward strategic initiatives.

This budget does not address very serious problems with repair and renovations and information technology infrastructure.

The $1 million we have budgeted for repair and renovations is for emergencies only. It does not come close to the $20 million per year that we need to address this growing problem.

We cannot put off this situation much longer. This is a cost that cannot be avoided. And the longer we delay taking action, the more difficult it becomes.

It is my recommendation to the Finance Committee that it propose that the full board delegate authority to approve the 2004-2005 conceptual budget, tuition and fees to an Executive Committee meeting in May.

This will comply with the request we received from the governor. As you know, the governor asked us to keep tuition and fee increases at 4 percent or below. He also asked the state's public universities to hold a public hearing on tuition and fee proposals 30 days before being approved by the boards of trustees.

The governor's letter reached us too late in March to accomplish this before the April 9 meeting.

We advertised today's public hearing in 21 newspapers distributed widely across the state, including minority publications. We have received less than a dozen formal letters and e-mails addressing the proposed increase. We have also received two requests to speak at the public hearing.

I would now like to return this meeting back to the Finance Committee Chairman for the public hearing.

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