Purdue president outlines tuition factors at public hearing

Good afternoon. Thank you all for joining us today. I am Martin Jischke, President of Purdue University.

This afternoon we are holding a public hearing for the purpose of gathering information and comments dealing with Purdue tuition for the next two academic years.

With us here today will be four members of the Board of Trustees: Chairman Tim McGinley, Sarah Cusick, Barbara Edmondson and Mark Townsend. Also here today is Purdue Provost Sally Mason, our chief academic officer and Executive Vice President and Treasurer Morgan Olsen, our chief financial officer.

We are linked by video hookup to locations on our campuses at North Central, Calumet and Fort Wayne.

Before we begin the hearing, I will make some short comments. I will focus on four general areas impacting tuition: inflation, quality, state support, and repair and rehabilitation. At the conclusion of my remarks, we will open the floor to public comments.

As of this moment, we have no tuition numbers before the Board of Trustees for the 2005-2006, 2006-2007 fiscal years. The Indiana General Assembly continues to work on a budget bill for the next biennium.

The House and Senate have approved different versions of the budget bill. These differences are being worked out in a conference committee. Legislators have until midnight next Friday, one week from today, during the regular session to approve a spending plan and pass it on to the governor for his signature.

Until we know exactly what will be approved for higher education, and specifically for Purdue, in the next biennium, we cannot make any proposals regarding tuition.

A conceptual budget, based on funding from the state, is scheduled for presentation to the Purdue Board of Trustees at its next meeting on May 20. That meeting has long been scheduled for Purdue North Central in Westville, and it takes place after the close of our spring semester.

We are holding this hearing today to facilitate student involvement to make certain all interested people have a convenient opportunity to comment before the semester ends and also before final exams begin.

As we work hard to keep higher education affordable, increasingly, our nation's public universities, including Purdue, are being asked to do more. We are needed to do more for our students and more for our state.

And it all comes at a price.

Our costs for technology, insurance, utilities, and all associated expenses are rising. We have increased costs associated with opening new buildings, facilities of great benefit to our students and state that were constructed predominantly through private donations.

As I will explain in more detail in the next few minutes, we have repair and rehabilitation costs that must be addressed. We must also take action to be in compliance with federal environmental mandates and there are high costs associated with this.

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.

We are being impacted by inflation. Our increased costs are reflected in the Higher Education Price Index, which has been rising sharply.

This is a measure of costs associated with running a university and it generally runs higher than the Consumer Price Index. We anticipated the Higher Education Price Index for the next two years to be in the 4 percent to 5 percent range.

Inflation is one factor placing pressure on tuition.

In 2002-2003, after considerable discussion with students and leaders throughout the state, 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.

Thus, quality is a second factor affecting tuition at Purdue.

Since 2002-2003, Indiana University, Ball State and Indiana State have also implemented $1,000 fee increases to new students. Nonetheless, 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 those at other public universities in our state. This year, resident tuition and fees at Ball State are higher than at Purdue. Resident undergraduate tuition and mandatory fees at Indiana University this year are 11 percent higher than Purdue.

The best way to compare our fees is by looking at other major research universities of similar size and mission as opposed to looking at averages for all 600-plus public four-year institutions across the nation.

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

Purdue West Lafayette undergraduate resident fees this year are 19 percent below the mean and rank sixth among our 12 peer institutions. Our in-state fees rank eighth among Big Ten public institutions excluding Northwestern, which is private, and 20 percent below the mean of the Big Ten publics. The mean excludes Purdue.

Our non-resident tuition and fees rank eighth among our peers and 8 percent below the mean. In the Big Ten, our non-resident fees rank sixth among public institutions and 6 percent below the mean.

The gold line shows the percentage change in Purdue's West Lafayette tuition since 2000-2001. You can see 2002-2003 when we instituted the $1,000 increase. The black line is our peer mean increases. The green line represents Big Ten mean increases.

With the exception of the one year, since 2000-2001, Purdue has been at or below the Big Ten and peer mean. In fact, last year the increase in resident tuition at Purdue – 4 percent – was less than half the Big Ten mean and less than one-third the peer mean.

As amazing as it sounds, the net cost of attending Purdue today is about the same as it was 10 years ago.

This year, tuition for Indiana residents, plus room and board, books and other expenses for the academic year total an average of $15,322 at West Lafayette. However, thanks to scholarship support from generous donors, federal Pell grants and other sources of aid, the average student received $3,500 in grants, exclusive of loans.

And because of federal and state tax benefits for education, Lifetime Learning tax credits, and the tuition and fees tax deduction, we estimate that a typical student's family receives $1,500 in associated tax reductions.

Taking all these reductions into account takes the average net cost per student down to $10,322. Ten years ago, the net cost measured in 2004 dollars was $10,408, just slightly more than what it is today.

While Purdue tuition has increased since 1994, so has median household income. At the same time, grants for education and tax benefits have increased. Grants have increased 170 percent.

The $1,500 in tax benefits that were not available 10 years ago plus grants per student total an increase in assistance that is 286 percent higher than 10 years ago.

Taking all of this into account, the percent of household income to attend Purdue in 2004 is actually 5 percent less than it was 10 years ago.

Median household income includes many households of one person. Another figure often used is median income for a family of four persons. The percent of family income to attend Purdue has dropped from 17 percent in 1994 to 16 percent in 2004.

This slide compares the relative contributions of student fees and state support for the running of the university.

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

At California-Davis, resident, undergraduate tuition and fees this year are 14 percent high than Purdue. For 2003, the most recent year available, the California-Davis relative share was 73 percent state and 27 percent students.

Thus, state support is the third factor affecting tuition after inflation and quality.

For a number of years, both in Indiana and throughout the nation, the relative share of state support for the cost of higher education has been slipping.

In fiscal 1993-94, the state of Indiana's relative share was just under 60 percent. 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 dedicated to special functions such as Extension and the Agricultural Experiment Station.

This year the numbers are almost exactly reversed from fiscal 1993-1994.

Today the student relative share is just under 60 percent, and the state relative share is just over 40.

If you add total tuition and fees per full-time equivalent student and state appropriations per full-time equivalent student, you have total revenue per full-time equivalent student.

Purdue ranks last in the Big Ten.

The first row of Purdue numbers includes the state support for our Agricultural Research Programs and Cooperative Extension Service. The last row removes this funding, which are line items in the state budget.

If Purdue had the same per student revenue as Michigan, we would have an additional $367 million to spend.

There is a fourth factor impacting tuition after quality, inflation and state support. It is repair and rehabilitation.

The state's formula calls for Purdue to receive $34 million for the biennium systemwide for repair and rehabilitation, or $17 million per year. Of that, $30 million is for West Lafayette over the biennium, or $15 million per year.

Purdue has not been fully funded according to the state formula for the past 10 years. The yellow line is the amount we actually received. You can see the steep decline down to zero in 2001-2003.

It is estimated that Purdue is about $116.5 million behind in deferred maintenance and faces a $293.5 million backlog in renovations and rehabilitations.

This is a very serious problem that must be addressed

Our regional campus undergraduate resident tuition and fees compare favorably with peers. The Calumet campus is ranked sixth among 11 peers. At IPFW we rank fifth among 14 peers. At North Central we rank 5th among eight peers.

Purdue is committed to its land-grant mission of access and affordability. One of the central focuses of our strategic plans is keeping the cost of this great education affordable.

Our $1.5 billion Campaign for Purdue has a major focus on student aid and scholarships. There is a tremendous amount of aid available to our students.

When institutional fee remissions, loan programs and employment opportunities are included, total student financial aid on the West Lafayette campus is $396 million this year.

As a comparison, allow me point out an interesting fact. In West Lafayette this year, all student fees paid to the university total $365 million, or $31 million less than the total student financial aid.

Student fees are certainly not the only cost in pursuing higher education. And a great deal of this financial aid is in the form of loans that must be paid back. But those loans are great investments in the future of these students.

We appreciate everything the state is doing for Purdue. Our legislators and our governor have strong support for higher education and its impact on the lives of individuals and on economic development.

But with a budget deficit of $600 to $700 million, plus more than $700 million more in payment delays, difficult decisions must be made. The budget must be brought in balance for the fiscal integrity of our state.

In a higher education budgeting process, inflation, state support, and repair and rehabilitation are all factors to be taken into account. And Purdue must ultimately balance costs and accessibility with the quality of education at this university.

We continue to be unwilling to sacrifice quality.

Our state and our students have given our strategic plans strong support. The value of a Purdue diploma has never been greater. We are having a growing impact on economic development in our state.

It is our intention to stay the course with these plans. This is in the best interests of our state and our students.

At the same time we will continue to work on cutting expenses to maintain the affordability of our campuses.

Thank you.

I will now open this hearing to public comments.

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