May 20, 2005

President Jischke discusses fees, conceptual budget

This morning, I will give an overview of the proposed fee increase and the conceptual budget for Fiscal Year 2006. I presented a more detailed report on this Thursday at the Board's Finance Committee meeting, which also served as a public hearing on the fee increase.

We are very appreciative of the work by members of the General Assembly and the governor in shaping a budget for the coming biennium. All of us at Purdue recognize the very difficult financial situation faced by our state.

Indiana has a budget shortfall of $600 million to $700 million, plus more than $700 million in payment delays. More than $100 million of this is owed to higher education, including more than $30 million to Purdue.

We support the governor and General Assembly in the important process of balancing the budget.

I believe balancing the budget is critical to the future of Indiana. But all of this is resulting in a very challenging situation for Purdue during the coming biennium.

In drafting a conceptual Purdue budget for Fiscal 2005-2006, we propose to stay the course with our strategic plans. To do anything else would be to break our promise to our students and our state. To do anything else would be failing our state at a time when it needs our potential to move forward.

The conceptual budget I will present today will show we are investing in ourselves by reallocating resources for highest priority initiatives. We are holding the line on expenses and cutting costs, while moving forward with initiatives that will improve the quality of education at Purdue.

We are proposing next year that total student aid increase 6.3 percent on our West Lafayette campus, 9.5 percent in Calumet, 6.1 percent at IPFW and 6.5 percent at North Central.

For a number of years both in Indiana and many other parts of the country, 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 and student fees and tuition totaled just over 40 percent. This year the numbers are almost exactly reversed. Today the student relative share is just under 60 percent, and the state relative share is just over 40.

Relatively smaller state support is impacting tuition at universities in Indiana and throughout the nation. Tuition is also being impacted by efforts to maintain and improve the quality of education and by inflation.

We anticipate the Higher Education Price Index for the next two years to be in the 4 percent to 5 percent range.

There is a fourth factor impacting tuition and fee recommendations. It is repair and rehabilitation, which has reached the crisis point on our West Lafayette campus.

This year, Purdue resident undergraduate fees rank third among Indiana public universities. 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 undergraduate, resident in-state fees rank eighth among Big Ten public institutions and 20 percent below the mean.

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

Purdue is an incredible value for Indiana residents and people from outside our state.

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 6 percent increase for resident and nonresident students next fall on all of our campuses. We are proposing a 6 percent increase for resident and nonresident students in the fall of 2006.

At the same time, we must face the repair and rehabilitation issue on our campuses.

Therefore, in addition, we are proposing a repair and rehabilitation fee on all of our campuses for new students beginning in the fall of 2006. Money generated from this will be combined with state funds and internal reallocations to address the situation.

We have delayed starting this fee until the fall of 2006 to provide 15-month advance notice of the initiative. This means students considering enrolling at Purdue will be aware of the fee before making their final decision.

Student already enrolled as of the spring of 2006 will not pay this fee.

We will be increasing student aid to partially offset the impact of this on highest need students.

This chart shows how students would be affected in West Lafayette.

There are students at Purdue who were enrolled before the fall of 2002 and, therefore, do not pay the additional $1,000 fee initiated that year.

Under this proposal, following the numbers in gold in the left set of columns, residents students enrolled before the fall of 2002 would see fees increase from $5,000 this academic year to $5,300 next fall, and $5,618 in the fall of 2006.

This is an increase of $300 – or $150 a semester – beginning next fall, and $318 – or $159 a semester – beginning in the fall of 2006.

Tuition and fees for non-resident students enrolled before the fall of 2002 would rise from $17,552 this academic year to $18,604 next fall, and $19,720 in the fall of 206.

The middle set of columns applies to students who started in the fall of 2002 through spring 2006.

Under this proposal, following the numbers in gold, resident fees would rise from $6,092 this academic year to $6,458 next fall. This is an increase of $366 – or $183 per semester. In the fall of 2006, fees would increase to $6,846. This is an increase of $388 – or $194 per semester.

Nonresident tuition and fees for students in this category would go from $18,700 this academic year to $19,824 next fall, to $21,016 in the fall of 2006.

As you see in the far right column, new resident student fees in the fall of 2006 would be $7,096, which includes a $250 repair and rehabilitation fee. New non-resident students entering in the fall of 2006 would pay $21,266, which includes the $250 repair and rehabilitation fee.

These rates are very competitive nationally and within our own state. They would continue to be below the highest resident, undergraduate public tuition and fees in Indiana.

The number of applications to Purdue continues at record levels. This year we are also setting records for the number of accepted students who are sending in their security deposits.

We believe the evidence shows our competitive advantage will continue.

This is the repair and rehabilitation situation we will work to address through the new fee on new students beginning in the fall of 2006.

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 $120 million behind in deferred repair and faces a $293.5 million backlog in renovations and rehabilitations.

Our regional campuses are proposing fee and tuition and increases similar to that at West Lafayette.

On our Calumet campus, the repair and rehabilitation fee is $79.50 and it applies only to new students enrolling in the fall of 2006. The increase to most students next fall would be $286.50 – or $143.25 per semester.

These numbers, and all the numbers I will give for our regional campuses, assumes a 30 credit hour load per year.

At IPFW, the repair and rehabilitation fee is $73.50, and it applies only to new students enrolling in the fall of 2006. The increase to most students next fall would be $318 – or $159 per semester.

Here at North Central, the repair and rehabilitation fee is $60, and it applies only to new students enrolling in the fall of 2006. The increase to most students next fall would be $294 – or $147 per semester.

I would now like to present Purdue's conceptual budget plan for 2005-2006 as it describes the application of the fee proposal just presented.

In West Lafayette, our Fiscal 2006 conceptual General Fund budget includes a reduction of $1.1 million in state appropriations. Student fees would provide an additional $29.3 million for our budget. "Other income" includes the increase in F&A recovery from sponsored programs by our faculty.

The total of revenue change is $30.3 million. In West Lafayette, we are proposing internal reallocations of $14.4 million – or 3.5 percent for Fiscal 2006. Total revenue and reallocations are $44.7 million.

Mandatory cost increases are $6.3 million. Increases in compensation and benefits are $15.8 million. This is based on a 2 percent pool as merit salary policy with flexibility for colleges, schools and divisions to meet special needs of extraordinary merit, market or equity for faculty and staff. We have other strategic plan initiatives totaling $22.6 million.

This brings the total additional allocations to $44.7 million.

Allocations from the new $1,000 student fee increase that started in 2002-2003 go directly into areas that impact learning.

The biggest single area is adding new faculty – $2.5 million. As of this academic year, our strategic plans have added 146 positions. In 2005-2006 we plan to add 54 more faculty, bringing us closer to our goal of 300.

The next largest item is student aid – $1.3 million. Faculty compensation, information technology, diversity and experiential learning are all key components of the learning environment.

Our allocations by strategic plan initiative shows the highest percentage going to compensation and benefits – 41.1 percent. Overarching initiatives would receive 23.3 percent, followed by learning at 21.7 percent, discovery at 11.3 percent and engagement at 2.6 percent.

We have strategic plan initiatives totaling $38.4 million.

I will stop here to take questions of the West Lafayette conceptual budget before moving on to our regional campuses.

On our Calumet campus, state appropriations have decreased $406,521. Student fees would result in increased revenue of nearly $3.1 million. Internal reallocations at Calumet are 2.2 percent, which totals $906,831. Total revenue changes and reallocations are $3.6 million.

Mandatory cost increases at Calumet combined with debt services result in increased costs to continue current operations of $101,437. Strategic plan initiatives, including compensation and benefits, total $3.49 million. Total allocations are nearly $3.6 million.

On our Calumet campus, the new student fee increase would provide additional funds for the Best and Brightest Scholarship Program and faculty compensation. Compensation, benefits and overarching initiatives would receive the largest share of $3.5 million in strategic plan initiatives.

IPFW is receiving an $811,932 increase in state appropriations for Fiscal 2006. Student fees in 2006 would produce an additional $2.79 million in revenue. The internal reallocation at Fort Wayne is 4 percent, totaling almost $2 million. Total new revenue is $5.8 million.

There is a 2 percent merit salary increase pool consistent with our systemwide salary policy. With this plan, compensation and benefits will increase $2 million. Other strategic plan goals total $3.6 million. Total net allocations are $5.8 million.

At Indiana Purdue Fort Wayne in fiscal 2006, about $756,000 in revenue from the new student fee increase will be allocated for a number of areas. These include added faculty, student aid and information technology. Compensation increases and benefits will receive 35.8 percent of IPFW strategic plan initiative funds. Academic programs will receive the next largest share at 29.8 percent. The total for strategic plan initiatives are $5.6 million.

At North Central, state appropriations will increase about $43,000. Student fees will produce $846,757 in new revenue. Internal reallocations at North Central are 3.2 percent, totaling $445,000. Total revenue changes and reallocations are $1.3 million.

Mandatory cost increases are $257,878 to continue existing operations. Compensation and benefits would increase $494,013. Other strategic plan initiatives total $586,317. Total allocations would be $1.3 million.

At North Central, our allocations of Fiscal 2006 revenues from the new student fee increase would go toward a new faculty position. Compensation and benefits would receive the largest allocation among strategic plan initiatives – 45.7 percent. Academic programs would receive 31.2 percent.

I believe that systemwide we have held the line on spending.

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 allocations at each of our campuses of at least 2 percent toward strategic initiatives.

This budget also addresses very serious problems with repair and renovations on our campuses.

I will be happy to take your questions.

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