September 23, 2005

President Jischke's comments to the Board of Trustees

Good afternoon.

It is great to have you on campus today as you continue your meetings that began yesterday.

As we celebrate the start of our academic year, we recognize these are very difficult times for people on the U.S. Gulf Coast. And another hurricane is now threatening.

Purdue student groups, academic and administrative areas, and housing units have launched a broad initiative to offer relief to victims of Hurricane Katrina.

We offered immediate admittance to academically qualified students wishing to transfer from colleges and universities forced to suspend operations in Louisiana, Mississippi and Alabama. We have admitted 32 students and to date 12 have enrolled.

Available spaces in graduate and family housing facilities were temporarily offered at no charge to the families of Purdue students from the hurricane-damaged areas and to high school seniors from the affected regions who enroll in the West Lafayette, Lafayette or Tippecanoe County school systems.

We are now housing eight transfer students and one family of a current student. The family consists of a mom, dad and a 14-year-old sister.

Student volunteers from about a dozen groups are leading campus wide efforts to raise money being donated to hurricane relief through the Lafayette chapter of the American Red Cross.

Our semester is off to an exciting start. Our football, volleyball and soccer teams are doing very well.

Joe Tiller is taking his team to Minneapolis to play Minnesota tomorrow. Purdue-Minnesota games seem always to be exciting. Purdue is ranked as high as 10th nationally. This will be the nation's number one rushing offense in Minnesota against the number one rushing defense in Purdue. In the coming weeks we will be hosting Notre Dame, followed by Iowa and Northwestern.

Our volleyball team is off to a terrific start and has been ranked 19th in the nation. Our soccer team recently beat two ranked teams on the same weekend for the first time ever.

We have a number of activities planned surrounding our fall football season, including the dedication of our Bindley Bioscience Center and our Birck Nanotechnology Center in Discovery Park. We have many other building dedications and groundbreakings planned.

It’s going to be a great and busy fall.

As always, the most exciting part is our students.

We have 38,712 students on our West Lafayette campus this semester. That is a difference of only 59 students from last year as we work to hold our West Lafayette enrollment steady. But we were able to admit a larger freshman class because more students are graduating in four years.

The student population includes 7,429 first-semester freshmen. That is an increase of 301 from last year. While the class is larger, we are maintaining high academic standards. This is an excellent freshman class.

Doug Christiansen, assistant vice president for enrollment management and dean of admissions, is here this afternoon to fill you in on the details.

We are making incredible progress.

For the second straight year, The Wall Street Journal has named our Krannert School of Management a national No. 1 MBA school in a special section published Wednesday.

The Journal's survey of corporate recruiters concluded that Krannert is No. 1 in the nation among universities serving recruiters from a regional base. Unlike other MBA rankings that use a variety of measures, The Journal uses only surveys and interviews with corporate recruiters.

The article on Krannert in The Journal's special rankings section was titled: "Spreading its wings: Purdue may be No. 1 in the regional rankings, but it is trying to think bigger." We are always working to move one brick higher to the next level.

The Journal says of Krannert students: "Purdue graduates are considered impressive because of their humble attitudes and strong work ethic."

The article discussed Krannert's plans to establish partnerships with Chinese universities, its three new MBA interdisciplinary study options, the addition of 20 faculty members, and MBA graduates' starting salaries and bonuses rising 8 percent.

The article recognizes Discovery Park for adding interdisciplinary vigor to Krannert's programs and research opportunities for its faculty. We have also benefited enormously from Rawls Hall.

Congratulations to Dean Richard Cosier and everyone at Krannert.

Also from our state, The Wall Street Journal ranked Indiana University's Kelley School of Business No. 11 and the University of Notre Dame's Mendoza School of Business No. 29, both in the regional category.

Last month U.S. News and World Report ranked Purdue 21st in the nation among public universities.

Our College of Engineering undergraduate program ranked eighth. Our School of Management undergraduate program moved from 17th to 12th. That is a sea change in one year!

This is the impact of our strategic plans and Campaign for Purdue. And I believe this impact will increase in the years ahead.

As we talk about Purdue engineering, I was honored this week to be one of two university presidents invited to speak with a select group of U.S. senators in Washington, D.C. concerning the growing technical skills deficit our nation is facing.

We need more people in engineering and science and our College of Engineer is taking a national leadership in this effort.

As you know, we have been working very closely with the governor and the Indiana General Assembly. We support efforts to bring our state budget into balance. We realize the past several years have produced some very difficult funding situations as state revenues fell below projections while other areas, such as Medicaid, continued to rise.

We deeply appreciate the support our state has given Purdue throughout this difficult time.

We have also worked hard to reduce and eliminate expenses. We have continued internal reallocations to help reach our goals. We are on track with the strategic plans approved by this board.

This afternoon, Executive Vice President and Treasurer Morgan Olsen is here to give you a full report on the final budget.

As you know one of our major initiatives we have discussed with the governor and the General Assembly is repair and rehabilitation on our campuses.

Purdue encompasses over 400 buildings spread across more than 18,000 acres on four campuses and numerous agricultural and research properties throughout the state. On our West Lafayette campus alone, this represents a capital investment that easily exceeds $4 billion. The replacement value of academic and administrative buildings on our West Lafayette campus is about $2.8 billion.

Protecting this investment is our highest capital priority.

A major aspect of protecting this investment is annual repair and rehabilitation.

During the past four years, Purdue campuses have received less than $4 million in state repair and rehabilitation. This is a reduction in the long-standing formula that called for investing $56 million in Purdue repair and rehabilitation during that same time.

The full state 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.

This chart shows the R&R funding formula for West Lafayette. The yellow line is the amount we actually received. You can see the steep decline down to zero in 2001-2003.

There have been many reasons for this. We all understand the difficult times we have been through. But there have been consequences as well.

A deferred maintenance backlog has developed at Purdue currently estimated at more than $413 million. This breaks down into two parts.

First, deferred repair – things that are broken and need to be fixed, such as leaky roofs. Our deferred repair total has now reached $120 million.

Second, deferred renewal – things that need to be upgraded to meet current program needs. A science lab constructed in the 1950s cannot meet the needs of 21st century learning and discovery. It also falls short of building codes that have advanced over the years.

Purdue's deferred renewal is estimated at an additional $293 million.

If these situations are not dealt with, they will not simply go away. In fact, they will certainly only become worse as the years go by and the condition of facilities further deteriorates.

We are not standing idly by on this R&R challenge.

Ten days ago the State Budget Committee was in West Lafayette. At that time we presented to the committee a proposal for dealing with the R&R situation. This is only in the discussion stage at this point.

This plan addresses the repair and rehabilitation on our campuses through a partnership between the university, our students, our donors and our state.

Last May this board approved a dedicated fee on all of our campuses for new students beginning in the fall of 2006 – one year from now. Money generated from this dedicated fee will be combined with funds from the state and other reallocated Purdue resources to address the repair and rehabilitation situation. Funds from this new fee will go only toward repair and rehabilitation.

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

Students 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 our highest-need students.

The annual repair and rehabilitation fee at the West Lafayette campus will be $250 for newly enrolled full-time students beginning in fall 2006. At Calumet, the fee for newly enrolled full-time students will be $79.50. Newly enrolled full-time students will pay $73.50 at Fort Wayne and $60 at North Central.

This dedicated repair and rehabilitation fee will generate nearly $7.3 million annually on the West Lafayette campus by fall 2011 when it is fully implemented. It will allow us to make progress.

We are addressing the R&R issue by breaking it into three parts and using this fee.

First, we must address the ongoing, continuing repair needs of today and tomorrow on our campuses. At Purdue, we have established a goal of setting aside $15 million annually for ongoing repair and maintenance, as called for in the state R&R formula.

Second, we must address our deferred repair needs of $120 million.

And third, we must address our rehabilitation needs of $293 million.

The $15 million annually for ongoing repair and maintenance will come from five sources.

First, we will use $1 million from our current General Fund Budget.

Second, a portion of the new student repair and rehabilitation fee will be used. This will start generating funds in fiscal 2007, growing from $800,000 to $2.4 million in fiscal 2012.

Third, we will use some of the growth in our facilities/administration reimbursement revenue from our research. This begins at an estimated $950,000 in fiscal 2006 and grows to an estimated $5.1 million in Fiscal 2012.

Fourth, we will use the current state repair and rehabilitation funding at 50 percent of the formula – $7.3 million.

Fifth, we will add internal Purdue reallocations in fiscals 2006, 2007, and 2008 to bring the total to $15 million annually as the new fees and reallocations ramp up over the next five years, rising to nearly $16 million in 2012 and beyond.

This will deal with new repair and rehabilitation issues as they arise annually in the years ahead. But there are still the two other "catch-up" issues to deal with: The $120 million in deferred repairs and $293 million in deferred rehabilitation.

To address the $120 million in deferred repairs, we have a two-part proposal.

First, we are asking the state for authority to bond to come up with the capital to deal with a major portion of these deferred repair problems. Second, we are asking that the state of Indiana match us in this effort.

We propose that Purdue contribute from reallocations and dedicated student fees an amount that will grow from $1.2 million in Fiscal 2007 to $4.8 million in Fiscal 2012. This will allow us to bond $60 million – or one-half of the $120 million deferred repair backlog – over the next four years. roughly $15 million per year.

We are asking the state to match this with an equal amount – $60 million over four years – which will enable us to eliminate the $120 million in deferred repair.

With the ongoing situation and deferred repair dealt with, the final issue to be faced is deferred rehabilitation.

For this, we are asking the state to fully fund the repair and rehabilitation formula.

This would provide an additional $7.3 million for deferred rehabilitation catch-up. This money would be matched with targeted private fund raising and unrestricted gifts to Purdue as well as special state capital requests.

We will address deferred rehabilitation as these funds allow. But it is critical that we solve the deferred repair problem now.

Purdue and the state of Indiana enjoy a national reputation for exemplary stewardship of our physical facilities. That hard-won reputation is at risk.

We are asking the state to join with us to solve this problem now.

Through this proposal, we are not asking the state to fully fund the repair and rehabilitation backlog at Purdue. Rather, we are asking the state to join us in solving this problem together.

Gaining access to the tools necessary to help ourselves is fundamental to success.

We plan to continue working with the General Assembly and the Governor to deal with this very important issue.

I would like to take a special moment to welcome the new members of our board today: Rachel Cumberbatch, William Oesterle and Thomas Spurgeon

We are very pleased to have you with us.

It is a very exciting time at Purdue. We welcome you to this great opportunity as we work to build Purdue into a better university so we can better serve our state, its communities and people and most especially our students.

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