President Jischke Speech

February 20, 2002

Purdue University President Martin C. Jischke delivered this speech to the Economic Club of Indianapolis on Wednesday (2/20).

Strategic planning for Purdue: economic consequences for Indiana

It's a pleasure to be here and have this opportunity to speak with you.

I'm especially pleased that the Economic Club of Indianapolis would invite an educator to speak today. We educators don't typically get invited to such places.

In fact, some people, in the past, have pretty much invited us to stay away.

I believe the fact that I have been invited here is strong evidence of the growing appreciation of the important role higher education can play in our economy.

Either that or you just couldn't find anyone else available to speak today. Or maybe you were just looking for someone who would speak for a free lunch.

I belong to an esteemed organization of university presidents. We operate by a very strict code: We will speak for food. The better the food, the better we speak. And the longer.

Lunch was great. So settle back. Get comfortable. And let's roll.

I am very happy to be here to bring you a message I believe is vital to our state and its future.

First, the time is right for Indiana to focus on tax restructuring and investments in education in order to compete in the new, knowledge-based economy.

Second, partnerships between business, government and education are absolutely essential to success in building this new economy.

And third, Purdue is positioning itself strategically to have an even greater impact on Indiana – especially in the area of economic development.

This is our goal at Purdue: As we achieve our strategic aspirations, we will become a preeminent university, and Indiana will become a preeminent state.

In the 19th and 20th centuries, Purdue brought science to the farm and helped transform Indiana agriculture. In the 20th century, Purdue helped to build the manufacturing industry that is the foundation of Indiana's economy today. But now we are in the 21st century, and Purdue has committed itself to doing more than ever before.

Our strategic plans have specific initiatives designed to help Indiana build a high-technology, knowledge-based economy and make this state a major player in the global marketplace.

This new economy is driven by science and technology. States that have most effectively developed this knowledge-intensive economy have succeeded by partnering with major research universities. Purdue, with its top-ranked programs in engineering, science, technology, computers, agriculture, veterinary medicine, biomedical engineering, nanotechnology, biotechnology, pharmacy, and management, is ideally situated to be an engine powering Indiana's success.

But we must act. And we must act now. Developments in this new economy are taking place rapidly. Those who hesitate are being left behind. President John F. Kennedy said: "There are risks and costs to action. But they are far less than the long-range risks (and costs) of . . . inaction."

We live in exciting times filled with remarkable opportunities. It is an especially exciting time to be president of Purdue. We are very, very proud of Purdue, proud of what it has accomplished, proud of what it is doing today.

But our greatest excitement lies in the fact that with all that Purdue has done, the future is even more intriguing, more compelling, and more promising than anything that has happened before.

Both Purdue and the state of Indiana have reached a point of major transition in their great histories. Some people see times of transition as times of danger. And they can be. But they are also times of great opportunity.

We are at one of those rare moments when forces converge to allow something great and important to be achieved. We are at a point when, together, we can reach out and grasp our own destiny.

Last month Jeff Smulyan spoke to you and said: "At the crossroads of America, we are at an economic crossroads." I quite agree.

Our Indiana economy is in a major, long-term transition. Indiana's economy has had its foundation in manufacturing – especially automotive manufacturing – for many years. It has served this state well.

Forty years ago, more than 40 percent of Indiana's jobs were in manufacturing. Twenty years ago, 33 percent of the jobs were in manufacturing. Today, it is a bit more than 20 percent, and falling. Indiana has lost more than 40,000 manufacturing jobs in the past 18 months. And most likely, these jobs will not come back.

The manufacturing jobs that remain are – by and large – good ones paying good wages. But, there is a 50 percent overcapacity in automotive production around the world. And this, along with advances in manufacturing technology, suggests that the trend of manufacturing job losses will continue into the future.

Today, the wealth-creating, nationally and globally traded share of our regional economy is shrinking relative to the local service sector. Service is certainly an important part of our economy. But when it is the growth sector of our economy, there are implications.

Income for Hoosier workers is declining compared with national norms. According to the U.S. Department of Commerce Bureau of Economic Analysis, average Hoosier wage and salary disbursements dropped from 100 percent of the national average in 1980 to 87 percent in the year 2000.

During the past 20 years, we have also witnessed a drain of university-educated talent from our state. Unfortunately, Indiana retains a much smaller fraction of our college graduates than the surrounding states of Illinois, Michigan, and Ohio.

The good news is that we are reversing this trend at Purdue. During the past four years, the percentage of our graduates remaining in Indiana has increased from 52 percent to 65 percent. But we have further to go. We have higher standards to meet.

Our state's finances reflect these trends as well. Though the national recession has hit a number of states, Indiana has suffered more than many others. This is due to our continued dependence on increasingly vulnerable, low-end manufacturing jobs.

By the end of this biennium, our state government will have an ongoing deficit of $1.3 billion, maybe more. This will have to be balanced through additional revenues or devastating cuts to education and other important state services.

Just to get to the end of this biennium, we estimate Purdue's budget might be reduced by $85 million to $90 million. And it could be more if the governor and the General Assembly cannot agree on a solution.

I believe the message in all of this is quite clear. Indiana is a traditional, strong state, with good, solid, hard-working people. But global economic changes are taking place. Indiana must think globally, and more strategically. We must put our best assets to work. We must make fundamental changes to take part in the opportunities that will shape our world in this new century.

For starters, I believe our business tax structure contributes to our financial problems.

For example, we tax gross corporate revenues rather than net income. This hits new, start-up enterprises especially hard. The situation is exacerbated by a structure that taxes inventory and property rather than profits. By doing so, we squander Indiana's comparative advantage as a natural center for distribution. Two-thirds of the nation's population lives within one day's drive of our state.

In addition, our tax structure does not provide competitive incentives for high-skill, high-wage, technology-based start-up companies. And these are the enterprises that will fuel the life sciences, information technology, and advanced manufacturing industries of tomorrow.

The fact that we are at or near the bottom in the number of small business start-ups is due, in part, to Indiana's increasingly archaic tax structure.

But, competing and growing in a global economy is about more than the structure of our tax system. More than ever, a vibrant economy requires a well-educated work force. Not only are well-educated workers better paid, they are less likely to be a drain on state coffers.

With a well-educated population, communities and this state will collect more taxes, spend less on social services, and reap the huge benefits of creativity and entrepreneurship that translate into prosperity. Education is a low-risk, high-return investment – a rare combination.

Indiana has room for progress in education. But the trend lines are encouraging. The fraction of our high school graduates going on to post-secondary education climbed from about 37 percent to nearly 61 percent in 12 years. The new Community College of Indiana will accelerate this trend.

The performance of Indiana youngsters on standardized tests of mathematics and science is improving. Our kindergarten-through-grade-12 system is committed to higher academic standards and accountability reforms.

But all this progress Indiana has made is in jeopardy if the state cannot find the necessary resources to continue investing in education. And not just K-12, and not just higher education. Indiana must think of education as one seamless system pre-kindergarten through postgraduate.

Indiana must think this way, because we want our young people to think and act this way as they prepare for their future.

We need to grow our economy to provide good-paying jobs for people and revenue for government.

I am convinced that the key to seizing opportunities in this time of transition is for the three sectors of our state – business, government, and education – to work together as they have never done before. Opportunity in this case is like a three-legged stool. Unless all three legs are in place, opportunity will collapse.

Perhaps we should listen to the advice Benjamin Franklin gave as he urged those drafting the Declaration of Independence to maintain a strong partnership. Franklin said: "We must all hang together, or, indeed, we shall all hang separately."

I don't know if the good people of Indiana will hang us if we fail them. At least – we hope they won't. But, indeed, Indiana's future is hanging in the balance.

Throughout the country, life sciences, advanced manufacturing, and information technology clusters have been growing at rapid rates. While Indiana has been slow to recognize the strategic importance of these clusters, this is changing.

Just last week, the city of Indianapolis, the Central Indiana Corporate Partnership, the Indiana Health Industry Forum, Indiana University, and Purdue University announced a new, joint effort called the Central Indiana Life Sciences Initiative. It brings together the three legs of opportunity: education, government, and private enterprise.

This initiative focuses on building Indiana's competitive advantage in the life sciences. The life sciences industry is one of Indiana's largest employers. Life sciences workers earn 2.5 times the average worker salary in Central Indiana. And the potential for growth is substantial.

Working together, we can retain and grow what we already have. We can attract new enterprises by marketing this region as a world-class hub of health and life sciences.

All of this will mean more jobs, more opportunities, and a better quality of life for the people in this state. And last but not least in these difficult times, it will mean more revenue for government.

Partnerships between education and business are multiplying. The 21st Century Research and Technology Fund has had a major impact on the collaborative research between Purdue and Hoosier businesses.

Let me give you just one example: Using 21st Century Research and Technology funds, Purdue, IU, IUPUI, and Notre Dame have teamed with Zimmer Inc. of Warsaw. This collaborative research is making great strides toward creation of a new generation of minimally invasive orthopedic implants. This will transform the way more than 300,000 hip fractures are treated each year in the U.S. alone. This research is also creating new implant technologies for repair and strengthening the human spine.

All of this will result in hundreds of new, high-skill, high-paying jobs at Zimmer, new jobs at Indiana companies that supply Zimmer, and new jobs in the communities where these people live and spend their income.

This is what major research universities can do, given the opportunity. But this year, because of our state's revenue problems, 21st century funds are frozen. Opportunities are frozen as a consequence.

At this time of change, Purdue is reaching forward to shape its destiny by developing strategic plans that will guide us, and our state, into the future.

Three years ago, our Board of Trustees made a very important decision as they began their search for a new president. They determined the university was in good shape, excellent in many regards. They also concluded that business as usual was not what Purdue or the state of Indiana needed.

They decided the time was right to take Purdue to the next level. And to achieve that next level of excellence, Purdue was going to have to think more strategically and take charge of its future.

We benchmarked Purdue with 11 nationally prominent public universities. We listened to the people of Indiana. We learned a great deal about ourselves and about the competitive environment at the next level.

We learned we have too many graduate teaching assistants, and too few full-time professors in the classroom.

We learned that our research activity, while growing, is not keeping pace with these next-level peers.

We learned our faculty salaries are not competitive and we risk losing talented people.

We learned our infrastructure needs modernization.

We learned we need to do more in economic development for our state.

We learned there is growing competition in our signature areas and if we don't move, we will be left behind.

Finally, we learned Purdue is underfunded, relative to our peers.

These findings, in many ways, are a microcosm of the situation facing the state of Indiana.

At Purdue, we now have plans for change, plans for improvement, plans for excellence based on our findings.

Our goal at Purdue is to become a preeminent university, a world leader. We realize we cannot be all things to all people. We have to choose our priorities wisely.

To realize our aspirations, we have identified seven key areas in which we will invest our resources.

First, we will add 300 faculty members, reducing reliance on teaching assistants, and provide our students with a richer learning environment.

Second, we will expand our engagement efforts with Indiana, focusing on economic development.

Third, we will increase the diversity of our campuses.

Fourth, we will expand scholarships and financial aid to ensure student access. No talented student will be denied the opportunity to study at Purdue because of finances.

Fifth, we will offer competitive salaries so we can recruit and retain the best faculty and staff.

Sixth, we will invest more than three-quarters of a billion dollars in the modernization and expansion of our infrastructure.

And seventh, we are investing in programs such as a new $100 million Discovery Park that will expand our research capacity.

All of this will transform Purdue. And it has the potential to transform Indiana. But it will take money. Lots of money. It will take cooperation. Lots of cooperation. No single source can fund this entire effort.

The investments we plan in these seven areas will require an increase in our operating budget of $156 million a year, and an increase in our capital expenditures of $781 million over the next five years.

To fund these improvements, we must involve everyone who benefits from higher education. The additional funds will come from: first, a $1,000 fee increase for new students, an increase that will still leave us in the lower half of the Big Ten; second, more faculty-generated research grants and contracts; third, an internal reallocation of resources involving everyone at the university; fourth, state funding, as we are asking the state to stay the course with its funding of higher education; and fifth, private support, as we are stepping up our private fund raising from alumni and friends.

We anticipate at least a $1 billion fund drive to meet our needs. And we anticipate complete success.

We are already well on our way with these plans. And the results are starting to show.

Even after our announced $1,000 per year fee hike for new students, the number of applications arriving at Purdue this year is up 10 percent above last year. The students we are enrolling have higher SAT scores, higher class ranks. We are receiving increased numbers of applications from minority students.

As part of our strategic plans, we have instituted new economic development initiatives and given ongoing efforts a higher priority.

We are participating in the Central Indiana Life Sciences Initiative.

We are building our $100 million Discovery Park aligned with Indiana's future economic opportunities, focusing on nanotechnology, biotechnology, e-enterprises and entrepreneurship to bring our ideas to the marketplace.

We have a statewide technology program that is taking educational and training opportunities to communities and businesses wherever they are needed.

We are part of the Central Indiana Corporate Partnership with a goal of improving the quality of life here in central Indiana.

We have a research park in which one million square feet are owned or leased by more than 100 companies, employing 2,500 people, many of them developing Purdue-licensed technologies. We have more than 50 companies at our Research Park incubator. We are working with state and federal officials to create similar technology parks across Indiana.

We have created a new leadership position of vice provost for engagement to pursue our economic development efforts.

This afternoon, we are opening a new engagement office right here in Indianapolis.

Our friends and alumni believe in what we are doing. They are on board. They have come forth with gifts totaling more than one-third of a billion dollars in the past 18 months. Purdue is on the move.

Though Purdue alone cannot solve all of Indiana's economic, financial, and educational challenges, we intend to carry more than our share of the load. We are finding partners all across the state of Indiana who want to join us in these efforts and seize the new economic opportunities. There is a groundswell of understanding and commitment sweeping across our state.

And that is what makes this such an extraordinary time.

It is an exciting time to be a Boilermaker! It is an exciting time to be a citizen of Indiana. And with the support and encouragement of leaders such as you, together there is no limit to what we can achieve.

To borrow a quote from Todd Beamer, a new-century American hero who has given us a rallying cry for our times: Indiana – let's roll!

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