sealPurdue Letter from the President

April, 2002

The genius of America lies, in part, in the way government and private interests work together for the common good. In devising a system that would protect the individual from tyranny, the nation’s founders also created a way of life that encourages and rewards creativity, hard work, courage and altruism.

By not imposing an economic system on ourselves, we unleash the most powerful economic force of all: a free market that can grow in many directions. This market constantly develops new products and services. Although it can appear chaotic and wasteful at times, in general, it moves inexorably toward greater efficiencies. For example, Americans pay less for food than any people on earth, while using fewer people to produce it. Widely used commodities – from cars to computers – become less and less expensive and more and more reliable.

Of course, government does have powerful influences on the economy. One of them is through taxation, and it is in this area that Indiana has fallen behind other states.

As the General Assembly prepares to convene in special session on May 14, our state’s leaders are struggling with the question of whether this is the time to overhaul a tax structure that was largely formulated on 19th century principles and that most economists and business leaders agree is a drag on the state’s economic development.

The legislators also must confront a revenue shortfall of crisis proportions and the impacts of court-ordered property tax reassessments that threaten the welfare of homeowners and farmers throughout the state.

Although Governor Frank O’Bannon has attempted to address the revenue shortfall by reductions in state spending, these steps have come at a high cost. Colleges and universities have been forced to reduce their budgets and raise student fees significantly. For Purdue, the impact of the cuts is in the $100 million range for the biennium. A 10 percent fee increase, effective in the fall semester, will not make up the difference. Other higher education institutions and the public school system have suffered in similar ways. This comes at a time when the need to improve Indiana’s education system has never been greater. We cannot prosper in the global economy without first-rate education for our people.

As bad as the current budget cuts are, the long-term future for Indiana could be even bleaker. It is for this reason that the General Assembly should act now to create a tax system that is workable for the 21st century. Even with the governor’s budget reductions, a gap of at least $800 million a year remains between state revenues and expenditures. The longer we wait, the deeper this hole will grow and the more money it will take to fill it.

Indiana needs a tax structure that encourages business growth and entrepreneurship. Our state has lost 100,000 jobs in the past two years, a greater loss than any other state. This is true in terms of both the total number and in proportion to population. Ohio – a much larger state – has the second worst record with a loss of 69,000 jobs. During the same period, some states have been making gains – as many as 400,000 in the case of California.

An economic recovery may bring some of Indiana’s jobs back, but it won’t restore all of them. Worse news is that Indiana is unlikely to make a full recovery from the recession unless we make some drastic changes.

There are some beacons of hope in this sea of trouble. Through the Alliance for Indiana’s Future, a politically and economically diverse group of organizations have urged our state’s leaders to seize this moment to deal with the full range of fiscal issues while investing in ourselves through education.

Senator Larry Borst and some of his colleagues have proposed an ambitious budget bill that addresses many of the long- and short-term challenges the state is facing. Whether or not his bill proves to be the best solution, Senator Borst has given our legislators a very credible starting point for debate. They will have something to talk about on May 14, but it is critical to our state’s future that they translate the discussion into real action.

Indiana is at one of those historic moments when it must take charge of its destiny. Political differences must give way to strong leadership and courageous action at a time like this. The great American system does not give guarantees. It gives opportunities. It is up to us to make the most of them.

• • •

Congratulations are in order for some Purdue people. At its April 12 meeting, Purdue’s Board of Trustees recognized three new named professors. They are:

Prabuddha De, who will join the Krannert School of Management faculty in the fall as the Accenture Professor of Information Technology; Leah H. Jamieson, appointed the Ransburg Professor of Electrical and Computer Engineering; and Werner Soedel, appointed the Herrick Professor of Engineering.

Martin C. Jischke