September 2005

A monthly letter from President Martin C. Jischke

Dear Purdue Partners,

One of the most formidable challenges Purdue faces is the cost of repairing, renovating and maintaining the university's facilities and infrastructure in the years ahead. I have mentioned the problem in this monthly letter before, and today I'd like to explain the plan we have developed to deal with a situation that I believe would undermine the quality of the university if left unresolved.

The problem is rooted in Indiana's fiscal straits, which have left the state unable to fully fund the formula that was designed to keep higher education facilities in good condition. Purdue has received full funding only once in the past 10 years. In the past four years, funding has totaled less than $4 million while the formula called for $56 million. The total backlog of work on all our campuses now is more than $413 million, and that number certainly will grow if we don't take action.

Expressed in tangible terms, the figure includes everything from outdated laboratories to leaking roofs to deteriorating electrical and plumbing systems.

All of these things ultimately threaten the quality of education we provide; our ability to attract high-quality faculty, staff and students; and our capacity to support Indiana's efforts to improve its economy and the quality of life in the state.

When the State Budget Committee visited the West Lafayette campus in mid-September, I outlined a plan that I believe will allow Purdue to address this crisis. The plan calls for combining university funds, reallocations, bonding, state formula repair and rehabilitation funding, private donations, and a dedicated student fee – which was approved last spring to be paid by new students who enroll during and after the fall 2006 semester.

Under the plan, Purdue would set aside $15 million annually for ongoing repairs. The money would come from five sources:

• $1 million from the university's current general fund budget.

• The student repair and rehabilitation fee, which will grow as more new students enroll, contributing $800,000 in 2007 and increasing to $2.4 million in fiscal year 2012.

• An allocation of half the growth in revenue from facilities and administration cost reimbursements on research grants. This could grow to as much as $5.2 million by fiscal year 2012.

• $7.3 million each year in state repair and rehabilitation funding, which is less than half of the current repair and rehabilitation formula.

• Internal reallocations as needed for each fiscal year through 2008, while the new student fee phases in.

To address the $120 million backlog in deferred maintenance, Purdue is asking the state for authority to issue bonds, to be paid off with university budget reallocations and revenue from the repair and rehabilitation student fee. We believe those two funding sources will generate $1.2 million in fiscal year 2007, growing to $4.8 million for fiscal year 2012. The university also is asking the state to match that investment.

This tactic will allow us to sell bonds to borrow $60 million – which would address one-half of the $120 million deferred repair backlog – over the next four years We are asking the state for an equal match in order to deal with the other half of the repairs backlog.

The biggest number of all is $293 million in deferred renovation of facilities. To address this, the university will ask the state to resume funding the full repair and rehabilitation formula, generating about an additional $7.3 million annually. Purdue would supplement that through private fund raising targeted to this purpose and would supplement that with unrestricted gifts to the university.

Finally, we would ask the state to fund special projects similar to the $43.6 million in strategic infrastructure projects funded in the 2005 legislative session.

This is a complex and difficult approach to a problem that could become truly overwhelming, but I believe the plan shares the burden fairly and allows us to gain control of a situation that has been worsening at an accelerating rate. If we can put this plan into effect quickly, it will protect the integrity of Purdue and the state's investment in facilities that are worth more than $4 billion to the people of Indiana.

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