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Strategic Budget Advisory Committee (SBAC)
Strategic Budget Advisory Committee

State Budget Ax Falls on Colleges, Universities

ISU is hit hardest because of high costs, low graduation rate

December 23, 2009

By Dan McFeely -

The state slashed $150 million from seven public universities Tuesday, but they will not share the pain equally -- and that was by design.

Instead of recommending straightforward per-pupil cuts, the Indiana Commission for Higher Education penalized universities that it considers to be underperforming.

But if some felt punished, none felt rewarded. Indiana and Purdue lost more than $100 million combined, leaving them to fret about the future of research. Smaller state universities will be forced to look at cuts in academic and athletic programs. And even Ivy Tech Community College, which had the lowest percentage cut, will find itself struggling to serve a burgeoning enrollment with fewer state dollars.

No university was hit harder than Indiana State University; it was penalized for its high cost per student and low six-year graduation rate, two factors noted by the commission.

Indiana State's appropriation was cut by 6.64 percent over the next two years -- the highest rate among universities. The Terre Haute campus, with about 7,900 full-time students, will be forced to find ways to cut its budget by $10.5 million.

"If you look at ISU, it is one of our highest in appropriations ($9,541 in state funds per student)," said Teresa Lubbers, the commissioner for higher education. She also noted that fewer than half (43 percent) of its students graduate in six years. By comparison, $7,953 is spent on a student at Ball State, which graduates 61 percent of its students.

"(ISU's) completion levels," Lubbers said, "like all of our institutions, needs to be higher."

Diann McKee, vice president of business affairs at Indiana State, said she was not surprised at the news. She said ISU's per-pupil cost has been exacerbated by declining enrollment.

"But we feel we are turning the corner," McKee said, "which is certainly a key to getting these expenses under control."

Indiana State's cut is especially deep for another reason. Nearly 60 percent of its budget relies on state funding, typical for smaller colleges.

Larger universities with more tuition dollars, endowments and diverse revenue sources such as athletics and performing arts do not rely as heavily on the state. For example, only 21 percent of IU's total operating expenses comes from state support.

Gov. Mitch Daniels had asked the commission earlier this month to recommend the cuts to help close a budget shortfall. He is widely expected to approve them.

The commission also released general cost-cutting guidelines for universities to consider but left the specific cuts up to them and their boards of trustees.

The guidelines include reallocating resources to high-demand academic programs, reducing or eliminating low-priority programs and services and consolidating some services.

Lubbers does not think the cuts will result in higher tuition rates.

Most university officials contacted Tuesday said they already have begun the process of identifying areas to cut -- leaving open the possibility that academic programs and athletic programs are potential places to trim.

"It's not going to be easy. Everything is on the table," said Randy Howard, vice president of business affairs for Ball State University, which must find a way to plug its $15.2 million hole.

The state's largest institutions were also hit hard.

IU will lose $58.9 million over the next two years -- the largest dollar amount of any. And Purdue will lose $45.5 million. Both said Tuesday they will have to work hard to preserve their roles as major research universities.

"No one should underestimate the very serious challenge that this deep cut represents, nor the impact it will have on IU's broader contributions to the state," IU President Michael McRobbie said in a statement. "In the coming weeks, hard and difficult decisions will have to be made."

At Purdue, Al Diaz, the executive vice president for business and finance, said large research grants and directed endowments cannot be used to make up for any shortages in the general budget.

"We had hoped the number would not be quite this high," Diaz said. "We are going to have to find efficiencies and make some other cuts without impacting our research.

"Federal funding from our grants is restricted. When we take a grant, we commit to doing the work. We don't have any latitude to redirect those funds in any way."

Mike Smith, chairman of the commission, conceded that point but said big schools such as IU and Purdue are still in a strong position to handle these cuts.

"When you think how Purdue University spends over $112 million per year for health benefits," Smith said, "one would imagine that large of a cost center can be reviewed and perhaps refined."

If there was a winner Tuesday, it was Ivy Tech, which escaped with a cut of just $11.9 million, or 3.5 percent. Lubbers said Ivy Tech has kept its cost per student low and is "bursting at the seams" with growing enrollment.

Still, Tom Snyder, Ivy Tech's president, said the cuts will hurt.

"We are pleased that we did not take a serious spring cut and will not have to cancel classes or lay off staff," Snyder said. "But for the fall cuts next year, we will have to develop a game plan."

At Vincennes University, President Richard Helton stopped short of announcing a hiring freeze but said open positions and any coming vacancies will be "scrutinized."