Indiana Alumni Magazine
On the Cutting Edge
IU has scrimped and saved, stretched and squeezed, to get through state budget reductions.
By Mike Wright
Mike Sandy decided two years ago to attend IU Kokomo because it was affordable and close to his family. With fees increasing at a rapid pace, he's not sure it's still all that affordable.
Students like Sandy, and their parents, are feeling the burden of some $107 million in state funding cuts IU is experiencing in the current biennium. With less state support available, instructional fees are up significantly and will grow even more in 2003, when a special "increment for excellence" will be added to the tuition rate at each campus.
"Are we being priced out of higher education?" asks Sandy, president of the Kokomo student body. "I can't say how many, but some definitely are. Most of us (on IU's regional campuses) pay our own way. One of the main reasons people come here is affordability."
IU Bloomington freshman Meagan Alvey, of Boonville, Ind., reports that loans to her and her parents will finance her education. She doesn't see the cost as prohibitive — yet. But at some point, students could be priced out of college, she says.
Parents say some families already have reached that point. Rita Bolton, whose daughter, Brooke, is a freshman at IUB, says several students in her daughter's high school class plan to work at least a year before starting college, because they can't afford to attend now. Bolton, of Tennyson, Ind., anticipates a $30,000 debt by the time Brooke graduates.
"I'm glad this is my last one," says Bolton, who is still paying off loans for her other two children's college education. "It is a burden, and it affects your way of life."
More and more, college students and their families, not just in Indiana but across the nation, are being asked to assume a higher portion of the cost of their education. Over the last two years, according to The Chronicle of Higher Education, colleges and universities across the country saw tuition percentage increases in the double digits. Clemson University was among the highest, upping its in-state tuition 42 percent in 2001-2002.
The reduction in state support is being felt at IU in ways other than higher costs to students. Needed repairs have been put off, and new construction of facilities deemed vital to learning and research are on hold. Technology spending has slowed, despite additional fees imposed on students this fall.
The recent increase in costs for higher education and administrative cutbacks are fallout from a national recession that has dried up tax revenues in state after state, including Indiana. The recession has put the bite on governmental services, especially public higher education.
Myles Brand, IU's outgoing president, says the university will do its part to manage the situation, but he notes that a crisis looms if state support continues to fall.
"We can do this for a short period of time under emergency conditions," Brand says. "We can't do it on a regular basis."
THE BEAR-MARKET FACTS
The recession has hit Indiana particularly hard. As the economy faltered, tax collections in Indiana began to dwindle, eating into a state surplus estimated at $2.1 billion just four years ago.
According to the state auditor's office, deficit spending began in fiscal year 1999, when expenditures exceeded revenues by $21.4 million. In fiscal 2002, which ended June 30, the state spent nearly $1 billion more than it took in. Collections from sales and income taxes fell from $9.1 billion in 2000 to $8.71 billion in 2002. It was the first time in more than 20 years that tax collections declined two years in a row.
Transfers from surplus accounts and delays in payments, along with cuts in spending, helped the state balance its books.
IU lost $107 million in state funds. The IU cuts included $9.6 million for information technology and $9 million for repair and rehabilitation in the 2001 budget process. The governor later authorized deferred payments and additional cuts, including all of the university's two-year appropriation for repair and rehabilitation (R&R) of facilities.
With state support down, IU began a year ago to take measures to get by financially. Each campus was asked to create and implement a plan to save money. Part of the cost-saving measures is a one-year deferral in the computer-replacement schedule. University personnel have done less traveling and bought fewer supplies. Vacant positions have been held open longer than usual, and some staff reductions have occurred.
And student fees have increased. Undergraduate tuition for state residents went up 9 percent for this academic year at IUB and IUPUI and 8 percent at the five regional campuses under IU's jurisdiction. That followed a 7.5 percent increase at IUB and IUPUI and a 6.5 percent increase at the five regional campuses in 2001. Purdue administers IPFW and sets its fees. IPFW fees increased 7.5 percent in 2001 and 10 percent this year for continuing students. New students at IPFW are paying an additional $1,000 a year under Purdue's strategic academic enhancement plan.
In addition, technology fees doubled on all campuses until state technology support returns, and administrative fees charged by some academic units increased. For example, the Kelley School of Business upped its administrative fee from $200 to $415 per semester.
The IU trustees already have announced an additional tuition charge that will go on top of whatever percentage increase is approved for the 2003-2004 school year. New IUB students will pay an additional $1,000 per year, those at IUPUI will pay $800 more, and those on regional campuses will pay $500 more. Current students will not be subject to this "excellence increment," but those starting in the fall of 2003 and after will have that amount added to their tuition base.
In implementing a stream of new revenue, IU is following the lead of several other universities that raised tuition this year. Brand says the money isn't intended to "backfill" the revenue lost from the state, but it will be used to hire more faculty, boost financial aid, strengthen retention efforts, and increase graduate fellowships. But if state support doesn't recover, Brand concedes part of the new money could be used just to stay afloat.
Higher education officials are hoping that higher taxes, approved in June during a special session of the state Legislature, will help bring funding back at least to previous levels. IU is counting on the current reductions being a one-time measure. While trimming corporate and property taxes, Hoosier lawmakers approved increases in sales, cigarette, gambling, and gasoline taxes. The measure is expected to bring in an additional $600 million a year.
But unless the economy picks up, the added tax revenue still leaves Indiana $400 million short of funding its current budget. The prospect of further tax increases is bleak, and state officials aren't ruling out further budget cuts.
"We hope we don't have to cut any more," says state Rep. B. Patrick Bauer, MS'74, chairman of the House Ways and Means Committee and a member of the IU South Bend advisory board. "But I don't anticipate being able to adjust the budget with revenue again. That's not in the cards. All we can hope for is economic recovery."
FEELING THE PAIN
IU has gone to great lengths to keep the budget cuts from affecting academic quality. Brand is adamant about protecting the academic units.
The campuses' administrative savings, reallocations, delayed maintenance, and deferred spending have allowed operations of the university to continue on a fairly normal scale. Raises were given last year; hiring continued, albeit sometimes delayed; and financial aid remained in place.
The plan has worked to date, but the mood around IU's eight campuses is apprehensive.
"Concern is starting to mount," says associate professor of nursing Mary L. Fisher, president of the IUPUI Faculty Council. "Our faculty know that all the fat has been taken out, and there wasn't that much fat to begin with. After a while of going through budget cuts, you start cutting the meat out of things. We worry about maintaining programs, how it will affect our ability to provide the kind of education that makes our students want to be here."
Roy Schreiber, a history professor and president of the IUSB Academic Senate, says there are more questions than answers right now. For example, most of the South Bend faculty was hired in the 1960s and 1970s. Many are nearing retirement.
"The question that hangs over departments is, Will these people be replaced or will slots be lost?" he says. "If they are lost, how do we deal with our students and what becomes of the programs?"
David Fulton, MA'68, PhD'74, chancellor at IU East in Richmond, says the community is relieved that state legislators stepped up to the plate and took some action. But, he notes, there is concern that not enough money is available to properly fund higher education.
"I think everybody should be worried," Fulton says.
Along with fears about higher costs to students and the future of IU's academics, patchwork maintenance and higher fees to fund technology are examples of immediate effects of the budget cuts.
"Obviously, we have to continue to operate, so we are making only those major repairs that are emergencies," says J. Terry Clapacs, BS'65, MBA'69, IU vice president and chief administrative officer. "But we're doing very little at the moment."
Normally, IU would replace several roofs during the summer, Clapacs says. This year, with no state R&R money, none were replaced.
"Where we have roofs that leak, we're just patching to the point that the building can continue to be in service," he says. "It's the same all the way up and down the line. Interior renovations have been postponed, and building systems and all exterior work has been put on hold."
Clapacs says the delayed maintenance will begin to show within a year.
"Suddenly you look up one day and see the campus isn't in the same condition that we are used to seeing," he says.
The cuts also have had a human toll. IUB trimmed the physical plant work force by 35 people through early retirement incentives and layoffs. Other areas, including the university architect's office, have reduced staff as well.
New construction has come to a standstill. Work on new buildings funded in previous budgets continues, but projects approved more recently by the Legislature, including the first phase of a multidisciplinary science building at IUB and a new library at IU Southeast, still need the go-ahead from the State Budget Committee and the Commission for Higher Education. Those agencies aren't handing out building permits at the moment.
Information technology is another example of how budget woes are affecting students and operations. Revenue from the doubled student technology fee this fall will replace some of last year's spending for IT improvements, says Steve Keucher, BA'72, MBA'82, assistant vice president and university budget director. Some purchases will be delayed. University officials say the technology fee will return to previous levels when state support increases.
SHAPE OF THINGS TO COME
Heading into the 2003 session of the Indiana General Assembly, higher education funding remains very much in question.
Don Weaver, BS'61, special assistant to the president for state relations, acknowledges that unless there is a dramatic turnaround in the economy, the revenue is simply not available to satisfy state government needs. And that's bad news for colleges and universities.
"Without revenues, most legislators have higher priorities than higher education," Weaver says.
Judy Palmer, IU vice president and chief financial officer, has outlined to legislators the potential effects of further cuts. Further loss of state support, she notes, would result in additional reductions in staff, larger class sizes, limited student services, slower progress on retention rate improvements, and limitations on research.
Enrollment is still growing, and IUB has reached its capacity, Brand says. More than 7,000 freshmen came to IUB this fall, a record number, pushing total enrollment to 38,903. Last year's student-faculty ratio already was 19.9 to 1, the highest in the Big Ten. At IUPUI, the 18.6 to 1 ratio is still higher than any other Big Ten school.
Research in such key areas as the life sciences and health fields, IU officials point out, contributes to the state's economic growth and development efforts. Further budget cuts would stall that research, jeopardizing the future of strategic economic initiatives, says Palmer, BA'70, JD'74.
"Now is not the time to make further cuts to the higher education budget," she says. "Future economic growth and opportunities for all Hoosiers depend on the vitality, quality, and competitiveness of our state's research universities."
The state's revenue forecast is due in mid-December. Even with those figures, the state still sets its budget based on guesswork, says state Sen. Vi Simpson, D-Ellettsville, LLB'94. The effect of the special session is still unknown, and no one knows what the economy will do.
"Our immediate problem is how much we have to cut current spending to eliminate any deficit by the end of the biennium," Simpson says. "And the long-term problem is what do we do for our next budget."
Brand says IU has used up its flexibility. The university can't keep cutting costs forever without sacrificing the quality of the institution. And it can't keep increasing fees without reaching a point where students can't afford to attend.
"There is some irony to the fact that if we manage well — if we stretch and squeeze and reallocate — we don't get credit for it, because some people say, 'You don't need that much money,'" Brand says. "We are frugal in the way we use our money, but higher education is very competitive. If Indiana and IU are going to have world-class education, the fact of the matter is it's going to cost money. We've managed, but the long run is going to be difficult if the state isn't going to invest."
He readily admits that dramatically higher fees are placing an increasingly heavy burden on the backs of students and their parents.
"It's a very painful decision to make," Brand says of the rising tuition rates. "We cannot continue to raise tuition at the levels we have. It's not fair to the students and their families. It's essential that the state do its fair share, too, even in economically difficult times."
For the two-year budget that will take effect in June, Brand says IU needs to get back to previous funding levels, and a little more. The key issue, he adds, is what happens afterward. Continued cuts will harm the campuses' physical plants and could begin to erode academic excellence.
"We've done something wise but difficult," Brand says. "We've asked students and their parents to assume the cost of quality improvement through the special tuition fee. The danger is that, if the state continues to cut us back even more, we'll have to divert some of that money just to keep operating at the current level rather than improving. The last thing we want to do is divert that money to operations as opposed to enhancing excellence.
"And if we have another biennium without R&R money, I think we will face a crisis. In the next biennium, what happens with R&R is going to be crucial." 
Mike Wright, BA'78, is managing editor of the Indiana Alumni Magazine.