The beginning of the budget process for Indiana's 2001-2003 biennium brought bad news for Purdue, for higher education, and for the entire state. The proposal sent by the state budget agency to the House Ways and Means Committee provided very little new funding for any state program and would have reduced appropriations by $6.2 million for the West Lafayette campus alone. Indiana University's Bloomington campus was slated for an even larger cut. To put this in perspective, Purdue would have needed a 3 percent student fee increase just to get back to the current operating level.
Although the Ways and Means Committee rejected the agency's recommendation and developed its own budget as the starting point for discussion, the funding proposal that now is on the table still would leave Purdue far short of its proposal to the state. It also does not come close to the level of funding recommended by the Indiana Commission for Higher Education.
The current budget would fund Purdue operations at the same level as this year, but it does not include $11.8 million in non-recurring technology money that has been allocated in recent years, The budget provides nothing for inflationary adjustments, no capital funding and no provision for new programs.
This is a very serious situation, and I am deeply concerned about the future of both the university and state. It is important to recognize that Purdue is treated no better and no worse than other institutions including the public school system and state units. Virtually every activity that depends on state funding will suffer unless we find a way to increase state revenues.
The root of the problem is a very bleak state financial picture. The economic boom that brought copious revenues and created large surpluses has slowed abruptly. At the same time, the cost of some major state programs has been higher than expected. Medicaid will go $79 million over budget this year. Suddenly, it seems, annual spending is exceeding revenues by more than $700 million a year, and reserves are dwindling fast. The almost $2 billion surplus the state enjoyed in June 1999 will be down to $960 million this June and soon will be gone unless we take corrective action.
This is happening at a time when the competition for talented faculty is becoming more intense and our ability to continue to recruit and retain outstanding professors requires salaries that meet the marketplace. This is also a time when the state cannot afford to fall behind in the global economic race. The knowledge-driven changes that are spawning new high-technology industries also have tremendous impact on other economic sectors, including manufacturing and agriculture, which are the foundations of Indiana's economy.
Purdue's budget recommendation to the state includes proposals for new investments in biomedical engineering, computational sciences and engineering, and genomics and biotechnology on the West Lafayette campus and smaller, but very important, programs on the regional campuses. It also seeks funding for the capital projects that will give the university the tools and infrastructure needed to carry out these initiatives. The entire budget is built around improving the university and strengthening its ability to support the state's economic development.
I believe the investments we make in education now will pay higher returns than they ever have in the past. Conversely, if we allow our universities and our public schools to slip now, the damage to our future and the consequences to our younger generations will be incalculable.
Along with other higher education officials, I have been working with our state leaders to find solutions to the fiscal situation. We are early in the legislative process, so I believe there still is time to get a favorable resolution. We must face some tough issues, including the reality that the state must find some way to increase its revenues.
While I remain optimistic, I have also asked Purdue's staff to develop contingency plans for dealing with an unfavorable budget. We will do this with the firm commitment that the quality of academic programs must not be allowed to suffer. If Purdue must become more focused in order to maintain excellence, then that is the regrettable choice we will make.