BLOOMINGTON, Ind. — Some of Indiana's public universities say they're bracing for continued drops in aid that could bring the state's contribution to their budgets to as little as 10 percent within a decade, a decline that has some questioning whether the schools should still be classified as public institutions.
"If the universities are getting more money from private donors than they are from the state, then who are they answering to?" said Timothy Sands, Purdue University's provost. "When we hit that, then I think that will be an interesting point of reflection."
Public colleges and universities across Indiana have seen their share of public aid cut in recent years as the state has dealt with the recession and declining revenues. Two decades ago, half of Indiana University's budget came from the state. Now it's at 20 percent, a rate shared by Purdue University. Ball State University gets about 33 percent of its budget from the state.
IU President Michael McRobbie doesn't think that trend will change, and he predicted last month that IU will get less than 10 percent of its revenue from state funds within 10 years.
Purdue officials expect state support to make up just 11 percent of the budget for the West Lafayette campus by 2020.
The numbers have spurred talk of privatizing the schools — but a key Indiana lawmaker stresses that it's just talk.
Sen. Luke Kenley, R-Noblesville, told The Indianapolis Business Journal he has been approached with informal proposals to privatize Purdue, whose engineering and aeronautics programs could probably draw far more out-of-state students.
Kenley, who chairs the Senate's appropriations committee, said he shot down the idea immediately, noting that Purdue would first have to write the state a multibillion-dollar check for its investments in the university since its founding in 1869.
"It's been suggested to me, ‘Shoot, West Lafayette is so successful, why don't you just let them be independent and run them as a private school?'" Kenley said, adding, "They want to be their own emperors."
The concept isn't as far-fetched as it might sound. The "gradual privatization of public universities" has become the topic of frank discussions in Michigan, Colorado, California and Oregon as the economy continues to struggle, said Diane Viacava, a public finance analyst at Moody's Investors Service in New York, who follows both IU and Purdue.
"That is a trend that we have seen and will continue to see," she said. "The states are reducing their support for their public universities, and that's going to continue, especially as they're wrestling with their budgets."
Purdue officials say they have run the numbers of what a privatization would look like. It used a model developed by the University of Oregon that calls for a university to borrow money to create an endowment that would build up to such a level that it could generate enough cash to replace the state appropriation.
"It's conceivable, but it would take a pretty desperate situation [at the state level]," Sands said. "When I think of Purdue, in particular, I don't see that in the near-term horizon at all. But it could happen in another state."
McRobbie said he thinks the state should have less control if the universities are receiving less money.
"At the same time our state support has declined, the desire and demand for increasingly detailed administrative and legislative oversight of all aspects of our operations has increased," McRobbie said in his Sept. 27 State of the University speech.
Kenley, who has chafed at recent tuition increases, thinks IU and Purdue have forgotten that they're also supposed to be affordable for Indiana citizens. And he thinks they're missing opportunities to dramatically lower their costs.
"They are all creations of state statutes and their governance is at the whim of state statute," Kenley said. "So that means that they just intend to keep raising tuition at such an incredible rate? I think they're going to do it on the backs of the citizens. If that's their plan, then we have a fundamental disagreement about what their mission is."
McRobbie and Purdue President France Cordova acknowledge that tuition and fee increases aren't the long-term solution and are looking for new revenue sources. Both schools have increased their fundraising efforts in the past decade.
IU raised more than $340 million last year, ranking it 10th in the nation for private fundraising in 2010, according to the New York-based Council for Aid to Education.
Purdue, which has been raising about $200 million per year, wants to double that figure over the next decade. The university also has approved a plan to save money by offering more summer coursework and to drum up more revenue from businesses and students around the world.
"If we did nothing, but just relied on the continuing trend in state appropriations, and just the cost of living index for tuition and fees, it's not a good picture," Cordova said. "So that's made us look carefully at having a different plan for how to generate revenue."
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