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Larry MacIntyre
University Communications

Last modified: Saturday, April 30, 2011

IU expresses concern over 'flaws' in new funding plan

April 30, 2011

BLOOMINGTON, Ind. -- Indiana University officials today expressed deep concern over funding mechanisms in the state's new $28 billion budget that will sharply reduce support for IU's Bloomington campus and IU's schools of medicine, dentistry, nursing and rehabilitative sciences on the IUPUI campus.

IU President Michael A. McRobbie said that although IU supports the concept of performance-based funding for higher education, the mechanisms in the just-passed budget are "deeply flawed" because they take into account neither the current levels of excellence nor the distinctive research missions of the IU Bloomington campus and the health sciences schools in Indianapolis.

Michael McRobbie

Michael McRobbie

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"I am very disappointed that our efforts to improve the performance funding plan for higher education were unsuccessful," McRobbie said. "The plan proposed by the Commission for Higher Education and approved by the General Assembly has serious flaws. While we understand the plan is a work in progress, the fact is that it severely cuts funding to two of Indiana's highest achieving and best performing institutions, the IU School of Medicine and IU Bloomington."

Under the plan, all publicly-funded institutions will see their operating budgets cut by 5 percent to create a pool of $61 million. That pool is to be redistributed according to a set of guidelines meant to reward improvement in performance. The result, however, will be to reward campuses with growing undergraduate enrollments at the expense of more stable enrollment campuses with stronger graduation rates, graduate programs and major research activity.

For example, a campus such as IU Bloomington, which has full enrollment, the highest graduation rate of any public institution in the state and will graduate 8,562 students next week, will receive no performance funding based on graduation rates or numbers.

IU estimates that the new funding mechanisms will result in a loss of more than $10 million in operating funding for IU Bloomington next year despite already having the highest graduation rate of any publicly funded institution in Indiana. With this cut, state operating funds for IU Bloomington have now fallen by $25 million, or 12 percent, over the last three years.

The state's plan also is expected to cut nearly $4 million from health sciences schools at IUPUI because they enroll relatively few undergraduate students. The plan does not take into account the mission of these schools, which is to produce high-quality physicians, dentists, nurses and health professionals. With these cuts, state operating funds for the IU School of Medicine have now fallen $14 million, or 11 percent, over the last three years.

Funding from state government provides 19 percent of IU's $2.8 billion annual budget. Under the new state budget, the state's share of funding will drop to 17.6 percent, according to Neil Theobald, IU vice president and chief financial officer.

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IU Vice President and Chief Financial Officer Neil Theobald (left) and Michael McRobbie.

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"Next year's budget returns IU to the level of state support for operations that it had in 2003-04 and provides absolutely no state funding for maintenance of IU's nearly 900 buildings on seven campuses," Theobald said. "All in all, this forces us to look elsewhere for some $41 million next year to continue operations at current levels and to protect the state's investment in this infrastructure. Because the state has not fully funded needed renovations and upkeep for the past decade, IU now has a deferred maintenance bill in excess of $300 million for academic and campus infrastructure."

McRobbie noted that IU officials attempted to work with lawmakers and the Commission for Higher Education to craft a performance funding formula that would be fair to all schools.

"We believe that for such measures to be effective they must be applied in a way that is consistent with the missions and responsibilities of each institution," McRobbie said. "It should be self-evident that a plan that evaluates very different higher education institutions according to the same, one-size-fits-all performance measures will inevitably create perverse and unintended budget outcomes. Unfortunately, that is what we now have as a result of this budget.

"While IU was not successful in obtaining changes to the performance funding formula during the legislative session, I am very pleased that the General Assembly included language in the budget that requires a review of these performance measures before the next budget," McRobbie added. "Indiana University will continue to support appropriate and well-designed performance measures for higher education in Indiana. We welcome the opportunity to work collaboratively with the Commission for Higher Education and legislators on developing a performance funding system that will provide incentives for Indiana's public institutions to perform in a manner consistent with the state's goals for improving higher education and state economic development."