Purdue’s financing team was able to convert the debt to a historically low long-term fixed rate of 3.47 percent, said James Almond, senior vice president for business services and assistant treasurer.

Purdue issues bonds for academic, athletic and residence hall facilities. The state of Indiana provides Purdue an appropriation to offset the cost of debt for academic facilities that the state financially supports. The savings on the actual debt service relative to the appropriation goes to the state.

“The state appreciates Purdue’s efforts to return appropriations because of debt service savings,” said Christopher Ruhl, state budget director. “Realizing the savings at this time is extremely beneficial given the current fiscal environment.”

In the 1980s, Purdue was the first university to issue variable-rate bonds, which are reset every seven days at a short-term interest rate. This financing strategy has saved millions of dollars over the years, Almond said. In fact, during fiscal years 2007-08 and 2008-09, Purdue returned $7.2 million to the state through the use of variable-rate debt financing.

“Through the active management of the debt program, the state has benefitted from low short-term rates in recent years. This refinancing secures a very attractive low long-term fixed rate,” Almond said.

“A patient and thoughtful approach over the years has enabled the university to lower its cost of financing.”

With the $4.6 million in savings for fiscal years 2009-10 and 2010-11, the total Purdue will return to the state for the fiscal years going back to 2007-08 is $11.8 million.

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Purdue converts debt on bonds to fixed rate for $4.6 million savings

Board chairman Keith Krach, vice chair Mamon Powers Jr. and trustees JoAnn Brouillette and Michael Birck voted unanimously to approve after listening to 10 students, graduate students and parents speak at a public hearing.

At the West Lafayette campus, resident students will pay an additional $388, and nonresident students’ tuition will increase by $1,394. This translates into an increase of 5 percent for resident and 6 percent for nonresident continuing students each of the next two academic years.

When comparing state support versus tuition, Indiana's share of the academic mission was 50% in FY1993. Today that share is 31%. Purdue receives 20% less in state appropriations per full-time equiv. student than its peers and other Big Ten public institutions.

There also will be a new $500 fee per academic year for new West Lafayette campus students tied to strategic plan improvements for academic programs. However, first-time Indiana undergraduate students will have this $500 fee rebated this year, using stimulus funding provided to Purdue by the General Assembly. Students enrolled prior to the summer of 2009 will not be assessed the fee. Funds generated by the proposed strategic plan fee will be used to invest in academic curricula, financial aid, student success programs, and assist in attracting and retaining top faculty.

The approved conceptual general fund budget – $1.1 billion system-wide for the current fiscal year – was drafted after the state approved its biennial spending plan.

“It was a hard decision, but a lot of thought went into it,” Krach said. “We had to balance three major factors: preserving the quality of a Purdue education, staying competitive with our peer institutions given our tuition is among the lowest in the Big Ten, and making sure the organization was run responsibly and keeping costs low.”

Purdue President France A. Córdova said, “As the students said at the hearing, the value of a Purdue degree can’t be matched, and we want to make it affordable for families, too. We are awarding more scholarships and financial aid than ever before. This year we launched a new scholarship directed at middle-class families and I commit to raising more money to help students afford a Purdue education.”

Although Purdue was given an apparently flat budget in the state appropriations process, 8 percent was made up of the one-time stimulus funding. Purdue actually received a cut of 8 percent in its recurring funding for operations, or $21 million over two years at the West Lafayette campus, said James S. Almond, Purdue’s senior vice president for business services and assistant treasurer.

Almond said stimulus dollars from the American Recovery and Reinvestment Act would not be used to fund recurring expenses. Instead, those funds would be dedicated to one-time expenditures, such as repair and rehabilitation costs and to credit the first-year cost of the $500 fee for newly enrolled undergraduates back to in-state resident students. Purdue also will use the stimulus funds to help with $400 million in facility repair and rehabilitation needs.

Under the new tuition and fee structure, which includes the one-year $500 credit for first-time students, resident students will pay $8,138 in the 2009-10 academic year. Tuition and fees for 2010-11 would be $8,544 for returning residents and $9,070 for returning sophomores and first-time resident students.

Nonresident students returning to the West Lafayette campus would pay $1,394 more, and nonresident first-time students would pay $1,894 more for the 2009-10 academic year. Tuition and fees in 2009-10 would be $24,618 for returning nonresident students and $25,118 for nonresident first-time students. Tuition and fees for 2010-11 would be $26,096 for returning nonresidents and $26,622 for nonresident first-time students.

Some programs, such as engineering, management, pharmacy and veterinary medicine, also have fee differentials, which are dedicated to defraying the higher costs of these programs. New this year is a $500 differential fee for College of Technology students who start this fall on the West Lafayette campus.

For 2008-09, total financial aid and student support on the West Lafayette campus was budgeted at $467 million, and three out of four Purdue students receive some form of assistance. In 2008-09, for a student with a family income below $40,000, the net cost for tuition, room and board was an average of $1,666 after all forms of aid were counted. Students who qualify for federal financial aid will have their tuition and fees offset with additional Purdue aid.

Purdue’s undergraduate resident fees this year rank ninth among all Big Ten institutions, and nonresident tuition and fees rank seventh.

Fees for Indiana students at other Purdue campuses are assessed on a per credit hour basis. Rates for resident and nonresident students, which represent a 5 percent and 6 percent increase, respectively, are:

• Purdue Calumet – $210 and $471
• Purdue North Central – $213 and $502
• Indiana University-Purdue University Fort Wayne – $231 and $549

System-wide general fund budgets were established with recurring funds only and exclude any federal stimulus dollars. In approving Purdue’s general fund budget, which supports educational and base operating expenditures, the Executive Committee endorsed the following spending plans for fiscal year 2009-2010:

• At the West Lafayette campus: A 4.5 percent increase to $873.3 million.
• At Purdue Calumet: A 3.1 percent increase to $78.2 million.
• At Indiana University-Purdue University Fort Wayne: A 5.2 percent increase to $100.5 million.
• At Purdue North Central: A 4 percent increase to $28.2 million.

Almond said aggressive cost-cutting measures led to a budget that will allow the university to provide competitive financial aid packages to students and continue to fund strategic plan initiatives while, at the same time, offsetting increased operational costs.

For example, staff benefits and unavoidable costs, such as fuel, utilities, insurance, plant expansion, and repair and rehabilitation, are expected to increase a total of $15.7 million on the West Lafayette campus in the upcoming fiscal year.

At West Lafayette, the budget calls for a 5.3 percent decrease in recurring operating appropriations from the 2008-2009 fiscal year budget and supply and expense budgets have been flatlined. The university also has previously announced that there would be no annual merit salary adjustments for all employees, however, funds will be allocated to cover both the employee and university share of significant increases in health-care costs.

The general fund, which supports the academic mission of the university, represents only a portion of the university’s total system-wide operating budget. The full operating budget totals more than $1.96 billion for fiscal year 2008-2009 and includes the general fund; sponsored programs; gifts; and revenue from residence halls, athletics, other auxiliary income and university-funded financial aid.

The total operating budget fiscal year 2009-2010 is not yet established and will be presented at a future trustees’ meeting.

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Executive Committee approves Purdue tuition plan, operating budget

“Our budget proposal reflects a dual commitment to freeze or cut costs where possible while, at the same time, targeting our resources to areas that will enhance Purdue’s educational mission and the overall student experience,” said university President France A. Córdova.

The conceptual general fund budget – $1.1 billion system-wide for the coming academic year – was drafted after the state approved its biennial spending plan.

The proposal calls for a $388 increase for resident students and a $1,394 increase for nonresident students. This translates into a 5 percent resident tuition increase and a 6 percent nonresident tuition increase for continuing students each of the next two academic years at the West Lafayette campus.

Although Purdue was given an apparently flat budget in the state appropriations process, 8 percent was one-time “stimulus” funding. Purdue actually received a cut of 8 percent in its recurring funding for operations, or $21 million over two years at the West Lafayette campus, said James S. Almond, Purdue’s vice president for business services and assistant treasurer.

Almond said stimulus dollars from the American Recovery and Reinvestment Act would not be used to fund recurring expenses. Instead, those funds would be dedicated to one-time expenditures, such as repair and rehabilitation costs and to rebate the first-year cost of a fee for newly enrolled undergraduates back to in-state resident students.

“The Legislature has continued to be very supportive of higher education,” Córdova said. “At the same time, universities are faced with a variety of underfunded needs. All of our budget decisions were driven by a desire to leverage that state support with other funds in a way that continues to strengthen the university. Now is not the time to lose ground we have fought so hard to gain.”

System-wide general fund budgets were established with recurring funds only and exclude any federal stimulus dollars. In approving Purdue’s general fund budget, which supports educational and base operating expenditures, the trustees endorsed the following spending plans for fiscal year 2010:

• At the West Lafayette campus: A 4.5 percent increase to $873.3 million.
• At Purdue Calumet: A 3.1 percent increase to $78.2 million.
• At Indiana University-Purdue University Fort Wayne: A 5.2 percent increase to $100.5 million.
• At Purdue North Central: A 4 percent increase to $28.2 million.

Almond said the spending plans will allow the university to continue funding initiatives outlined in the campuses’ strategic plans while also providing the funding needed to offset increased operational costs. For example, staff benefits and unavoidable costs, such as fuel, utilities, insurance, plant expansion, and repair and rehabilitation, are expected to increase a total of $15.7 million on the West Lafayette campus in the upcoming fiscal year.

At West Lafayette, the proposed budget plan calls for a 5.3 percent decrease in recurring operating appropriations from the 2009 fiscal year budget and supply and expense budgets have been flatlined. The university also has previously announced that there would be no annual merit salary adjustments for all employees, however, funds will be allocated to cover both the employee and university share of significant increases in health-care costs, Córdova said.

“Despite the challenges we face, Purdue continues to offer a world-class education at a cost that compares favorably to our peers and Big Ten public institutions,” she said.

Purdue’s undergraduate resident fees this year rank ninth among all Big Ten institutions, and nonresident tuition and fees rank seventh. Among eight peer institutions across the country, Purdue fees rank sixth for both residents and nonresidents.

The general fund, which supports the academic mission of the university, represents only a portion of the university’s total system-wide operating budget. The full operating budget totals more than $1.96 billion for fiscal year 2009 and includes the general fund; sponsored programs; gifts; and revenue from residence halls, athletics, other auxiliary income and university-funded financial aid.

The total operating budget fiscal year 2010 is not yet established and will be presented at a future trustees’ meeting.

In Related News:

• Executive Committee approves Purdue tuition plan, operating budget
• Purdue converts debt on bonds to fixed rate for $4.6 million savings
• Stimulus dollars power Purdue to even greater value
• Purdue to help veterans, military students pay tuition
• Purdue to conduct public hearing on tuition, student fees

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Purdue Finance Committee reviews budget plan; trustees vote set for July 13