10

Money, Money,
But Never Enough

For the past 50 years faculties, students, and administrators of Indiana University have repeatedly lamented the inadequacy of the state’s support for higher education generally and Indiana University in particular. Their complaints have had merit because there seems never to have been a time throughout the life of the university when the money made available to it from taxes and other revenues has been equal to its opportunity for effective use of resources on behalf of the citizens of the state.¹ The fact of the matter is that the opportunities available to a university for teaching, research, and public service are, for all practical purposes, limitless; as a consequence, it is improbable that sufficient money will ever be made available for an institution to realize all its capabilities in any given period.

From one standpoint this fact is not as remarkable as is the fact that the public supports higher education with tax dollars as generously as it does. Narrowly speaking, higher education directly benefits only those who have the opportunity to attend a college or university and receive training, and they constitute a relatively small percentage of the total population. Furthermore, there are always other highly desirable social goals dependent upon public support that compete for the tax dollar—highways, hospitals, and, in modern times, a vast number of social services in the areas of welfare, pensions, mental health, prisons, and the like. Although those of us who have spent our lives in the work of higher education are acutely aware of the inadequacy of the public support we have received, we remind ourselves of the fact that in most respects our governmental bodies make greater provision for higher education than do the governments in any other country in the world. A larger proportion of the college-age group is enrolled in college in this country than is true for any other country in the world, and a larger proportion goes on to advanced training here. There may be a few minor exceptions, but this is in general the case. So it does seem to me that the remarkable fact is not how little we receive but, in view of all of this, how much.

From the very beginning of statehood, the founders of Indiana expressed a belief that a free democratic society required support of public education for its realization. Unquestionably universities are essential to the development of society economically and politically. It is a fact that there are no highly developed nations in the world without highly developed universities. Nevertheless, the relationship between higher education and the total development and welfare of the state is a subtle and difficult one to comprehend. Many government leaders and informed citizens throughout the country have this understanding, but I doubt that the majority of the population has any comprehension of the relationship; yet year after year a substantial proportion of the tax dollar is spent for education at all levels including higher education.

Early in my administration I came to realize that the most we could ever expect to receive from the state were funds for the basic instructional work of the institution and for the basic instructional plant and that as a consequence we had to seek funds from other sources to finance complicated research programs and to build peaks of excellence throughout the institution. A state institution needs a wholesome balance between the two sources, namely, state appropriations and outside funds, and our financial policies were governed by that tenet throughout the years of my administration.

We attempted to keep the members of the Indiana General Assembly well informed, not only as to our needs, but also as to our operations. We used every possible technique available to us to accomplish this—visits to the individual legislators from time to time throughout their terms of service and invitations to the State Budget Committee or, on occasion, the entire legislature to visit the campus and see firsthand what had been achieved with the tax money and what further support was needed. During the sessions of the General Assembly, rarely did I leave the state for more than a few hours because I wished always to be available for consultation with our legislative team or for making contacts with individual legislators. Our very effective legislative team through the years consisted of Ward Biddle, Joseph A. Franklin, Ross Bartley, Claude Rich, George Henley, the University’s attorney, and Henry “Rosie” Snyder, a local attorney—Rich and Franklin throughout the entire period, and Biddle, Bartley, Henley, and Snyder during the years of their active service. These men were trusted by the members of the General Assembly and never betrayed that trust.

Through the years I formed great admiration for members of the General Assembly. They were men of integrity and of considerable talent, dedicated to public service. I felt that, with rare exceptions, they were attempting to do as well for the university as was possible in light of the other needs of the state as they saw them. We may have had a different evaluation of the relative needs of the state, but I always felt that the legislators were sincere and honest in their final judgments. Therefore it was our policy always to accept the money appropriated to us with expressions of appreciation and to request that we be allowed to use it as efficiently as possible where it was needed rather than to use it rigidly according to our original request. This policy was desirable because invariably our requests were substantially reduced and it was crucial for us to adjust according to our greatest needs rather than across the board.

In addition to attempting to secure as much financial support as we could from both state appropriations and private sources, we took other steps to try to improve the university’s financial situation. One of the earliest of these was to relieve the university budget of the cost of indigent-patient care at the Medical Center. University hospitals customarily provide free medical care for indigent patients in order to furnish clinical training for medical students. The Indiana University Medical Center follows this practice, providing a large amount of indigent-patient care. I discovered at the beginning of my administration that the cost of this care had to be absorbed in the university budget. No other university hospital in the country followed such a budgetary custom. Here I am speaking only of adult indigent-patient care because there were endowments and certain legal provisions to reimburse unmet expenses of young patients at the James Whitcomb Riley Hospital for Children at the Medical Center. But the university received no reimbursement for its adult-patient care, including even that which it provided for the inmates of the penal institutions. This was a tremendous drain on the university budget and particularly on the budget of the medical school. We made a decision to try to change the arrangement and were successful in securing legislation (passed March 13, 1947) that would allow us to bill the cost of indigent-patient care to the state auditor, who reimbursed us and in turn was reimbursed from the state treasury. The state treasury was then to be reimbursed by the counties from which the patients came. The net result was that the Medical Center was indirectly given considerable additional support and the general university budget given corresponding relief.

Another basic step was to break the vise in which the university budget was placed by the General Assembly’s policy of appropriating equal amounts to Purdue and Indiana universities for operations and capital. We had about the same enrollment on the Bloomington campus as Purdue had on the Lafayette campus, or a little more, and yet we had to support another campus in Indianapolis and several extension centers out of the same amount of money—an intolerable situation so far as Indiana University was concerned, restricting its growth and making it nearly impossible for us to find the funds required for a quality program. At that time the alumni rivalry between the two schools was intense. This rivalry extended even into the state legislature and made it difficult for the General Assembly to do other than give each school the same amount regardless of the need. Achieving a more rational basis for appropriations was a long and painful effort.²

Breaking the parity involved the preparation of innumerable statistical studies and also meeting after meeting of the presidents of the four institutions and their staffs. At times it would seem that the cause was hopeless. We persisted, however, and finally were able to agree that the unique need of each institution should be the basis for its request but that the total would be circumscribed and determined by a set formula.³ An important corollary of this procedure was an agreement for the four institutions to bring to the General Assembly a joint budget request with individual budgets supported by all four and with the understanding that if any changes, upward or downward, were made by the General Assembly the percentage change would apply to each institution. This voluntary coordination was popular with the legislature for many years. It placed the burden of seeking an equitably allocated appropriation upon the institutions themselves rather than upon the state officers. The institutions naturally had more information available to assist them in arriving at an equitable distribution of the dollars to be spent for higher education than any state officer had. Furthermore, the combined request enabled the friends of all four institutions to join in supporting the request and made it possible for the four presidents and their staffs to make joint presentations, not only to the legislature, but also to all Indiana statewide organizations interested in the state budget such as the Farm Bureau, the Taxpayers Association, the state press associations, the state Chamber of Commerce, the Manufacturers Association, the leading newspapers, the State Teachers Association, and others. The achievement of a quadripartite budget through cooperative planning undoubtedly was the most important financial development that occurred in my administration.

Another effective policy initiated in the early years of my administration was to use in the budget request enrollment figures based upon a straight-line unit cost for each student enrolled, for we believed we were entering a period of generally increasing enrollments. It was easy for the legislature to understand making an appropriation on the basis of a given number of students at so much per student. Moreover, this method frequently yielded an increment above actual cost because there is an element of decreasing unit cost up to a certain level as additional students are added to existing programs. We early established a policy of using this free increment for enrichment of graduate programs within our specific fields, for additional library support, for scientific equipment, and so forth. This practice did not represent any deception by the university because at the same time we refrained from requesting any substantial amount of money for new programs and new program development and informed the budget officials how we were using the free increment.

Another important financial policy that we initiated was the segregation of overhead received from grants into a special fund in the Foundation and the use of this fund to prime the research program, to furnish seed money for new programs, and to support the “peaks of excellence” efforts. The importance of this practice is explained in chapter 11.

We also followed the policy of trying to build for excellence rather than breadth. We refrained from taking on whole new areas of work such as engineering and a large number of new service programs just because somebody else was doing them and it seemed opportune to follow suit. Instead we attempted to use our money to strengthen in depth and quality our traditional fields. When the legislature mandated that we undertake new programs or fields, we asked that these be funded separately because, if the basic budget were to cover them, compliance would have meant skimping some of our existing work. It was helpful that Purdue also followed this policy.

We were never bound rigidly by salary scales or other internal formulas. Instead we always sought the courage to make exceptions when exceptions were in the best interest of the institution, regardless of how much temporary unhappiness the exceptions caused and how much extra effort was required of the administrative staff to handle them. Looking back over his administration, President Bryan once said that his biggest mistake was treating every faculty member and administrative officer the same in respect to salary. There was one figure for deans, one for full professors, and so on—a policy he came to believe had been counterproductive.

We studiously avoided the easy response of the administrator, “Where is the money coming from?” when confronted with requests by a faculty member who had a new project or an idea of importance to him. Rather we would compliment the colleague upon his idea and discuss with him how much money would be required, the possible sources of funds, and the time span envisioned. We used these new ideas as a stimulus to try to find the money either from outside sources or in savings from existing operations. It is remarkable how frequently with a little imagination a way could be found to do something even though there was no apparent source of money.

In other words, we were willing to start big things in a small way, adopting a policy that President Bryan had followed throughout his career. But we went further, keeping in mind the big projects or ideas that had started small and trying to find the money and talent to realize them.

In budgeting, we practiced the policy of approximating as closely as we could what the departments needed so that they would not have an excess that they might spend ill-advisedly just to keep it from reverting. Once the reversions were aggregated, we sought to use them for constructive purposes—principally of an academic and sometimes of a dramatic nature. For example, with budgetary reversions, we acquired special books and collections and purchased scientific equipment. We had to be sure that those expenditures were sorely needed by the university and were not of a recurring type. Subscribing to one hundred new journals, for instance, would have meant a recurring cost and a future budget commitment, but acquiring special collections or specially needed equipment, adapting a space for a particular use, and providing the means for program initiatives were essentially one-time costs.

A university, like other large enterprises, has sufficient diversity to make creative budgeting possible, by which I mean using a combination of ingenuity and good financial practice to make available funds go as far as feasible, make them encompass in part what is desirable for the university as well as what is needed. Creative budgeting requires knowing what is possible, being willing to take risks, and, with due regard for solvency, viewing unawed the problem of balancing the budget.

Early in the days when funds became available from the Public Works Administration (PWA), the trustees of the university had made a decision to seek federal funding for expansion of the physical plant and to secure the matching funds required through bond issues, with the approval of the legislature. We adopted the same plan and later, with enactment of a federal graduate facilities act, followed it again. Without this policy we never could have achieved anything like an adequate physical plant within the direct-dollar appropriations that the General Assembly was able to make.

Another systematic approach that we took was to use such funds as we could find during World War II to purchase land for future expansion. Much of the land to the north and east of the central campus was acquired in this fashion. Land prices were very low then, and there was no general comprehension of the fact that the university would be expanding rapidly after the war. Had we not applied funds to acquiring land during those years, our rapid postwar expansion would have been nearly impossible.

Not unlike that precautionary approach to land acquisition was a decision we made with the verbal approval of the governor and the State Budget Committee, but without a specific legislative appropriation, to incur a deficit in order to finance a large amount of temporary housing required by the returning veterans following World War II. The frenetic activity to obtain housing that took place at that time has been described elsewhere.⁴ Suffice it to say here that the campus was dotted with Quonset huts and other relics of military installations. The incurrence of a deficit brought criticism from certain quarters, but it did enable us, for all practical purposes, to admit every returning Hoosier veteran who was qualified and who wished to come to the university following the conclusion of World War II. To overcome the criticism, we invited the whole General Assembly to the campus to see firsthand the reason for the deficit expenditure as well as the justification for other features of the budget request. As a consequence we received reimbursement for those expenditures and kept faith with the veteran students.

Our decision to accommodate returning veterans entailed considerable expenditure for temporary buildings because there was neither time nor suitable materials available to erect permanent buildings. We tried to expedite the contractors’ work by making on-the-spot decisions about problems as they arose.

A crucial action, far-reaching in its effect, was the decision made in 1955 to attempt a major residential-hall program with borrowed money, a plan that was to accommodate an enrollment of at least 25,000 students. The buildings were to be constructed over a period of years and to be financed by pyramiding our indebtedness in such a manner that the holders of the later bond issues would be in just as secure a position as the holders of the first issues. The whole program was laid out in great detail by Joseph Franklin and his associates and presented in the course of a two-day Board of Trustees retreat at Camp Brosius in Wisconsin, after which the board courageously adopted it. From that time on we followed the plan consistently, building one student housing complex after another, accommodating both single and married students. The plan through the years proved to be remarkably viable and was not modified in any basic respect except toward the end when two residence complexes (Eigenmann Hall and Forest Quadrangle) were added because enrollment went slightly higher than had been predicted. We felt that the residential program was necessary, not only to see that students were properly housed, but also to relieve the city of the unconscionable burden of accommodating the students privately and to make sure a lack of housing would not strangle the university’s development.

During this period enrollments were rising rapidly and requiring a large amount of ever-increasing appropriations. We made it a policy to try to explain our budget request not only to the legislature but also to the presidents of the private colleges in Indiana so that they would be fully informed of what we were asking and would be aware that we were not asking for anything that would be prejudicial to them. In addition we were careful to explain our budget request to the representatives of the various important tax-paying groups, as I have mentioned before, and to describe it fully to the members of the faculty. On at least one occasion we held a student convocation to present the budget request to them just before they went home to family and friends for Christmas. It was our feeling that our own faculty and staff should understand the budget completely and that Bloomington leaders should understand it too because their friends from around the state would undoubtedly be asking them for their reactions and because members of the state legislature would seek their opinions of the need for our ever-higher, well-publicized requests. We therefore would invite representative townspeople to a meeting at which our budget request was explained in detail.

In our search for wherewithal, we attempted by every conceivable device to use what we had effectively and, as inspiration struck, creatively. We would use unconventional methods, if legal and sound, to achieve short-run objectives when it seemed to be necessary to do so. We actively sought efficiency, avoided any unnecessary expenditures, and stood ready for examination at any time. My own work in banking had acquainted me with the importance of being ready for the bank examiner without notification any morning at opening time, and we attempted to run the university in exactly the same way.

Concurrently with our efforts and initiatives to use public funds efficiently, we increasingly stressed the importance of obtaining outside funds from the federal government, from foundations, from private donors. The development of the search for additional sources of funds is treated in chapter 11.

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1. Thomas D. Clark repeatedly makes this point in his three-volume history, Indiana University: Midwestern Pioneer, 3 vols. (Bloomington: Indiana University Press, 1970–1977). His presentation of the financial picture in volume 3 contains two misreadings of the situation, however, which need correction: (1) on page 184 the food-services building was an addition to the Indianapolis Union, not to IMU in Bloomington; and (2) the $25 million appropriation for construction, referred to on page 205, was actually a ten-year program adopted by the trustees but never implemented.

2. The story of this process and its culmination is set out in considerable detail and clarity in a letter to Lytle J. Freehafer, then budget director of the state, dated November 15, 1950 (Thomas D. Clark, Indiana University: Midwestern Pioneer. Historical Documents Since 1816 [Bloomington: Indiana University, 1977], pp. 579–84).

3. See Clark’s history, vol. 3, ch. 6. President Frederick Hovde of Purdue lent his full support to these efforts.

4. Ibid., ch. 8.