Office of the University Chancellor

Introduction

Good afternoon, fellow faculty members and colleagues. Let me also welcome Trustee Sue Talbot, who has joined us this afternoon. It is a pleasure, as always, to speak to you and present my annual State of the University report.

Since I spoke to you last time, we have seen history made in a number of ways. In November of 2008, we saw the first African American elected President of the United States. In October last year, one of our colleagues Dr. Elinor Ostrom was awarded jointly the Nobel Prize for Economics, the first woman to receive this prize and the 8th Nobel Prize winner associated with IU, but the first on the faculty when they received their prize since Hermann Muller won the Nobel Prize for Medicine or Physiology in 1946.

The past eighteen months have seen IU’s superb faculty continue to receive awards and distinctions in many other fields, and some have become members of some of the most prestigious academies in the world. Their research and scholarship have drawn widespread acclaim, and their inventions increasingly turned into valuable products that are helping to transform and diversify the Indiana economy.

An IU education remains an extraordinarily good value and has continued to become more affordable and accessible in recent years while the quality of IU students has reached record levels. This was recently recognized when the respected national magazine Kiplinger’s Personal Finance ranked IU Bloomington 28th out of over 500 public universities analyzed in terms of “delivering strong academics at affordable prices.”

More Indiana students than ever before are being educated at IU with a record total of 107,000 enrolling in the fall semester while the student body, in turn, is becoming steadily more diverse. IU’s students have also continued to receive among the most prestigious of awards and distinctions such as Rhodes, Fulbright, Marshall, Truman, Goldwater, and Beinecke scholarships.

Our staff continue to provide outstanding services to the university community, advising students, managing the data centers and networks, maintaining laboratory equipment, repairing buildings, tending the grounds, staffing the offices, and performing a myriad of other essential tasks, sometimes unheralded but never unappreciated.

And IU’s alumni and supporters have continued their selfless generosity, enabling the IU Bloomington campus to get within $16 million of the goal for the Matching the Promise Campaign, including a remarkable $35 million gift from Mickey and Janie Maurer to name the Maurer School of Law, helping the IU School of Medicine continue to build and expand its research strength through the matchless generosity of the Lilly Endowment’s gift of $60 million late last year, and providing IU student athletes with superb facilities through a wonderful gift of $15 million from Bill and Gayle Cook, announced just a few days ago.

The Financial Situation

In spite of all these accomplishments and achievements, it has been the state of the national and global economy that has dominated the news over the last eighteen months. In early 2009, the situation was indeed grim as the Dow plummeted to 6,547 points, a 54% drop from its peak of less than eighteen months before. When I last spoke to you, unemployment in Indiana stood at 6.4% and nationally at 6.6%. Now both stand at about 10%. State revenues have fallen substantially and have yet to stabilize. They are now at around 2005 levels, which some commentators have said will become the “new normal.”

American higher education has certainly not been immune to these severe challenges and faces extraordinary budget challenges, with great universities and university systems particularly seriously affected. Hiring freezes, furloughs, layoffs, and halts to new, as well as on-going, construction are now all too common at colleges and universities across the U.S.

IU has been very fortunate in being able to avoid these types of cutbacks, but much of this good fortune is due to our own planning and actions. At the urging of our trustees, we substantially increased our “rainy-day fund” over the last three years as a buffer against economic downturn. The flexibility and stability that such fiscal discipline provides have helped to cushion us against much of the economic maelstrom experienced elsewhere in higher education.

We also benefit greatly from groundbreaking software agreements such as those with Adobe and Microsoft, as well as one of the best credit ratings among public universities in the country, which provides IU with extremely low financing costs. We have actually reduced energy consumption at the same time that we are greatly expanding our science laboratory space.

Fortunately, IU had these past successes on which to build when the state announced in June that our recurring budget would be cut by nearly $30 million over the biennium—$22.2 million this year and $7 million next—and then followed this up in December with a cut of nearly $60 million in funding for this biennium.

We announced at last week’s trustees’ meeting that in the first nearly eight months of the current academic year, Indiana University has cut its on-going base budget by just over $22.2 million, in part, by lowering non-faculty employment—even though IU enrollments increased by over 4,500 full-time students this year—and by cutting travel costs. On June 30 last year, 6,200 non-academic staff members were employed in our operating units. Today, IU employs 147 fewer staff in these units.

Even though these reductions were accomplished by attrition rather than layoffs, their impact clearly reflects the human side of these budget cuts. That impact includes increased work-load widely felt by staff seeing record student numbers and a booming research enterprise, a reduction in services, the decline of opportunities for staff to advance themselves within IU, and the reduction in new staff employment opportunities across our campuses.

As well, in a move that inflicted pain to all IU employees, I made the decision last summer, endorsed by the Trustees, that for the first time in more than fifty years, IU would not provide any salary increases.

Thus, savings created by staff attrition, eliminating a planned salary increase, and a $5 million cut in non-faculty travel spending allowed us to cover this year’s state budget cut of $22.2 million. Let me stress that it was our decision to begin to make these cuts immediately last July, and that has helped cushion the impact of the further cuts we have received.

I remain concerned about the continuing impact of cuts of this kind on our academic mission. Thus, for 2010-11, I directed that we achieve next year’s $7 million cut through university-wide administrative cuts that will achieve greater efficiency and lower the costs that our schools and units pay for retirement benefits and overtime.

The total of $23.3 million in cost savings that IU created this year is for recurring activities. Thus, we will save an additional $23.3 million next year. These savings, combined with next year’s funding reductions, will allow IU to meet the state target of a $58.1 million cut to our biennial spending.

Key Priorities: Academic Core and Infrastructure

When the first of these cuts was announced, I identified two key principles that would guide our efforts and shared these in a letter sent to faculty and staff earlier this year:

“First, we must protect and strengthen the academic core of the university. This means retaining and hiring even more of the best and most promising faculty. They represent IU’s future and will ensure its continuing excellence in teaching and research. We must also take advantage of a national situation in higher education that is far worse in many other states, where jobs are few and it is a hirer’s market.”

“Second, excellent facilities for research and education are essential if IU is to reach its full potential as a research university. In the last year or so, the costs of construction have fallen by an unprecedented 24%—and on some smaller projects by as much as 40%! Along with our favorable bond rating, this positions us well to aggressively pursue projects that maintain and add to our facilities.”

And I went on to say:

“In short, we must continue strategic hiring and keep building if we are to make genuine progress on our academic agenda. These principles should be regarded as the highest priority for all deans and administrators.”

These principles will continue to guide us.

Schools and campuses have continued to move aggressively to seek out and hire outstanding new faculty members while retaining our current excellent faculty. IU added 129 additional faculty members this year. At a time when other universities have imposed hiring freezes, our continued financial prudence puts us in a position to continue to recruit great faculty.

We also moved rapidly to take advantage of the current construction trough to build new facilities at historically low costs, and we presently have over half a billion dollars of construction and renovation underway or planned. The last time that the U.S. experienced a similar downturn in its economy was the 1930s, and in that decade, ten major buildings on the Bloomington campus were constructed.

With few signs that the downturn in the Indiana economy has halted, there is a strong likelihood of yet further cuts. Hence, we must continue to work to generate further recurring cost savings. Moving forward, work is already underway by task forces of faculty and staff exploring more ways to create greater administrative efficiency by centralizing services and containing health care spending.

The stakes are considerable, and not just for IU. A thriving research university undergirds Indiana’s current economic stability and future prosperity. The discoveries, new knowledge, and understanding that will result from faculty hiring and building construction will have an influence, similar to that created in the 1930s and will propel the university to new levels of excellence.

The Academic Core: New Academic Directions

The vital importance of preserving and enhancing the academic core of the university is our highest priority in difficult times. This academic core is reflected in the various schools and campuses that comprise the university as well as the various administrative units that support them. These units are well-managed, and many are very highly ranked. But especially on the IU Bloomington and IUPUI campuses, they have mostly remained the same for many years. The School of Informatics, which was established in 2000, was IU’s first new school since SPEA was established in 1971, though we hope to establish new schools of public health in the next few years, one of them through the transformation of the School of Health, Physical Education, and Recreation.

The structures we have reflect, at least in part, the accreted wisdom of many generations. As President Wells said, “A university is a durable institution, built on the accumulated experience of the past.”.¹ Edmund Burke made the point that human institutions that function well tend to be the result of long and difficult processes of social and political evolution, and one should exercise the greatest of care when considering any change to them. As our recent Nobel Laureate Elinor Ostrom has demonstrated, complexity such as in the IU academic organization chart is not the same thing as chaos. It is also vital to remember that a liberal education that provides students with an education of breadth and depth, as well as a sound preparation for professional and graduate study, is at the core of an Indiana University education.

Nevertheless, an institution like ours, which holds critical inquiry to be a core value, has the duty, from time to time, to ask hard questions of our institutions. In spite of Burke’s point, we all know that structures that are put together in a relatively piecemeal way over decades can also gradually come to embody inefficiencies that can slowly accumulate in any organization over time, even in an area as dynamic as higher education.

Hence, we have an obligation as a university, and especially as the state of Indiana’s flagship public university, to ask from time to time:

• Are we offering the right kinds of degrees and educational opportunities that one should expect of a university that aspires to be one of the finest universities of the 21st century?
• Do the structure and organization of the academic units at IU allow this to happen in the most effective way?
• Are there areas in which we should be considering new schools or other units in which our peer institutions nationally and internationally have already established flourishing academic programs not present at IU?
• Should some of our present schools be transformed in ways that allow them to take better advantage of some of the major mega-trends seen around the world?

These trends are caused, in part, by the relentless impact of information technology and globalization, which are changing in far-reaching ways the very structure of American society and business. After all, as President Wells said, “From the beginning, the state universities have been most representative of the community as a whole; quick to respond to new educational trends.”²

I will, therefore, ask the Provost of the Bloomington campus and the Chancellor of the IUPUI campus to co-chair a committee to be called the New Academic Directions Committee. That committee will be charged with asking and trying to answer these kinds of questions specifically for these two campuses. Some of these questions will only be relevant to one campus or the other and thus may result in recommendations that only involve one campus. But others will involve both campuses, say for example in the suggestion of a new core school. Where such questions are already being asked on these two campuses, they should again be incorporated into this effort.

I will work with faculty governance and the Alliance of Distinguished and Titled Professors to help identify some of our most distinguished and visionary faculty to be members of this committee. This committee will consult widely and will seek the input of all the deans and schools at IU Bloomington and IUPUI, the regional campuses, administrators, faculty, students, staff, alumni, and donors.

This will be one of the most important exercises of this kind ever carried at Indiana University. I am hoping it will attract the best and most creative thinking of the whole university community. I would like a report from this committee by the end of this calendar year.

The Academic Core: New Directions in Learning

As the New Academic Directions Committee considers structural and organizational changes on a relatively large scale, I am also challenging each campus and each academic unit to renew its commitment to the quality and currency of the education they provide.

Higher education in the United States is under scrutiny to an unprecedented extent by legislatures, federal and state regulators, private foundations, and the general public. They make many demands of institutions of higher education. Often lost in the debate over cost and degree production is the most important demand of all: that institutions like IU provide an excellent education. More than a parchment to hang on the wall, a truly excellent education gives students the knowledge, values, and habits of mind that will enable them to contribute and thrive in the world they inherit.

The great tradition of a liberal education in America has given this country, and indeed the world, an enormous wealth of analytical and creative thought. In an economy where knowledge expands at an exponential rate, where people change jobs many times in their lives, and where many of the most important jobs and careers are new ones, the great public universities educate not just for the next few years but for a lifetime, and not just for what we see now but for what lies beyond the horizon.

It is no longer good enough—if it ever was—to say, “We know better. Trust us.” We cannot avoid the same kinds of questions that I asked about structure:

• Are we teaching in ways and in settings that are most meaningful for the students of today?
• Can we be using the technologies that were unavailable just a decade ago to educate more effectively?
• Are we teaching intentionally by identifying learning goals and outcomes and assuring that they are met?
• Have we identified the knowledge and skills that students need for a rewarding intellectual, economic, and community life, and how are we assuring ourselves that such knowledge and skills have been transmitted?

We cannot wait for others to ask and answer these questions for us; we must accept this challenge ourselves, and as a matter of urgency. I am therefore directing each campus to establish a New Directions in Learning Committee—including the senior academic administrators, faculty members who have distinguished themselves in scholarship and teaching, and students who have distinguished themselves in their studies—to address these questions for each campus.

Where existing committees or organizations are already addressing these questions, they should be incorporated into this effort to learn better from experience and to avoid duplication.

Each campus committee should have completed enough work to support a Conference on New Directions in Learning, convened to share ideas and experiences, early in the spring semester of the next academic year. I would like to see comprehensive reports, including near-term and long-range action items, by the end of the next academic year.

The Academic Core: The Future of Faculty Governance

It is, of course, no accident that both of these academic initiatives will be joint faculty-administration endeavors. The quality of the academic core of a great university is a joint responsibility, as a matter of tradition, of principle, and of necessity.

The great American tradition of liberal education has also been a tradition of strong faculties making informed judgments about academic fundamentals. Contemporary criticism to the contrary notwithstanding, this approach has been outstandingly successful: witness the huge advances in quality of life and culture in this country and the virtually universal international demand for places in American universities.

It is a matter of principle that protection of the freedom of inquiry and expression at the core of the academic enterprise is a joint responsibility of faculty and administration: witness Wells’ heroic defense of Kinsey and his steadfast insistence that all students, regardless of race, have full access to an IU education.

Finally, it is a matter of necessity. It is simply unimaginable that any institution, and especially one committed to the academic enterprise, would ignore those with the knowledge and expertise who make the institution what it is.

These joint responsibilities are most readily and most importantly shared in schools and departments, where—we must never forget—the vast majority of the actual educational and research work of this or any university takes place. At the broader organizational levels, by contrast, universities must often respond to important external constituencies with a rapidity and unity of voice that is more compatible with corporate and governmental organizations than with universities. Throughout the university, new internal and external pressures have made traditional shared governance more difficult than it has been in the past.

• For example, universities operate in a highly complex and highly dynamic economic, social, and political environment. Academic administrators must be fully engaged in seeking new resources and allocating scarce existing ones; engaging with multiple stakeholders; responding to external regulations and reporting, where failure to comply can involve draconian consequences for individuals and the university.
• The sheer size of the academic enterprise at large public universities like ours—IU is one of the largest enterprises in Indiana with a nearly $3 billion budget—presents enormous challenges to coordination.
• In a highly competitive academic environment, more is demanded of faculty than ever before in the classroom, the lab, the studio, the office, the community, and faculty members must not be required to sacrifice their teaching and research to participate fully in shared governance.
• Universities are no longer left to their own devices; they are held very directly accountable for the investment of students’ tuition, public funds, and private philanthropy.
• These are serious challenges to our traditions of shared governance, but they are not reasons to abandon the sharing of academic responsibilities. Like liberal education, shared governance has proven its value in the past and remains essential to the way forward.

Nevertheless, like our academic organization and educational methods, we must ask ourselves some hard questions:

• In what areas are busy faculty members most productively involved, and where should their time be freed by delegation to administrators?
• What kinds of procedures and institutions are most effective at the different levels of the university organization?
• Can we use technology, and in particular information technology, to facilitate communication and interaction?
• How can we bring the best information, knowledge, and experience to bear on academic issues?
• How can we involve faculty without time commitments that overwhelm or distract them from their research and teaching?

Therefore, I applaud and welcome Professor Simon Atkinson’s recent call, on behalf of the University Faculty Council, to revitalize shared governance at IU. I stand ready to work with faculty governance as it pursues this extremely important matter.

Infrastructure

I have talked at some length about the key priority of preserving the academic core of the university. The other key priority is that we do all that we can to take advantage of the historically low cost of construction in these difficult economic times to continue to build and renovate facilities for research and education. As I noted earlier, in the last year or so, the costs of construction have fallen by an unprecedented amount. Together with our favorable bond rating, this provides a maybe once-in-a-lifetime opportunity to aggressively pursue construction and renovation.

The IU Master Plan for the Bloomington and IUPUI campuses demonstrated a major need for new and renovated space, and addressing this need is essential if IU is to reach its full potential as a research university.

The last time that the U.S. experienced a similar downturn in its economy was the 1930s. In that decade, under the presidencies of William Lowe Bryan and Herman B Wells, IU constructed the following ten major buildings that are now icons of the Bloomington campus:

• the Indiana Memorial Union
• Bryan Hall
• Agnes Wells Quad
• Collins Living Learning Center
• the Chemistry Building
• Myers Hall
• Merrill Hall
• the University School (now the Simon Music Center)
• Woodburn Hall Ernie Pyle Hall

At present across Indiana University, we have four major buildings under construction and another eight in planning for a total of 1.5 million square feet. All will support new research and education activities or student life. The total value of all new construction and renovations in progress or planned is around $560 million. Of this total, only 30% is provided by the legislature, with 70% being provided through private sources or internal university sources.

And we should never forget that in these times of 10% unemployment, IU’s efforts to construct and renovate buildings create jobs.

IU Bloomington Master Plan

The Master Plan for IU Bloomington is complete, and for the first time since the days of Herman Wells, we have a superb blueprint for the future development of this campus. There are a number of outstanding and creative principles in this plan such as the establishment of Woodlawn as a boulevard that would be the major north-south axis linking the main academic campus to athletics, and the re-establishment of the Jordan River riparian corridor as the major east-west axis. Initial action has commenced in both of these areas.

One key conclusion that can be drawn from the Master Plan is that the way we use the magnificent iconic buildings that comprise the Old Crescent—the historic core of the campus—does not properly reflect the university’s core missions of education and research. Only about half of them house academic units, and the rest house administrative units that could be situated in less physically and symbolically central locations. Whether we intend it or not, our buildings reflect our values. The Old Crescent should be among the main academic centers on campus and a vibrant hub of student and academic life and activity, day and night.

These are valuable and historic buildings provided by the state over many years, and it is essential that we make the best possible use of them. Many of these buildings also require substantial renovation, and we will need to consider making the case to the legislature in the next budget session for funds to do this to protect the investment they have already made in them.

Hence, I am asking the Provost and the Vice President for Capital Projects and Facilities to jointly convene a working group to be called the Old Crescent Academic Working Group to develop a long-term plan for the re-allocation of the space in the Old Crescent buildings presently occupied by administrative units to academic units. This, in turn, will assist in identifying the funding that will be needed to renovate these buildings.

The assumption should be that this space will be re-allocated to College units, and priority should be given to considering units presently housed in the Agnes Wells Quadrangle. This will allow the Wells Quad to be returned to use as central campus student housing.

IUPUI Master Plan

The first phase of the Master Plan for the IUPUI campus was completed about a year ago. At that time there was uncertainty as to the future boundaries of the campus because of the possibility of IU swapping a parcel of land to the north of the campus for one to the northwest owned by Wishard Hospital. Consequently, the Master Plan could not be completed for the area north of Michigan. This land swap has now been effected, and final planning for this area has begun by the master planners, David King and the Smith Group.

Further, the Smith Group has also been engaged by Clarian to prepare a master plan for the Clarian campus that focuses, very roughly, on the area bounded to the north and south by 21st and 10th Streets, respectively, and Martin Luther King and Capital to the west and east, building on work previously done for Clarian and for the city for this area.

Given that there now are IU facilities at the southernmost edge of the Clarian campus with plans to build IU’s Neurosciences Building at the northern edge of the IUPUI campus, the IUPUI and Clarian campuses are now effectively physically linked together.

So given that Clarian is a joint venture of IU and the Methodist Hospital and is essential to the research and clinical programs of the IU School of Medicine and other IU health sciences-related schools, the IUPUI Master Plan, especially for the part north of Michigan Street, and the Clarian Master Plan will be conceptually linked together. We expect these plans to be complete in about six months.

The completion of these plans is an essential step in helping to refine our construction and renovation priorities at IUPUI and, where relevant, on or near the Clarian campus.

As with IU Bloomington, we must also give additional attention to the renovation and repurposing of the buildings and infrastructure we presently have at IUPUI provided by the state over many years to ensure we make the best possible use of them. Again, we will need to make the case to the legislature for funds to do this to protect the investment they have already made in them.

As these master plans are finalized, both Vice President Tom Morrison and IUPUI Chancellor Charles Bantz will be working to identify priorities. I am also asking Vice President Morrison to work with the regional chancellors on their priorities for the renovation and repurposing of buildings on their campuses.

International Excellence

Indiana University is one of America’s leading international universities, whether it is measured by the number of students it sends overseas to study abroad, the international students who attend IU, the number of foreign languages taught, the breadth and depth of its international research and scholarship, the level and variety of its international engagement, or the number of Title VI area studies centers.

Indiana University’s proud history of engagement in international activity and scholarship goes back at least 100 years. This, in part, stems from a longstanding recognition that the best university education instills an understanding of the world outside of the boundaries of the United States: of the history, ancient or modern, of the cultures, religions, politics, economies, institutions, languages, art, and literature of other countries. And such an understanding is even more important today when there is hardly a discipline or profession that is not affected, to greater or lesser degree, by globalization. Not only is this educational dimension a matter of practical necessity, but it is increasingly being demanded by students.

In recognition of this, I directed Vice President for International Affairs Patrick O’Meara, to prepare IU’s first International Strategic Plan, which was presented in March 2008.

The plan has twenty goals, but these can be reduced to four overarching main goals:

• to increase the number of IU students studying abroad;
• to increase the number and diversity of international students;
• to support the international engagement of faculty in their teaching, research, and scholarship
• to develop relationships with key overseas universities that help support these three goals, and IU’s international mission more generally.

Let me discuss progress on these first two goals in more detail.

According to the 2009 Open Doors Report³ prepared by the Institute for International Education and released late last year—a report based on data collected from around 3,000 institutions of higher education nationwide—the number of IU Bloomington students who studied abroad in the 2007–08 school year increased by 22% to 2,052 so that the campus now ranks 11th in this area up from 19th the previous year. The number of students studying abroad at IUPUI also increased by 17% to 389. Overall university-wide, 2,678 students studied abroad in 2007–08, an increase of 22% over the previous year.

And according to the same report, the number of international students at IU Bloomington increased 6.5% to 4,565 individuals, resulting in the campus being ranked 15th nationally. At IUPUI, the number of international students increased by 12% to 1,407. University-wide, IU saw international student enrollment jump by 8.7% in the 2008–09 year to a record total of 6,283 students.

The Open Doors Report gives us a good way to measure our excellent progress in pursuing these first two goals. All faculty and staff in all offices on all campuses are to be congratulated for their contribution to this progress. IU Bloomington is now close to being in the top ten in both categories, and I have asked Vice President O’Meara to work with the Provost to identify what will need to be done to achieve these rankings.

To support our international strategy and all four of these main goals, we have continued to build relationships with major overseas universities around the world.

In the last eighteen months, IU has signed major institution-to-institution agreements:

• in China with Peking University, Tsinghua University, Zhejiang University and Sun Yat-sen University, four of China’s top ten universities;
• in Japan with Doshisha University in Kyoto;
• in South Korea with: Ewha Womans University, Seoul National University and Sungkyunkwan University, all in Seoul;
• in Vietnam with the Vietnam National University in Hanoi;
• in Australia with that country’s top university, the Australian National University in Canberra, and with the University of Western Australia in Perth;
• in Egypt with the American University of Cairo;
• in Israel with that country’s top university, the Hebrew University of Jerusalem;
• and later this week we will be signing an institution-to-institution agreement with Bogacizi University in Istanbul, Turkey.

Though the list of IU’s international partners continues to grow and has increased significantly especially in the Asia Pacific, there are still regions of the world where we need to develop more robust and substantial relationships.

Statewide Economic Development

President Brand observed that, especially as a public university, we have a duty to engage with the economic development of the state for two reasons: the first because of its direct returns to the university, and the second—a prudential reason as he put it—because a prosperous state economy meant the state would have the revenues to continue to strongly support higher education.

The Office of the Vice President for Engagement was established to enhance the education and research mission of IU and contribute to the state’s economic vitality by coordinating and connecting Indiana University’s capacity for invention, innovation, and creativity with strategic opportunities that foster Indiana’s economic growth and enhance the quality of life for all Hoosiers.

A key initiative here is “Innovate Indiana,” an effort to engage IU in economic development activities across Indiana. Partnering with Purdue University, we have created a new engagement office in downtown Evansville’s incubator building, Innovation Pointe. In similar fashion, we partnered with Purdue, Ivy Tech, and the Indiana Economic Development Corporation to create a new Small Business Development Center in New Albany, where our colleagues at IU Southeast are assisting area entrepreneurs and small business owners.

These efforts complement similar programs we have underway in Fort Wayne, Kokomo, Indianapolis, Bloomington, and elsewhere, where we facilitate access to IU resources and regularly conduct technology showcase events, business seminars, and economic outlook panels using faculty, researchers, students, and subject matter experts from Indiana University to inform policy and influence economic development planning in all regions of the state.

Much of the university’s economic development effort is organized through the Indiana University Research and Technology Corporation (IURTC). Under Vice President Bill Stephan’s leadership, the IURTC has undergone major restructuring, including changes in board and executive leadership, all of which has been designed to enhance research activity, foster technology commercialization, generate new business start-ups, and create jobs.

Over the course of the last two years, there have been 275 invention disclosures, over 350 patent applications filed, over 20 patents issued, and royalty revenues of almost $11 million. The IURTC continues to foster new job creation and is credited with adding almost 400 new high-tech jobs since its inception.

This past year witnessed a new high-water mark at IU in terms of a commercial transaction linked to the sale of a university start-up company. Angel Learning, the Indianapolis-based company founded by IUPUI professor Ali Jafari and his graduate student David Mills, was sold for $100 million to Blackboard, Inc. of Washington, D.C.

The university’s equity share from the sale of the company of approximately $24 million is being used in turn to leverage the creation of new research infrastructure and further augment our technology commercialization capabilities.

We want to see more companies like Angel Learning formed and hence we established the “Innovate Indiana Fund” late last year and capitalized it with $10 million from private philanthropic contributions and university investments. This will enable the IURTC to provide early and late stage seed funding to promising IU affiliated business start-ups. This fund will provide critical, hard-to-get seed capital that can make all the difference in fostering new business growth and job creation.

Essential to these plans are IU’s two major business incubators managed by the IURTC: the Indiana University Emerging Technology Center in Indianapolis and the Indiana University Innovation Center dedicated last November and located in the research park at Tenth and the Bypass. This new 40,000-square-foot facility is designed to house both information technology enterprises and life science companies and to meet their need for wet lab capabilities.

The Innovation Center is now home to Indiana University’s Pervasive Technology Institute, which is comprised of three centers focusing on applied research in three areas of major commercial interest: managing massive quantities of data, transforming data into knowledge, and protecting privacy and ensuring security.

While there has been much progress in this area to applaud over the last year, we now find ourselves facing heightened expectations among elected officials, faculty and researchers, business and community leaders, and others. As Indiana’s economy continues to struggle, more and more people look to the university for answers. While our engagement efforts are increasing, there are limits on what we can do, especially at a time when we are struggling to absorb additional budget cuts and prospects of even further reductions.

But we will redouble our efforts to seek new sources of funding by pursuing competitive grants and contracts, as well as investments from private sector sponsors who are supportive of our mission and who recognize the value of our contributions to the Hoosier economy.

University Advancement

Private philanthropy is one of the great glories of the American system of higher education. There is nothing anywhere else in the world to compare with the esteem and affection in which alumni and supporters of American universities hold their alma maters, and how they demonstrate this repeatedly with their dedicated and selfless commitments of time and their personal philanthropy: it is a uniquely American phenomenon.

Private philanthropy provides major enhancements to student financial aid, endowed faculty chairs, specialized buildings and infrastructure, and support for path-breaking academic initiatives. In short, it allows American universities to do things no other universities in the world can do. Private philanthropy is, thus, one of the key reasons for the excellence and creativity of American higher education, and it is the envy of the rest of the world.

We have seen just recently a wonderful example of private philanthropy from an IU faculty member when Lin Ostrom gave her Nobel Prize of approximately $700,000 as a gift to the university to support the Workshop on Political Theory and Policy Analysis, which Lin and her husband Vincent founded in 1973. And this is on top of other gifts they have given over the years totaling $2.1 million and an estate gift of $1.5 million.

Private philanthropy is also one of the four financial pillars of the university along with our state appropriation, tuition, and sponsored research. With state appropriations declining, tuition increases subject to political pressure, and the future of sustaining sponsored research at present levels uncertain due to the prospect of federal cuts, private philanthropy becomes of even greater importance.

Consequently, a year ago at the height of the economic crisis, IU Foundation President Gene Tempel and I appealed to all who support Indiana University to redouble their efforts when we increased the goal of the IU Bloomington Matching the Promise

Campaign from $1 billion to $1.1 billion. It is important in these difficult times that IU supporters demonstrate to the state that we are doing all we can to help ourselves.

IU supporters have responded magnificently and with the extraordinarily generous gift of $15 million from Bill and Gayle Cook, which I mentioned earlier, only $16 million remains to be raised by the end of the campaign on June 30. Let me take this opportunity to ask everyone listening or reading this speech to consider making a gift now to this campaign to ensure we reach this goal or, preferably, exceed it.

No sooner does the Bloomington campaign finish, than the Impact IUPUI campaign will begin, which also has a goal of $1.1 billion. The public phase of this campaign will be officially announced later this year on October 9. At that time we also expect to announce that more than 50% of the goal has already been raised with the campaign due to finish on June 30, 2013. Planning for the next Bloomington campaign will begin by 2011, and it will move into its public phase later in 2013.

As you can see, then, we expect from now on to be in constant campaign mode alternating between Bloomington and Indianapolis. Campaigns for the regional campuses will be aligned with one or the other of these campaigns as their needs for and readiness to conduct campaigns develop.

But this financial pillar is under threat as well. There have been some spectacular falls in the value of university endowments, especially among some of the Ivy League schools. The value of IU’s endowment has fallen too. Just two years ago its value was nearing $1.6 billion but fell to as low as $1.1 billion, though it has recovered somewhat and is now closer to $1.3 billion. In spite of careful management, it will remain vulnerable to the state of the national and the global economy.

The fall in value of this endowment is reflected in the declining returns to IU and its schools and units. Here returns are averaged out over twelve quarters. This cushions falls, but it means the effects of the recent fall will be felt for the next few years, though in a predictable way. And unlike many of the Ivys, IU does not budget endowment returns as part of its base budget, so the effects of this fall can be more effectively managed.

We have also seen a fall in the base level of private giving to IU of about 5%, which is roughly in line with the decline in giving to higher education seen nationally.

Given all this, it is essential that IU’s fund-raising arm, the IU Foundation and its fundraising partners throughout the University are doing all they can in their vital roles of cultivating and attracting private philanthropy to advance the goals of the university, roles they have pursued so well for many years.

Presently, the Foundation is reviewing both its internal operations and the entire university development program as well as its board structure, in order to ensure that they are as effective and efficient as possible. They are also making sure that all of these advancement efforts are closely aligned and form a seamless whole with the efforts of the individual schools. This is critical with the university moving towards constant campaign mode.

The advancement efforts of the IU Alumni Association also need to be closely aligned with those of the Foundation, and I will be working to ensure this happens as we move to appoint a new head of the Association.

With the appointment of a new Athletics Director for the Bloomington campus since my last State of the University speech, I believe we are now in a position to ensure that the triad of the Foundation, the Alumni Association, and Athletics, all of which are essential to IU’s advancement, are all tightly aligned to help build philanthropy for all of our campuses.

Conclusion

The past year has presented all of us with difficult challenges as we seek to continue the forward momentum of this great university in the midst of a deep and potentially protracted economic downturn. In response, we moved early and decisively to adjust our expenses while preserving and enhancing the academic core of the university and continuing to develop our facilities.

I am proud of the way the university community has responded and grateful for the support and the cooperation that has been so essential in confronting these challenges. And I would like to express my sincere thanks to all IU faculty and staff for the vigorous and confident way they have responded to them.

However, no one should assume either that this process has been easy for Indiana University or that our work is done.

In 1938, at a time very similar to the one this nation is currently facing, President Wells delivered his first address to IU faculty as acting president. In it he outlined the ways in which, after much consideration, he was convinced that the university’s budgetary problems could be solved: “First, by increased appropriations from the General Assembly; second, by gifts from alumni and private individuals.”

“If these first two sources of funds prove unproductive,” he continued, “we may find it necessary to face with realism and courage the whole problem of academic reorganization for financial reasons as well as for the purpose of increasing academic efficiency.”⁴

But it is unlikely that we will see appropriation increases from the General Assembly in the near future. And in spite of the extremely generous gifts IU continues to receive, I have described the difficulties that confront philanthropy.

Hence, now is the time for us to look across this university and to shape it to meet the demands of our changing world. And as we do so, we must remember the work at the heart of this university: the search for truth and the dissemination of knowledge to generations of students, whose characters are molded by the values of this great institution.

In the end, that is our real work. The stronger the university’s academic core and the better its facilities, the better we can focus on that vital endeavor.

Thank you.

Source Notes

1. Wells, Herman B “The Early History of IU as Reflected in the Administration of Andrew Wylie, 1829–1851.“ The Filson Club. Louisville, Kentucky. 7 Nov. 1960. Page 22. Indiana University Archives. http://webapp1.dlib.indiana.edu/metsnav/archives/navigate.do?oid=VAA2642-01169
2. Op cit, Page 3.
3. The 2009 Open Doors Report is available at http://opendoors.iienetwork.org.
4. Wells, Herman B “Shop Talk: Remarks Before the Faculty.” Indiana University. Bloomington, Indiana. 28 Apr. 1938. Page 6–7. Indiana University Archives. http://webapp1.dlib.indiana.edu/metsnav/archives/navigate.do?oid=VAA2642-00036