Mr. Chairman, thank you very much, and members of the Committee, welcome, all of you, back to Ball State. I want to thank you for being here, and for making this special effort to inform citizens about fiscal issues that now face the state and the plans for dealing with some of those issues.

Having seven meetings around the state on this topic, I think, would qualify as at least one profile in courage, and the citizens of the state appreciate it.

As you know, or as some of you may have heard, we have a basketball game this evening just a few blocks away. I apologize in advance for not being able to be here for the duration of your meeting. We expect all 11,500 seats in Worthen Arena to be filled and you might even be able to hear the noise from here. Now I don't expect to able to hear the noise from here over there, but we understand you've had some pretty exciting meetings and I wouldn't be surprised.

BUDGET DEFICIT

We know you have some serious challenges ahead of you as you wrestle with an array of options, as we've just heard, many of them not very attractive for higher education

We will support you the best we can throughout this process.

We appreciate the leadership of the committee and the General Assembly during this past legislative session. You supported continued investment in education despite very difficult economic times and we appreciate it. 

Unfortunately, as we have heard, the economic changes of the past few months have forced Governor O'Bannon to propose a series of budget reduction strategies, and it's obvious that cuts in higher education alone cannot solve our current deficit in the state budget. I know you share the concern that long-term systemic change is required, as I think all the numbers suggest

Though we will do the best we can with what we have, I am obligated to tell you that spending freezes and payment delays and cuts in higher education technology, R and R funding, and operating budgets will have a major negative impact on Ball State University. Under the current governor's proposal, with no tax enhancements, we will lose almost $17 million in funding between today and July 1 of next year. To give you a sense of what that means, that accounts for about 13 percent of our total state appropriation. So I can't express to you strongly enough how seriously those cuts would be felt by our students, by the faculty, and by the larger university community, and how much they would impede our ability to serve the state. If these cuts are continued and they are not repaid in the very near future, the negative impact on all of higher education will be, I think, extremely critical and long lasting. Along with similar cuts in K-12, this will have adverse, and even permanent, effect on the education of our young people. So this is clearly not something any of us are interested in seeing happen.

I hope that as you go into this legislative session, you will be as attentive to the state's priorities as you contemplate the possibility of cuts in the state budget, as you have been when you allocate additional money. Because these priorities are actually even more important in tough times than they are in the good times.

TAX RESTRUCTURING

Governor O'Bannon and Lt. Governor Kernan have proposed a plan to restructure Indiana's tax system that you are very familiar with. It is a comprehensive proposal; it reflects many viable suggestions that support the transition to a 21 st  century knowledge-based economy. Four concepts proposed in the plan--expanding the research and development tax credit, eliminating the state's inventory tax, liminating the corporate gross income tax, and reducing Indiana's reliance on property taxes--are examples of proposals that can clearly spur economic growth. I think the governors' plan is a credible proposal that deserves your serious consideration. I also want to reiterate the point that the state's future--the ability to generate and sustain economic development in a new global, knowledge-based environment--cannot be addressed by a short-term fix or by tax restructuring alone. Equity among taxpayers is a very important consideration, but it does not by itself assure a bright future for Indiana. And making the numbers come out right for the following year is desirable, but it is not enough.

The state needs to make strategic investments--greater investments--in those activities that will fuel growth and provide economic and social dividends. And you'll have to decide what those activities are We at Ball State want to be an active partner with each of you and with Indiana state government to assist in your efforts to move this society forward I hope that, to the extent that you can, you will keep your eyes fixed on that far horizon--even a 10-year horizon--as you contemplate the impact of new public policies and budget decisions.

You won't be surprised that I think education is by far the greatest economic development engine of our state, just as it is elsewhere. A quality education is no longer an option for our citizens; it is a necessity in today's economy. The investment of tax dollars in education will always pay large dividends for our society and economy. But you need to know that, despite the funds you have provided, for which we are grateful, Indiana's education system is not now gaining on the systems in other states. And, as they say with technology, if you fall behind a year, it will take you two years to catch up So we cannot afford to fall behind.

A few government officials have expressed a concern that higher education has received funding increases recently that have exceeded the rate of inflation. That is true, but to use this year as an example, the increase of funding for higher education was approximately three percent, however the higher education system had about three percent more students. So if you factor in the cost of the new students, there was almost no increase for our institutions of higher education for their existing student bodies. It is very important for all of us in Indiana to continue our efforts to educate more young Hoosiers, but we must understand that as we bring many more students into higher education, we cannot use the rate of inflation as the sole factor in determining the level of funding for colleges.

The overwhelming majority of Ball State graduates are Hoosiers. The majority of these graduates do remain in Indiana. Your investment in them, both as elementary and secondary students and college students, does directly relate to improving our Indiana society and economy.

So we have a very difficult task ahead, all of us--because what we do can chart the directions, and define the possibilities, for Indiana for the next decade.

Again, I thank you for giving us the opportunity to share our thoughts and our hopes with you. It's always a pleasure to have you, ndividually or collectively, here at Ball State University. We look forward to working with you to tackle these serious issues, and we wish you happy holidays and wisdom and prosperity in the new year.