Indiana University is staring at an enrollment cliff, and this drop in students will have a big impact on IU’s bottom line.

“This is probably a dramatic decade ahead,” said Robert Kravchuk, chairman of the Bloomington Faculty Council’s budgetary affairs committee.

In a presentation last month, Kravchuk discussed the impact of demographic trends that will affect higher education institutions across the nation. He predicted a steady state of near zero enrollment growth in the years ahead. This will lead to intensified competition among colleges and universities for students. Recruiting will become more expensive. High-profile universities will probably shrink, merge with others or perhaps fail.

“We don’t know which ones are going to survive,” he said.

While a decline in birth rates has played a role, this situation is also fueled by a shift in funding sources, pressure to keep tuition low and a robust economy.

For years, state appropriations were the largest source of revenue for IU and most public universities. But with state support failing to keep up with the higher education inflation index, and even declining in some years, institutions including IU began to rely more heavily on student fees.

In 2003, state appropriations provided slightly more revenue for IU than tuition. The next year, tuition became the university’s largest source of revenue, and it has remained every year since.

At the same time, state legislatures have put pressure on public universities to limit tuition increases. IU has obliged, keeping increases on its flagship Bloomington campus below 2 percent. For two years during that period, tuition didn’t increase at all.

This has stressed the university’s budget. Employee compensation is IU’s largest expense. Today, a 1 percent increase in total compensation would cost the university $15.8 million. A 1 percent increase in total net tuition revenues would only generate $12.4 million.

Increasing enrollment helped alleviate some budget pressures, but that doesn’t seem to be a viable option in the near future.

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