Friday, September 19
Committee on Finance and Physical Plant
Agenda Item #4 |
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PENN STATE’S 2009-10
APPROPRIATION REQUEST
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Penn State enjoys a unique partnership with Pennsylvania. It enables us to move forward on a number of
fronts crucial to the economic health and well-being of the Commonwealth. Workforce development, energy initiatives, medical
advancements, scientific discoveries, creative activity in the fine and performing arts, agricultural research, community outreach,
and information technology are just a few of the areas in which Penn State is recognized for its academic excellence and
leadership. As Pennsylvania’s sole land-grant institution, we look forward to strengthening our partnership with the state
so we can do even more to address our most pressing needs. This year’s appropriation request will allow us to advance many
of the priorities of the state government and benefit the people of the Commonwealth.
Penn State is well known for outstanding teaching. Since its founding, Penn State has
conferred more than 647,000 degrees. One in every 115 Americans with a bachelor’s degree graduated from Penn State, and our
alumni association is the largest in the world.
In addition, Penn State’s reputation continues to grow and attract exceptional faculty and
students. This past year, Penn State received over 100,000 applications for admission from one of the most competitive
classes in history. Notably, approximately 60 percent of incoming students will be studying at one of Penn State’s
Commonwealth Campuses; 40 percent will begin their studies at University Park.
With 24 campuses, 139 research, extension, and affiliate locations, and the largest outreach effort
in higher education, Penn State plays a vital role in the economic health of the Commonwealth of Pennsylvania. In fact, the
collective statewide impact of Penn State’s activities is more than $8 billion annually, with an induced impact of an additional
$9 billion. Last year alone, Penn State added almost 1,600 jobs, principally related to our success in funded research
and the demand for services at the Penn State Hershey Medical Center.
Penn State’s $700 million research enterprise is one of the largest in the world and third in the
nation for research supported by industry. Significant resources have been dedicated to enhance already strong research,
education, and outreach activity within the areas of energy sciences, engineering, and policy. Our heritage of agricultural,
engineering, and science research uniquely positions Penn State to be a leader in the training of energy professionals, development
of energy technologies, management of energy resources, and implementation of energy policy.
Penn State’s 2009-10 budget request reflects the University’s need to keep pace with rising costs
associated with carrying out its land-grant, public university mission and the need to continue providing high quality programs for
its students. Penn State seeks an appropriation increase from the Commonwealth of $24,483,000, or 6.9 percent. Of
this amount, $18,561,000 is requested for the Educational and General line item and $4,922,000 for its other line items.
An increase of $1,000,000 also is requested in State and Federal Medical Assistance funding provided to the Milton S. Hershey
Medical Center through the Pennsylvania Department of Public Welfare.
These funds will be used to help support the University’s basic operating increases, with emphases on
competitive faculty and staff salary adjustments, escalating health care costs, rapidly increasing fuel and utilities costs,
deferred maintenance and facilities improvements, and strategic academic program initiatives.
If the Commonwealth is able to provide these requested appropriation increases, the tuition rate
increases for Pennsylvania resident students would be 4.9 percent for students at Penn State’s Commonwealth Campuses
and 5.5 percent at the University Park Campus.
For more than a decade the University has aggressively trimmed budgets, producing $173 million in
budget reallocations, and we are making every effort to maximize the impact of our tuition and state appropriations. Yet,
the fact remains that tuition is still a hardship for many families. Last year alone, 74 percent of undergraduates received
some form of assistance and about 60 percent of Penn State students have loans. Every year, we lose talented students due
to the cost of a Penn State degree. Many undergraduates work multiple jobs while carrying a full course load, yet students
graduate with an average personal debt of more than $26,000
We remain committed to cost containment and belt-tightening measures. However, the continuing
erosion of its funding support will negatively affect the University’s ability to provide the programs and services so critical
to the Commonwealth’s future.
An increased investment in the partnership with Penn State is an investment in the future of
Pennsylvania. With the support of the Commonwealth, Penn State can continue to provide the leadership, knowledge, and vision
that are essential for success in today’s competitive economy.
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HIGHLIGHTS OF PENN STATE’S
2009-10 APPROPRIATION REQUEST
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BASIC OPERATING COSTS:
- Faculty and Staff Salary Adjustments – Maintain competitive
faculty and staff salaries.
- Benefits and Insurances – Respond to
escalating costs for health care,
retirement and insurances.
- Facilities –
Provide for facilities cost increases, including rapidly increasing fuel and utilities costs, support for the
maintenance and operation of new facilities, deferred maintenance and the capital
improvement program.
- Strategic Initiatives –
Address the most critical strategic academic initiatives.
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APPROPRIATION
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The University is requesting an appropriation increase of $24,483,000. Of this amount, $18,561,000 is requested
for Penn State’s Educational and General line item and $4,922,000 for its other line items. Additional State and
Federal Medical Assistance funding of $1,000,000 also is requested for the Milton S. Hershey
Medical Center.
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TUITION
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- If
the Commonwealth is able to provide these appropriation increases, the tuition rate increase for Pennsylvania resident
students would be 4.9 percent for students at Penn State’s Commonwealth Campuses and 5.5 percent at
the University Park Campus.
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DETAILS OF PENN STATE’S 2009-10
BUDGET
PLAN AND APPROPRIATION
REQUEST |
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The University’s proposed budget plan for 2009-10 reflects basic
operating cost increases of $92,881,000. Table 1 summarizes the proposed budget plan for the Educational and General
Budget, Agricultural Research and Cooperative Extension, the College of Medicine at the Milton S. Hershey Medical Center,
and the Pennsylvania College of Technology.
Penn State’s request for an appropriation increase of $24,483,000 for 2009-10 is summarized
by line item in Table 2. Details of the University’s proposed budget plan and appropriation request are discussed
below.
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BASIC OPERATING COSTS:
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Faculty and Staff Salary Adjustments
Salary
adjustments represent the largest component of the changes in the operating budget. In 2000, the Board of
Trustees adopted a multi-year plan to make Penn State’s faculty salaries, which had been falling dramatically against
other universities nationally, more competitive relative to our peer institutions in the Big Ten and Association of
American Universities. This plan proved successful and showed steady improvement in our rankings through 2005-06.
Limited funding for faculty and staff salary increases over the past three years has resulted in some slippage
in our competitive position.
The budget plan for 2009-10 includes $40,137,000 for faculty
and staff salary adjustments and related employee benefits. The plan includes a 2.0 percent increase in
the salary pool for merit-based increases, plus a 2.0 percent increase for special merit, market and equity
considerations from the President’s Excellence Fund.
Benefits and Insurances
Rising health care insurance costs continue to create challenges for both employers and employees
across the country – a trend which is expected to persist for the foreseeable future. The University is
projecting an increase of 10.0 percent in health care costs for 2009-10.
Penn State has aggressively pursued efforts to mitigate its health care costs.
Beginning January 1, 2008, the University entered into a ten-year agreement with Highmark Blue Shield. As part
of this new agreement, Highmark is the exclusive administrator of all health plans offered to Penn State’s employees and
retirees, and their dependents, allowing the University to offer a comprehensive benefits plan across its geographically
diverse locations. This partnership with Highmark provides a joint focus, involving the Hershey
Medical Center, the College of Medicine, the College of Health and Human Development and the Mount Nittany Medical Center, on the development of wellness and disease management programs which will provide savings that will enable Penn State to
reduce annual health care cost increases in future years.
While health care costs will account for the
majority of the benefits cost increases, retirement and
social security also are projected to rise. The
employer contribution for the TIAA/CREF
retirement program will increase as the number of University employees participating in the program continues to
grow. Additional funds are included for an anticipated increase in the employer contribution rate for the State
Employees’ Retirement System (SERS). Actuarial projections continue to show the employer contribution
rates for SERS increasing significantly in future years, and actions to address the issue are under consideration
by the Governor’s Budget Office and the General Assembly. This is an area of concern for Penn State and
the University continues to monitor the situation closely. Funding also will be required for changes in
the social security base. In total, benefits costs are projected to increase by $24,692,000.
The University is expecting additional increases in property, liability, and workers’
compensation insurances. A total of $1,100,000 is projected for these expected cost increases.
Facilities
A total of $15,902,000 is projected for facilities cost increases. Included are
funds for fuel and utilities cost increases, the maintenance and operation of new or newly renovated facilities,
additional funds for deferred maintenance projects, and the continuation of the University’s capital improvement program.
Projected increases for fuel and utilities and for the maintenance and operation of new
or newly renovated facilities total $9,252,000. Most of these funds will be required to meet fuel and utilities
increases. Global and national events have had a dramatic impact on these costs for the University.
Significant increases in the cost of electricity, coal and natural gas are expected in 2009-10. Modest
additional funding is required for the maintenance and operation of new or newly renovated facilities primarily
for classroom and laboratory renovation projects at the University Park Campus.
Penn State’s physical plant is aging, and deferred maintenance continues to be a critical
problem. During this decade, more square footage will reach the 35-year threshold where major maintenance is
required than at any time in the University’s history. Currently the University has permanently budgeted
approximately $24.5 million for deferred maintenance. More needs to be done, however, to address the
maintenance backlog. For 2009-10, additional support of $3,000,000 is included for deferred maintenance.
Penn State continues to lag behind its peers in providing modern laboratory and
classroom space for its academic programs. Even with the new facilities constructed over the last several
years, Penn State has among the lowest overall space per full-time-equivalent
(FTE) student of any public university
in the Big Ten. While capital funds received from the Commonwealth are greatly appreciated, they will not be
sufficient to meet the University’s most critical needs. As a result, the University has established an
ongoing general funds budget to support the capital improvement program. These funds enable the University
to incur debt for building renovations and construction. A total of $3,650,000 is included in the budget
plan for 2009-10.
Strategic Initiatives and Other Program Needs
The budget plan includes a total of $11,499,000 for strategic initiatives and other
program needs at University Park and other campuses. Funding in the amount of $5,000,000 is provided for
investments in high priority academic initiatives identified through the University’s strategic planning process.
A total of $5,000,000 is included for other program commitments. This amount
includes funding for some limited new faculty positions, instructional workload adjustments that relate to
enrollment changes in the colleges, and for academic excellence scholarships. Funds also will be provided for
increasing costs of support services in areas such as research administration, information technology
services, and the university-wide parking and transportation plan.
The budget plan also includes $1,499,000 of additional program funds for Agricultural
Research and Cooperative Extension. These funds would be available if the Commonwealth is able to provide
the appropriation increases requested for the two line items. The increase would restore approximately
two-thirds of the reduction in program funds resulting from the flat appropriations for these line items in 2008-09.
Libraries, Computing and Telecommunications
A total of $1,100,000 is included in the plan for libraries, computing and
telecommunications. These funds will help to maintain library resources, which are essential to the quality of
the University’s academic programs, and help the University keep pace with rapidly expanding student computing and
telecommunications needs. A proposed $8 per semester increase in the student information technology fee will provide
the needed funds.
Internal Budget Reductions
The budget plan for 2009-10 is targeting $7,244,000 of internal expense reductions from
all academic and administrative units. This represents a 1.0 percent across-the-board reduction in
departmental operating funds. This will be the eighteenth consecutive year that Penn State has had a program of
internal budget reductions and reallocations in effect.
Need-Based Student Aid
Because the University must increase tuition to generate the necessary funds to meet its
strategic goals, it is imperative that additional need-based student aid also be provided. This is to help meet
the University’s goal to ensure that any student from the Commonwealth will be able to attend Penn State through a
combination of institutional, federal, state, and private philanthropic support.
A total of $1,000,000 is included in the 2009-10 budget plan for need-based student
aid. These funds will be used to leverage additional private donations for student grant and scholarship support.
Student Activities
An additional $621,000 will result from a $5 per semester increase in the student activity
fee at all locations. The increase will be used to support student activities and programs at the generating campuses, as
determined by the students themselves.
Student Facilities
A total of $3,978,000 is included in the budget plan resulting from an increase of $50 per
semester in the student facilities fee for the University Park Campus. The increase will bring the fee to $100 per
semester as approved by the Board of Trustees in May 2008. Funds from the fee will be used to support capital
projects designated to enhance student activities, fitness and recreation.
Income Changes:
Income increases of $92,881,000 are projected for 2009-10. This amount includes
$62,909,000 from projected tuition and fees rate increases for students at all locations and additional tuition income
available as a result of enrollment growth at University Park. It also includes $6,489,000 in other income.
Penn State is requesting an appropriation increase totaling $24,483,000, which represents
a 6.9 percent increase on all line-item appropriations. Of this amount, $18,561,000 is requested for Penn
State’s Educational and General line item and $4,922,000 for its other line items. An additional $1,000,000
increase also is requested in the State and Federal Medical Assistance funding provided to the Milton S. Hershey
Medical Center through the Pennsylvania Department of Public Welfare.
If the Commonwealth is able to provide these appropriation increases, the tuition rate
increase for Pennsylvania resident students at Penn State’s Commonwealth Campuses would be 4.9 percent and 5.5 percent
for students at the University Park Campus. The information technology fee will increase by $8 per semester to
support library resources and student computing and telecommunication needs, the student activities fee will increase
by $5 per semester for students at all campuses, and the student facilities fee will increase by $50 per semester at
University Park.
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