As part of the five-year strategic planning process implemented in 1997-98, the University will continue a program of internal budget reductions for 1999-2000. This will be the eighth consecutive year that an internal budget reduction and reallocation process has been in effect. Under this program, academic colleges and support units at University Park will reduce their budgets by 1.0 percent. These budget reductions will generate $3,602,000 for internal reallocation. Similar internal budget reductions and reallocations are included in the strategic plans of the other campus locations.

Each year, the University compares its faculty salaries with other Big 10 public universities and with 22 members of the American Association of Universities Data Exchange (AAUDE). This review shows that Penn State's average faculty salaries by rank have slipped since 1993-94. Among Big 10 institutions in 1993-94, Penn State had the 3rd highest average salaries for professors, 2nd highest for associate professors and 5th highest for assistant professors. By 1997-98, Penn State had slipped to 5th, 5th, and 8th respectively. In comparison with AAUDE institutions in 1993-94, Penn State ranked 4th for professors, 2nd for associate professors and 8th for assistant professors. In 1997-98, Penn State ranked 6th, 8th, and 15th respectively.

The budget plan includes $16,570,000 for faculty and staff salary adjustments and related employee benefits. This amount represents a planned increase of approximately 3.0 percent of the filled position salary base. While a 3.0 percent salary increase for 1999-2000 will probably not improve Penn State's rankings with peer institutions, it should allow the University to maintain its current position.

Employee benefits costs are projected to increase by $5,506,000. This includes provisions for health care cost increases, an anticipated increase in the employer contribution for Social Security, and continued growth in the number of employees participating in the TIAA/CREF retirement program. Penn State's health care costs are projected to increase by 8 percent for 1999-2000. This is up somewhat from increases the University has experienced over the last several years, and is consistent with a national trend toward higher health care costs.

A total of $2,755,000 is projected for the maintenance and operation of new or newly renovated facilities and for modest fuel and utilities cost increases. Major new buildings scheduled to come on line during 1999-2000 at University Park include the Leonhard Engineering Building, the Research Building, the Paterno addition to the Pattee Library, and the HUB/Robeson Center. There are also a number of new facilities at other locations, including the Biotech Building at Penn State Fayette and the Classroom/Office/Auditorium Building at Penn State Great Valley.

The President's Excellence Fund provides additional support for the highest priority needs within each college and administrative support unit. A total of $3,000,000 is planned for 1999-2000. The primary areas of emphasis for the President's Excellence Fund include: enhancing salaries for selected faculty and staff members to recognize special merit, or to assist in cases where equity, compression, or market adjustments need to be made; creating additional faculty positions or graduate assistantships; and meeting exceptional needs for additional departmental operating funds.

The University's budget plan includes $2,300,000 for critical academic program priorities. This includes continuing support for Penn State's initiative in the life sciences, and new support for three new academic initiatives identified through the strategic planning process as having significant potential for future development.

The Life Sciences Consortium at Penn State is an interdisciplinary program which involves faculty members from the Eberly College of Science, the College of Health and Human Development, the College of Agricultural Sciences, the College of Medicine, the College of the Liberal Arts, and the College of Engineering. This cross-college approach to education and research emerged from the University's strategic planning process, and has allowed Penn State to be more competitive in the field of the life sciences. A total investment of $5,000,000 over five years has been planned. The University has committed $1,000,000 per year for the past three years towards this effort. For 1999-2000, an additional $1,000,000 has been included in the budget plan.

In looking to the future, it is imperative that Penn State be able to invest in new program initiatives that are important to society and our students, and that will provide needed service to the Commonwealth. A total of $1,300,000 is planned for three such initiatives: Children, Youth, and Families; Materials Science; and Environmental Studies. All three areas reflect special needs and opportunities in our society, as well as existing strengths within Penn State. They also provide opportunities for the integration of undergraduate education, graduate education, research, technology transfer, and service.

The University has a growing backlog of major maintenance projects, estimated to be more than $190 million. Currently, approximately $9.7 million is budgeted annually for major maintenance projects. It will be necessary to increase this amount significantly over the next several years in order to meet the most critical maintenance needs and to reduce the backlog. Additional support of $1,000,000 is needed for deferred maintenance.

Over the next decade, Penn State's progress will be significantly linked to the quality of the facilities that are available to carry out its educational programs. Lack of space to accommodate students and faculty, changing technology, more interdisciplinary programs, and a growing research program have led to a serious space problem for the University. Insufficient or inadequate space has become a serious impediment to a growing number of academic programs. The State capital funds already approved for the next four years will not be sufficient to meet the University's most critical needs. As a result, the University plans to establish an ongoing general funds budget, beginning in 1999-2000, to support the University's capital improvement program. The investment of $2,210,000 per year for the next five years will allow the University to incur an additional $100 million of debt for capital construction and renovation projects over and above what might be received from the Commonwealth. It also will provide the associated operating expenses for facilities that will be built from these funds.

The budget plan includes a total of $1,300,000 for libraries, computing and telecommunications. These funds will help the University keep pace with rapidly expanding computing and telecommunications needs. They also will help to maintain library resources, which are essential to the quality of the University's academic programs. A proposed $10 per semester increase in the student information technology fee will provide the needed funds.

The plan also includes internal reallocations of $3,471,000 for the highest priority program needs of academic and support units identified through the University's strategic planning process.

Penn State is requesting a state appropriation of $4.5 million for the School of Information Sciences and Technology. This is just under half of the total operating funds of $9.5 million that will be needed for the new school, with the balance of the necessary funding coming from tuition income. This special state funding will enable the University to hire the new faculty needed and help to support the ongoing operations of the School. For the first few years, until full enrollment has been achieved, it will provide critically needed funding for start-up costs such as recruitment, support staff, computer laboratories, and equipment.

The University is requesting a special appropriation of $3,000,000 for 1999-2000 to expand Penn State's workforce development efforts. This includes $2,000,000 to support Penn College programs at Williamsport, to deploy certain Penn College programs to other Penn State locations, and to expand existing workforce related programs at Penn State campuses.

The funds will be used to hire faculty and purchase equipment at Penn College and at campuses where workforce needs are the greatest. Courses also will be delivered to other areas of the state through distance learning. In addition, $500,000 will support increased outreach activities, and $500,000 will be used to enhance the University's technology transfer efforts.