| PENN STATE'S 2004-05 BUDGET PRIORITIES |
| The University’s proposed budget plan for 2004-05 reflects basic operating cost increases of $74,377,000. Restoring the University’s appropriation to the 2001-02 level would provide $28,348,000 toward these increased costs, requiring $46,029,000 to come from tuition and fee increases. The budget plan also contains a $10,000,000 funding request from the Commonwealth for critically needed support for the College of Medicine. |
| Details of the University’s proposed budget plan and appropriation request are discussed below. 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 States appropriation request for 2004 05 is summarized by line item in Table 2. |
| BASIC
OPERATING COSTS: |
|
| Benefits and
Insurances Nationally, health care costs have escalated dramatically over the last several years, and increases approaching 20 percent are expected again for 2004-05. Penn State will experience similar cost increases. The University is projecting an increase of 18 percent in the costs of health care for next year. The employer contribution rate for the State Employees Retirement System will increase, and the number of University employees participating in the TIAA/CREF retirement program (which currently has higher costs than SERS) will continue to grow. In addition, funding will be required for changes in the social security base. In total, benefits costs are projected to increase by $21,916,000. |
|
| In line with national trends, the University is expecting significant increases in property and liability insurances. A total of $1,200,000 is projected for these expected cost increases. | |
| Facilities A total of $9,615,000 is projected for facilities cost increases. Included are funds for 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 the maintenance and operation of new or newly renovated facilities and for modest fuel and utilities cost increases total $3,356,000 for 2004-05. |
  |
| This includes operating funds for: the new building for the School of Architecture and Landscape Architecture, environmental projects, and classroom and laboratory renovations at University Park; the Classroom Building at Penn State Altoona; the Library/Classroom Building at Penn State York; the Maintenance Building at Penn State Delaware; the Training and Technology Center at Penn State Hazleton; and the Research and Economic Development Center at Penn State Erie. | |
| Penn States physical plant is aging, and deferred maintenance is a critical problem. Currently, the University has a backlog of deferred maintenance projects conservatively estimated at over $200 million. Since 1996-97, the University has allocated a total of $7 million for deferred maintenance, bringing the total permanent budget for these needs to approximately $14 million. More needs to be done, however, to address the maintenance backlog. For 2004-05, additional support of $1,000,000 is included for deferred maintenance. | |
| Steady enrollment growth, combined with changing technologies, more interdisciplinary programs, and a growing research program have led to a significant space problem for the University. Insufficient or inadequate space has become a serious impediment to a growing number of academic programs. Penn State lags behind its peers in providing modern laboratory and classroom space for its academic programs. The University has the lowest overall space per FTE student of any public university in the Big 10. 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, funded by a portion of the tuition rate increases, to support this program. A total of $5,259,000 is included in the budget plan for 2004-05. | |
| Faculty and Staff Salary
Adjustments Comparisons with other Big Ten public universities and 22 public universities participating in the American Association of Universities Data Exchange (AAUDE) show that Penn States average faculty salary levels slipped substantially from 1995-96 to 2000-01. Because of concerns about the competitiveness of Penn States salaries, the Board of Trustees adopted a multi year plan to reduce the gap between Penn States faculty salaries and those at peer institutions. As a result, for 2001-02 and 2002-03, Penn States average faculty salaries showed modest improvement in these comparisons, and continued modest improvement is anticipated when comparisons for 2003-04 are available. There is still lost ground to be made up, however, so these efforts will need to be continued again for 2004-05. The University is making faculty and staff salary increases a high priority again in the 2004-05 budget plan. |
|
| The budget plan for 2004-05 includes $30,291,000 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 some additional funds for special merit, market and equity considerations from the President’s Excellence Fund and the Faculty/Staff Excellence Fund. | |
   |
|
| Academic Initiatives
and Other Program Needs The budget plan includes a total of $10,142,000 for academic initiatives and other program needs. In the last few years, Penn State has focused on four interdisciplinary initiatives that address important societal needs for the future, including the life sciences, materials science, environmental studies, and children, youth, and families. The budget plan includes a total of $450,000 to complete the multi-year commitment to provide a funding base for these initiatives. In addition, $1,000,000 is included for Information Sciences and Technology as the University completes its multi-year development plan for the School. |
|
| A total of $5,000,000 will be used to launch a series of high priority investments designed to enhance the University’s educational programs. These investments will include enhancements for key academic fields, interdisciplinary programs, and other strategic initiatives at all Penn State campuses, including the World Campus, and help to enrich student life experiences. They will | |
contribute further to the University’s long-standing efforts to support economic development and cultural enrichment in the Commonwealth. The balance of $3,692,000 will be allocated for new faculty positions and instructional workload adjustments that reflect enrollment changes in the academic colleges and for critical support services. |
  |
Libraries, Computing and Telecommunications The budget plan includes a total of $2,200,000 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 $15 per semester increase in the student information technology fee will provide the needed funds. |
|
| Internal Budget
Reductions and Reallocations For 2004-05, the University will continue a program of internal budget reductions and reallocations based on the strategic planning process. This will be the thirteenth consecutive year that this process has been in effect. A total of $5,639,000, or the equivalent of one percent in departmental operating funds will be reallocated within each college, campus, and support unit to meet their highest priority needs identified in their strategic plans. |
|
| Cost Savings/Enhanced
Income Initiatives Since 1992-93, the University has recycled nearly $110 million. These funds have been reallocated to help offset cost increases and to provide critically needed support for academic programs. Over the years, this has resulted in a significant shift of funds from non-academic to academic functions. The University has systematically eliminated or merged existing academic programs as it has added new ones. Penn State has one of the most effective continuous quality improvement programs of any university in the country. Nevertheless, the University is committed to finding new ways to reduce costs and enhance income from sources other than tuition. |
|
| Last year the University established a task force to explore opportunities for additional cost savings that will not adversely affect the academic quality of the institution. Cost savings and income enhancement strategies that are under consideration by the task force include: increased scrutiny of low enrollment and less centrally critical academic programs, possibly resulting in additional program mergers or closures; administrative cost efficiencies, including the prospects of further consolidation of administrative units; reduction of some support services; additional cost recovery on research grants and contracts; and reduction or elimination of subsidies for selected outreach and public service activities. Many of these efforts are long-term in nature, particularly as they relate to program reductions, administrative reorganizations, and changes in public service activities. | |
| As a result of the work
of the Cost Savings Task Force, $14,461,000 in savings and non-tuition income
enhancements were reflected in Penn States 2003-04 budget. For 2004-05, the
University has once again established a target of $2,500,000 in cost savings
and enhanced income beyond the on-going internal budget reduction and
reallocation program. Additional cost savings are anticipated in future years
as these initiatives are put into place. 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 $1,200,000 is included in the 2004-05 budget plan for need-based student aid. These funds will be used to leverage additional private donations for student support through the Trustee Scholarship Program. This represents the third year that funds have been included in the budget for this purpose. | |
| Student Activities
An estimated $162,000 will be generated from a $2 per semester increase in the student activities fee at University Park and a $1 per semester increase at all other locations. These funds will be made available to each campus for allocation by its campus student activities fee committee. |
|
| Next Section |
| Return to Table of Contents |