DETAILS OF
PENN STATE'S
2007-08
BUDGET
PLAN AND APPROPRIATION REQUEST
The University’s proposed budget plan for 2007-08 reflects basic operating cost increases of $78,810,000. 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 $23,295,000 for
2007-08 is summarized by line item in Table 2. Details of the University’s
proposed budget plan and appropriation request are discussed below.
BASIC OPERATING COSTS:
Faculty and Staff Salary Adjustments
Comparisons with other Big Ten public universities and 22 public research universities participating in the Association of American Universities Data Exchange (AAUDE) show that Penn State’s average faculty salary levels slipped substantially from 1995-96 to 2000-01. Because of concerns about the competitiveness of Penn State’s salaries, the Board of Trustees adopted a multi-year plan to reduce the gap between Penn State’s faculty salaries and those at peer institutions. As a result, since 2001-02, Penn State’s average faculty salaries showed improvement in these comparisons to the point where the ground lost in earlier years was recovered. The modest level of funding included for faculty and staff salary increases in the 2006-07 budget, however, will likely result in a drop in our competitive position.
The budget plan for 2007-08 includes $35,360,000 for faculty and staff salary adjustments and related employee benefits. The plan includes a 3.5 percent increase in the salary pool for merit-based increases and for market, equity, and compression considerations for groups or individuals within the unit.
Benefits and Insurances
Rising health care insurance costs continue to create challenges for both
employers and employees across the country. Health care costs have escalated
dramatically over the last several years — a trend which is expected to
continue for the foreseeable future. 
The University has aggressively pursued
health care costs containment measures, but despite these efforts, is still
projecting an increase of 12 percent in the coming year.
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 rate for the State Employees’ Retirement System is scheduled to increase again in 2007-08, and required contributions to TIAA/CREF will increase as the number of University employees participating in the program continues to grow. In addition, funding will be required for changes in the social security base. In total, benefits costs are projected to increase by $25,364,000.
In line with national trends, the University is expecting additional increases in property, liability, and workers’ compensation insurances. A total of $1,000,000 is projected for these expected cost increases.
Facilities
A total of $11,993,000 is projected for facilities cost increases. Included are funds for the maintenance and operation of new or newly renovated facilities, fuel and utilities cost increases, additional funds for deferred maintenance projects, and the continuation of the University’s capital improvement program.
Projected increases total $669,000 for the maintenance and operation of new or newly renovated facilities. This includes operating funds for the new University Health Services Building, and classroom and laboratory renovation projects at University Park, the Academic Commons Building at Penn State Wilkes-Barre, and an addition to the Multi-Purpose Building at Penn State Schuylkill.
Global and national events have had a dramatic impact on the cost of fuel and
utilities for the University. It is projected that an additional $5,674,000
will be needed for these increases at all campus locations for 2007-08.
Trends in the marketplace indicate that significant 
increases will continue
for electricity, coal, and natural gas in the future.
Insufficient or inadequate space has become a serious impediment to Penn State’s academic programs. The University lags behind its peers in providing modern laboratory and classroom space for its students, faculty, and staff. 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 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, and to provide for the operating costs of the buildings once they are completed. A total of $3,650,000 is included in the budget for 2007-08.
Strategic Initiatives and Other Program Needs
The budget plan includes a total of $8,995,000 for 
strategic initiatives and
other program needs. Funding in the amount of $3,000,000 is provided for
strategic investments at both University Park and other campus locations.
These funds will support new academic initiatives and special opportunities
identified in the University’s strategic planning process.
A total of $4,500,000 is included for other program commitments. This amount reflects funding for new faculty positions and for instructional workload adjustments that relate to enrollment changes in the colleges. In addition, funds will be provided for high priority academic needs and for other support services such as research administration, information technology services, and the university-wide parking and transportation plan.
The budget plan also includes $1,495,000 of additional programs 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.
Libraries, Computing and Telecommunications
A total of $1,300,000 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 $10 per semester increase in the
student information technology fee will provide the needed funds.
Internal Budget Reductions
Since 1992-93, the University has recycled $147,000,000 from departmental operating budgets. 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 Unviersity has systematically eliminated or merged existing academic programs as it has added new ones. In addition, Penn State has one of the most effective continuous quality improvement programs of any university in the country.
For 2007-08, the University is targeting $7,143,000 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 16th 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 $500,000 is included in the 2007-08 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 $1,300,000 will result from an $11 per semester increase in the student activity fee at University Park and a $10 increase at all other locations. At University Park, $1 of the increase reflects the final year of a five-year plan to help fund the new University Health Services Building currently under construction. The remaining $10 per semester increase at University Park and the entire increase at other campus locations will be used to support student activities and programs at the generating campuses.
Income Changes
Income increases of $78,810,000 are projected for 2007-08. This amount includes $52,676,000 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 for the Fall Semester 2006. It also includes $3,802,000 in other income.
Penn State is requesting an appropriation increase totaling $23,295,000, which represents a 6.8 percent increase on all line-item appropriations. Of this amount, $17,567,000 is requested for Penn State’s Educational and General line item and $4,765,000 for its other line items. An additional $963,000 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 3.8 percent and 4.8 percent for students at the University Park Campus. The information technology fee will increase by $10 per semester to support library resources and student computing and telecommunication needs, while the student activities fee will increase by $11 per semester for students at University Park and $10 per semester at the other campuses.
