Friday,
September 15
Committee on Finance and Physical Plant
Agenda Item #17 |
| |
PENN STATE'S 2007-08
APPROPRIATION REQUEST
|
`
By any measure, Penn State is a sound
investment that pays important dividends to the Commonwealth of Pennsylvania
and the nation.
Penn State's nearly
500,000 living alumni contribute to every imaginable area of society, and
in Pennsylvania, their contributions to the Commonwealth's intellectual,
cultural, and economic prominence are immeasurable.
The value of a Penn State degree
continues to be widely recognized by Pennsylvania families. For 84,000
students matriculating at 24 campuses across the Commonwealth, Penn State
provides unparalleled access to knowledge and skills, social mobility, and
a bright future. This year Penn State received 94,000 applications for
admission (believed to be the most of any university in America).
Penn State ranks as one of the nation's
largest and best public research universities. The University's $700 million
research program, with most of this funding coming from sources outside
the Commonwealth, helps unfold new frontiers of knowledge, new products,
and new business. The discoveries, breakthroughs, and creative work by
Penn State faculty in fields as diverse as medicine, agriculture, engineering,
science, and the fine arts strengthen the Commonwealth's competitive economic
position and contribute measurably to the quality of life enjoyed by all
Pennsylvanians.
Penn State Outreach
activities reach half of the households in Pennsylvania with everything from
4-H and farm advice to continuing education and public broadcasting.
Within the Commonwealth, the University
does more to power the economy than any other enterprise in the state.
Penn State produces a collective statewide economic impact of more than
$6 billion annually and an induced impact of an additional $7 billion.
For every dollar that is invested by the Commonwealth, Penn State returns
$19.42 in total economic impact to the Commonwealth.
Penn State's 2007-08 budget request
reflects the University's need to keep pace with rapidly rising costs
associated with carrying out its Land-Grant, public university mission and
the need to continue providing access to high quality programs for students
across every region of the Commonwealth. Penn State seeks an appropriation
increase from the Commonwealth of $23,295,000, or 6.8 percent. Of this
amount, $17,567,000 is requested for the Educational and General line item
and $4,765,000 for the other line items. An increase of $963,000 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.
These funds will
be used to help support the University's basic operating cost increases,
with emphases on escalating health care costs, deferred maintenance and
facilities improvements, and modest faculty and staff salary adjustments.
If the Commonwealth is able to
support this request, the University would be able to keep its tuition
increase for the 2007-08 academic year well below average increases
throughout higher education. Indeed, Pennsylvania resident students
attending most Penn State campuses other than University Park would see
a rise in their tuition of only 3.8 percent, while those at University
Park would see a 4.8 percent increase.
Penn State takes its responsibility to be good stewards of the state's
resources seriously and ranks as one of the most efficient universities
in America. Over the past decade, the University has aggressively
trimmed budgets, producing $148 million in budget reallocations.
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. Since 1992, the University has merged or
eliminated 108 academic programs as it has added new ones. The
University will continue to cut and reallocate, however, inadequate
funding will negatively affect the University's continued ability to
provide the access and economic vitality so critical to the Commonwealth's
future.
Penn State's achievements
in teaching, research, and service are making life better in Pennsylvania.
Recent national rankings serve to highlight the University's
accomplishments. This August, Washington Monthly named Penn State the
3rd best University in America, based on how universities contribute
to the good of the nation.
Surely
there can be no wiser investment for the Commonwealth than to bolster
the resources available to Penn State. The budget request that the
University is submitting will make the University and the Commonwealth
partners in an effort to assure continued access and affordability for
the citizens of our state, while ensuring the level of quality that
Pennsylvania has come to expect from their Land-Grant University.
|
HIGHLIGHTS OF PENN STATE'S
2007-08 APPROPRIATION REQUEST
|
BASIC OPERATING COSTS:
- Faculty and Staff Salary Adjustments – Maintain competitive
faculty and staff salaries.
- Benefits and Insurances – Respond to rapidly escalating
costs for health care, retirement and insurances.
- Facilities – Provide for facilities cost increases,
including support for deferred maintenance projects, maintenance and
operation of new facilities, and fuel and utilities cost increases.
- Strategic Initiatives –
Address the most critical strategic academic initiatives.
|
APPROPRIATION
|
- The University is requesting an appropriation increase of $23,295,000.
Of this amount, $17,567,000 is requested for Penn State's Educational and General
line item, $4,765,000 for its other line items. Additional State and
Federal Medical Assistance funding of $963,000 also is requested for the
Milton S. Hershey Medical Center.
|
TUITION
|
- If the Commonwealth is able to provide these appropriation increases,
the tuition rate increase for Pennsylvania resident students would be 3.8
percent for students at Penn State's Commonwealth Campuses and 4.8 percent
at the University Park Campus.
|
|
| |
|
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 cost 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.
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. Since
1996-97, the University has permanently budgeted approximately $20.5 million
for deferred maintenance. More needs to be done, however, to address the
maintenance backlog. For 2007-08, additional support of $2,000,000 is
included for deferred maintenance.
Insufficient or inadequate space continues to be 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 peer university. 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
incorporated in the budget plan 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 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.
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 $148 million 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 University 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 sixteenth 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 projected 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.
|
|
