Friday, September 7
Committee on Finance and Physical Plant
Agenda Item #4 |
| |
PENN STATE'S 2008-09
APPROPRIATION REQUEST
|
When the General Assembly designated Penn State as
the Commonwealth's sole land-grant institution in 1863, the
legislature's vision went well beyond the establishment of
an educational institution; it created an enduring
partnership with the people of Pennsylvania. On every
account, this partnership has yielded exceptional returns
and extraordinary results.
Since its founding,
Penn State has conferred more than 610,000 degrees. In fact,
one out of every 115 Americans with a bachelor's degree
graduated from Penn State. For the more than 90,000 students
enrolling at 24 campuses across the Commonwealth and the
Penn State World Campus, the University provides
unparalleled access to knowledge and skills, social
mobility, and a bright future.
In addition, Penn State is now America's most
popular university, receiving nearly 99,000 applications for
admission in all its programs this past year. Moreover, of
students seeking admission to U.S. medical schools, one in
every six applies to Penn State's College of Medicine.
The University's research enterprise is among the most
comprehensive in the country. In materials sciences alone,
the pioneering innovations of our faculty impact areas as
diverse as computers, national defense, manufacturing,
energy, telecommunications, and medical technologies.
This year, Penn State's faculty will conduct $700
million of research, ranking the University among the
leaders worldwide and second in the nation for research
supported by industry. Within Pennsylvania, Penn State
conducts more industry-sponsored research than all other
colleges and universities combined.
Penn State continues to support the largest
outreach effort in American higher education, serving more
than five million people a year and reaching half of all
households in Pennsylvania. This effort extends beyond
agriculture to include health and wellness, alternative
energy, natural resource protection, national security,
business development, and leisure activities.
Within the Commonwealth, the University does more to
power the economy than any other enterprise in the state.
The collective statewide economic impact of Penn State's
activities is more than $6 billion annually, with 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 2008-09 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 $24,202,000, or 6.9 percent. Of this
amount, $18,287,000 is requested for the Educational and
General line item and $4,909,000 for its other line items.
An increase of $1,006,000 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 cost
increases, with emphases on competitive faculty and staff
salary adjustments, escalating health care 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 $163 million in budget reallocations.
These funds have been reallocated to help offset cost
increases and to provide critically needed support for
academic programs. We remain committed to continuing cost
containment and belt-tightening measures. However,
inadequate funding will negatively affect the University's
continued ability to provide the programs and services so
critical to the Commonwealth's future.
The
success of a university can be measured in many ways. The
richness, depth, and breadth of Penn State's efforts have
touched the lives of every Pennsylvanian. The budget request
that the University is submitting will make Penn State 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 they have come to
expect from their land-grant university.An increased
investment in this partnership 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.
|
HIGHLIGHTS OF PENN STATE'S
2008-09 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 the
maintenance and
operation of new facilities, fuel and utilities cost increases,
deferred maintenance and the capital improvement
program.
- Strategic Initiatives –
Address the most critical strategic academic initiatives.
|
APPROPRIATION
|
- The University is requesting an appropriation increase of $24,202,000.
Of this amount, $18,287,000 is requested for Penn State's Educational and General
line item, $4,909,000 for its other line items. Additional State and
Federal Medical Assistance funding of $1,006,000 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
4.9 percent for students at Penn States Commonwealth Campuses and
5.5 percent
at the University Park Campus.
|
| |
|
DETAILS OF PENN STATE'S 2008-09
BUDGET
PLAN AND APPROPRIATION
REQUEST |
The University's proposed budget plan for 2008-09
reflects basic operating cost increases of $81,401,000.
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 $24,202,000 for 2008-09 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
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 in the 2006-07 budget, however, resulted in
some decline in our rankings. The modest salary increase
plan implemented for 2007-08 will likely result in further
slippage.
The budget plan for 2008-09 includes
$39,594,000 for faculty and
staff salary adjustments and related employee benefits. The
plan includes a 2.5 percent increase in the salary pool for
merit-based increases, plus a 1.5 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. Health care costs have escalated dramatically over
the last several years - a trend which is expected to
continue for the foreseeable future. The University is
projecting an increase of 12.0 percent in 2008-09.
As discussed previously, Penn State has aggressively
pursued efforts to mitigate its health care costs. Beginning
January 1, 2008, the University will enter into a ten-year
agreement with Highmark, Inc. As part of this new agreement,
Highmark will be the exclusive administrator of all health
plans offered to Penn State's employees, dependents, and
retirees, allowing the University to offer a comprehensive
benefits plan across its geographically diverse locations.
This partnership with Highmark will provide 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 limit 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. In addition, funding will be required for changes
in the social security base. As a result of recent
legislation and actuarial projections, the employee
contribution rate for the State Employees' Retirement System
(SERS) is not expected to increase for 2008-09. It should be
noted, however, that the projections continue to show the
rates increasing significantly by 2012. This is an area of
concern for Penn State and the University continues to
monitor the situation closely. In total, benefits costs are
projected to increase by $22,614,000.In line with
national trends, the University is expecting additional
increases in property, liability, and workers' compensation
insurances. A total of $900,000 is projected for these
expected cost increases.
Facilities
A total of
$14,410,000 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 $2,079,000 for the
maintenance and operation of new or newly renovated
facilities. This includes operating funds for the Dickinson
School of Law Building, classroom and laboratory renovation
projects at University Park, a classroom building at Penn
State Worthington Scranton, the Community Arts Center at
Penn State Altoona, 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 $5,681,000 will be needed for these increases
at all campuses for 2008-09. 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 $22.5
million for deferred maintenance. More needs to be done,
however, to address the maintenance backlog. For 2008-09,
additional support of $3,000,000 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 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
incorporated in the budget plan for 2008-09.
Strategic Initiatives and Other Program Needs
The budget plan includes a total of
$7,946,000 for strategic initiatives and other program needs
at University Park and other campuses. Funding in the amount
of $3,000,000 is provided for strategic investments in
selected academic programs. A portion of these funds will
provide additional support for the energy initiative which
was initiated in 2007-08 through the Penn State Institutes
of Energy and the Environment. In addition, enhancement
funds will support high priority investments in a limited
number of other academic programs and the Huck Institutes
for the Life Sciences.
A total of $3,500,000 is included for other program
commitments. This amount includes funding for 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 $1,446,000 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
$1,402,000 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
over $163 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.
For 2008-09, the University is targeting $7,141,000 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 seventeenth 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
2008-09 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 $580,000 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.
INCOME CHANGES:
Income increases of $81,401,000 are projected for 2008-09.
This amount includes $51,645,000 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 in the Fall Semester
2006. It also includes $6,560,000 in other income.
Penn State is requesting an appropriation increase
totaling $24,202,000 which represents a 6.9 percent increase
on all line-item appropriations. Of this amount, $18,287,000
is requested for Penn State's Educational and General line
item and $4,909,000 for its other line items. An additional
$1,006,000 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 $10 per semester to support library
resources and student computing and telecommunication needs,
while the student activities fee will increase by $5 per
semester for students at all campuses.
|
|
