document provides a summary of the work of the Tuition Task Force. It is
presented in a "bullet" format, and divided into seven sections: Charge to the
Tuition Task Force; Background Information and Analysis; Five-Year Budget
Projections and Tuition Requirements; Possible Tuition Models; Conclusions and
Recommendations; Prospective Tuition Levels; and Summary. Additional
information is provided in the attached exhibits, which are referenced at
appropriate points throughout the report.
|CHARGE TO THE TUITION TASK FORCE (Exhibits, Tab A)
- The Tuition Task Force was asked by President Spanier to
consider realistic projections of a range of tuition increase options that may
be necessary over the next five years to support the continued competitiveness
of the University as a premier institution.
- Commonwealth appropriations have become a progressively
smaller share of Penn State's budget for several decades. This situation is
also typical of public universities in other states. Public sentiment is
generally reflected in policies and practices that keep state taxes low in the
face of rising costs for high-priority and mandated needs. Public perceptions
have shifted in recent decades from a view of higher education as a social good
toward higher education as a private investment with high returns to the
individual. Funding in Pennsylvania and many other states has shifted toward
need-based direct support of students rather than base institutional
- The University has faced significant cost increases for
salaries, benefits, capital improvements and maintenance, information
technology and library resources, regulatory compliance, and other cost
- Despite significant and continuing cost-cutting measures,
Penn State has had to increase tuition for many years in order to remain
competitive with peer institutions in terms of the quality of educational
experience it provides.
- All three of these trends are likely to continue for the
duration of the next five-year planning period.
- Despite current economic challenges in their states, many
of Penn State's Big 10 counterparts are making significant investments in new
faculty positions and launching new initiatives to enhance the competitiveness
of their academic programs. These initiatives are being supported through
substantial increases in tuition.
| Academic Quality
| Comparative rankings of
universities are difficult, if not impossible, to determine with precision. The
methodology of most rankings strongly favors private universities, particularly
those that are highly endowed and have far more financial resources to spend
per student than the typical public institution. Although we may regard the
methodologies and specific outcomes of particular rankings as debatable, there
are elements of the data and findings in these reports that should not be
U.S. News and
World Report's America's Best Colleges, 2002 Edition is one of the most
widely followed publications which includes rankings for national doctoral
universities in overall academic quality. Three important components of these
rankings are: (1) academic reputation; (2) faculty resources a
constructed measure of faculty compensation, percent of faculty with terminal
degree, percent of full-time faculty, student/faculty ratio, and class size;
and (3) financial resources the average educational expenditures per
student. Data from the report show the following:
- None of the top 50 national universities had nearly as
wide a gap between its rankings of academic quality and faculty resources as
did Penn State. Only six (none of them Big 10 public institutions) had
wider gaps between the rankings of academic quality and financial resources.
- In this survey, 19 of the top 20 universities are private
institutions, reflecting the greater weight given to institutional wealth as
measured by endowment, spending per student, faculty salaries, and annual
contributions from alumni and others. The highest-rated public institution, the
University of California at Berkeley, is ranked number 20.
- Penn State's overall ranking is 46th among the top
private and public doctoral universities in the nation. Only three other Big 10
public universities Michigan, Wisconsin, and Illinois are
included in the top 50. Among public institutions only, Penn State ranks
- Penn State's rank for academic reputation is even higher
than its overall ranking, in a tie for 37th. At the same time, Penn
State ranks 188th in faculty resources, and 81st in financial
resources. In fact, Penn State operates with fewer financial and faculty
resources than any of its counterparts among the top 50 institutions.
- In contrast, rankings for the other Big 10 universities
included in the top 50 are:
- Michigan ranked 25th in overall quality, 52nd in
faculty resources, and 42nd in financial resources;
- Wisconsin ranked 32nd in overall quality, 63rd in
faculty resources, and 57th in financial resources; and
- Illinois ranked 36th in overall quality, 127th in
faculty resources, and 66th in financial resources.
- These large gaps between Penn State's high academic
ranking and poor rank in resources are strong indicators of efficiency; i.e.,
they demonstrate that the University maintains high academic quality with
relatively few resources. On the other hand, they also demonstrate that the
university cannot hope to improve its standing with respect to academic quality
without a commensurate increase in resources. Indeed, Penn State will probably
have difficulty sustaining its current ranking with existing levels of
|Underfunding Penn State's Most Serious Problem
(Exhibits, Tab B)
| Penn State is seriously
underfunded in comparison with its peers, both nationally and within the
Commonwealth of Pennsylvania. This underfunding manifests itself in virtually
all University activities, from the number of faculty in the classrooms to the
number of staff who support the academic enterprise. It is a testimony to the
efficiency with which Penn State operates that it is able to provide a high
quality education despite the following resource-based conditions:
Extent of Underfunding
- In 1970-71, the Commonwealth appropriation represented
36.5 percent of Penn State's total budget, and tuition represented 20.8
percent. By 2001-02, the appropriation had declined to 14.6 percent, and
tuition had increased to 29.4 percent.
- The University's general funds budget supports most of
the teaching, research, and service activities as well as academic and
administrative support functions and maintenance of the physical plant. The two
primary sources of income are the state appropriation and student tuition. The
change in the proportions represented by each source are even more dramatic in
the general funds budget than in the total budget. In 1970-71, the
appropriation represented about two-thirds of the general funds budget and
tuition income represented about one-third. In 2001-02, the appropriation now
represents only one-third, while tuition represents about two-thirds.
- Penn State's appropriation per full-time-equivalent (FTE)
student is significantly lower than that of any other public university in
- Penn State's appropriation per FTE student is the lowest
in the Big 10.
- One of the best comparative measures of overall resources
available to an institution is total expenditures per full-time-equivalent
student. Penn State's total expenditures per FTE student are the lowest of any
of the Big 10 public universities.
Consequences of Underfunding
- Penn State's tuition rate is the highest of the Big 10
- Penn State has the highest student-faculty ratio and the
highest average undergraduate class sizes of any public university in
- In comparison with peer institutions, Penn State's
average faculty salaries have slipped substantially since 1995-96. Compared
with Big 10 public universities, Penn State's rank at the professor level
dropped from 2nd in 1995-96 to 5th in 2000-01. At the associate professor
level, our rank dropped from 2nd to 6th, while at the assistant professor
level, it moved from 8th to 7th. In addition, Penn State's average faculty
salaries are considerably below the private institutions belonging to the
Association of American Universities (AAU), and the gap is growing. At the
professor level, for example, the gap of $13,600 in 1995-96 has grown to
$19,900 in 2001-02. Similar changes have occurred at the associate and
assistant professor levels.
- An increasing number of the University's faculty
positions are fixed-term faculty those faculty hired on temporary
appointments, usually one year in duration or part-time faculty. The
University has made it a priority in its budget planning over the past five
years to increase the number of faculty positions. Although a total of 601 net
new full-time faculty positions have been added since Fall 1996, three-fourths
of these added positions have been fixed-term faculty, rather than tenured or
tenure track positions because sufficient funding and funding flexibility have
not been conducive to long-term commitments.
- The University Libraries at Penn State rank 8th out of 10
among the Big 10 public universities in number of professional staff per
- 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
Need for Additional Funds
- Maintaining the quality of education that Penn
State delivers while having the fewest resources available per student is an
indication of the University's overall efficiency and effective management at
all levels. This low level of resources per student is not a benchmark
point, however, to which the University should aspire.
- The University's current and future efforts to
enhance the quality of its teaching, research, and service missions will depend
largely upon the ability to secure sufficient financial resources. Failure to
do so would undoubtedly preclude us from improving or even maintaining
Penn State's standing as a world-class university.
- Additional program investment funds are required
additional full-time, tenure-track faculty to reduce class sizes and the
student/faculty ratio; to provide competitive start-up packages and
"bring-to-market" salary augmentation for filling vacated faculty
to modernize classroom and
laboratory facilities; to address growing deferred maintenance
Academic and Support Programs:
to sustain the
University's critical academic and administrative support programs and systems;
to seed and stimulate emerging new areas of education and research,
including the adequate support of interdisciplinary initiatives;
Libraries and Technology:
to further develop library
to provide life-cycle funding for necessary technology
improvements in teaching and learning, research, and
to enhance student life and learning
to provide more competitive stipends to attract the
very best graduate students; Outreach:
to improve educational
programming, services, and technology transfer to citizens and businesses of
- Additional salary funds are required to stop the slippage
in Penn State's faculty salary rankings and begin to recover lost ground.
- The University will continue its efforts to secure
additional state support. However, the Commonwealth is facing significant cost
increases for basic education, welfare and unemployment, Medicaid and health
care costs, retirement system funding, and other items. It is not likely,
therefore, that state appropriations in Pennsylvania will increase at a
sufficient rate to provide the necessary resources needed to maintain or
improve the University's academic quality.
Regarding Tuition Policies and Practices
Tuition Task Force was guided in its work by the following general principles
regarding tuition policies and practices:
- In accordance with Penn State's land-grant mission,
tuition should be held to the lowest level consistent with continually
enhancing the academic quality of the University.
- The University should seek new ways to operate even more
efficiently in order to help minimize the necessary tuition rate
- Tuition increases should be devoted to achieving the
University's strategic goals and should provide incentives for students to
accomplish personal goals in a timely manner.
- Tuition increases should be sufficient to improve the
University's competitive position for recruiting and retaining top-quality
faculty and staff, maintaining first-rate facilities, and improving the
teaching and learning environment for Penn State students.
- The University should be sensitive to the economic
climate, but University tuition strategy should be principled and take a
- Tuition policies and practices should be set in the
context of market considerations in higher education, policies of peer
institutions, and the competitive environment of various Penn State
- Penn State should continue to maintain many points of
student access through its multi-campus system.
- The schedule of tuition rates should be as simple and
understandable as possible.
- The use of mandatory student fees should continue to be
- Affordability should be preserved by maximizing the
amount of grant, loan, and scholarship aid available to students.
|Student Demand for a Penn State Education (Exhibits,
- Student interest in a Penn State education is
strong. Over the past three years, total applications for admission to Penn
State have been at record levels 75,051 in 1999-2000, 78,500 in 2000-01,
and 76,167 in 2001-02.
- The yield rate for freshmen baccalaureate offers to paid
acceptances for the University Park campus has been in the 39-41 percent range
for each of the last five years, while the number of entering freshmen for
summer and fall has increased from 5,224 in 1997 to 6,279 in 2001.
- The yield rate for freshmen baccalaureate offers to paid
acceptances for the other campus locations has been approximately 42 percent
for each of the last five years. The number of entering freshmen for summer and
fall has been relatively stable over this period 6,805 in 1997 and 7,006
- While the overall yield rate for the campus colleges has
remained consistent at about 42 percent, the recruitment effort required to
produce this rate is significantly higher at some campuses than at University
- Total enrollment is on target with the University's
enrollment management plan, with modest increases since 1997. In that year,
enrollment at all Penn State locations was 78,956, while in 2001 it was 81,704
a three percent increase over five years.
|| At University Park, enrollment is
virtually the same in 2001 (40,828) as it was in 1997 (40,471).
Modest enrollment growth has taken place at the campuses, with total
non-University Park enrollment increasing from 38,485 in 1997 to 40,876 in
2001, or just over one percent per year for the five-year period.
|Tuition and Appropriation History (Exhibits, Tab
- As shown in Exhibit D-1, Penn State has had to face
significant tuition increases over the last 30 years. In 11 of the 30 years,
tuition increases have been 9 percent or more. The conditions that led to these
increases have varied over the years. Inflation was a factor in the late 1970's
and 1980's, as was the fact that the state appropriation did not keep pace with
inflation or with Penn State's enrollment growth. During the 1980's, tuition
increases averaged nearly 10 percent. Since 1995-96, tuition increases have
been more modest, averaging 5.2 percent per year.
- When adjusted for inflation, Penn State's tuition rate
for undergraduates at University Park has doubled in constant dollars from
1970-71 to 2001-02.
- The state appropriation per full-time-equivalent (FTE)
student, on the other hand, has decreased in constant dollars by over 46
- The combination of the tuition rate and the appropriation
per FTE student represents a surrogate of the total dollars per FTE student the
University has to spend. Since 1970-71, in constant dollars adjusted for
inflation, this combination has increased only 4.9 percent. In other words,
Penn State's purchasing power per student is virtually the same in 2001-02 as
it was 30 years ago. This is a remarkable fact considering the higher
expectations of students and parents along with the increased costs associated
with technology advancements, environmental compliance, ADA, increased student
services, library materials, and major maintenance.
- The Governor's recommended budget for Penn State for
2002-03 includes a reduction in the University's appropriation of 5 percent, or
$16.7 million. When adjusted for inflation, the Governor's recommended budget
for next year would set Penn State back $35 million in purchasing power from
the 1995-96 appropriation level.
|Comparisons of Big 10 Public University Tuition Rates
(Exhibits, Tab F)
- Penn State's 2001-02 resident undergraduate tuition and
mandatory fees of $7,396 are the highest among the Big 10 public universities,
or 49.2 percent above the average of $4,958 for the other nine
- Penn State's 2001-02 non-resident undergraduate tuition
and mandatory fees of $15,522 ranks 3rd in the Big 10, or 4.7 percent
higher than the average of $14,832 for the other nine institutions.
- For 2001-02, tuition increased at the Big 10 public
universities by an average of 10.0 percent, ranging from a high of 18.4 percent
for freshmen at the University of Illinois to 6.5 percent at the University of
Michigan. Penn State's increase for 2001-02 was 7.76 percent.
- Several Big 10 public universities have announced their
intention to increase tuition in the 10-20 percent range for the coming
|Comparisons of Pennsylvania Public University Tuition
Rates (Exhibits, Tab G)
- Penn State's 2001-02 resident undergraduate tuition and
mandatory fees of $7,396 are comparable with those of the University of
Pittsburgh ($7,482) and Temple University ($7,324).
- Tuition for other public universities in the Commonwealth
is considerably less than that of the state-related universities. 2001-02
tuition and mandatory fees for institutions in the State System of Higher
Education range from $4,671 to $5,204, with an average of $4,982.
- For 2001-02, the University of Pittsburgh increased
tuition by 7.5 percent, and Temple University's increase was 4.9 percent. The
State System of Higher Education increased undergraduate tuition by 5.9
percent, and graduate tuition by 11.2 percent. By comparison, Penn State's
tuition increase for 2001-02 was 7.76 percent.
and Differential Tuition
- Laboratory surcharges were instituted for upper division
and graduate students in engineering programs in the College of Engineering and
the College of Earth and Mineral Sciences in 1985. Since that time, laboratory
and clinical surcharges have been expanded to include the Eberly College of
Science, Architecture, Landscape Architecture, and Nursing. The most recent
surcharge, which was approved in July, 1999, is for upper division and graduate
students in Information Sciences and Technology and related programs. The base
surcharge is $538 per academic year, while the IST and related-program
surcharge is $1,500 per year.
- For many years, Penn State had no mandatory student fees.
In 1990-91, faced with rapidly increasing technology costs and limits on
tuition increases imposed by the Commonwealth, an information technology fee
was instituted for all students. The fee is currently $260 per academic year.
In 1996-97, at the request of student government leaders, a student activities
fee was approved, with the funds made available to student organizations and
activities at the generating campuses. The fee, which varies by campus,
currently ranges between $62 and $82 per academic year.
- Differential tuition by student level was introduced in
1997-98. Somewhat higher tuition rates for upper division undergraduate
students and graduate students were implemented over a three-year period. The
current differential between lower division and upper division undergraduate
students at University Park is $356 per year. Differential tuition for upper
division and graduate students in the College of Business Administration was
approved in 2000-01.
|Student Aid (Exhibits, Tab H)
- In 2000-01, Penn State students received a total of $482
million in student aid from federal and state grants, loans, and institutional
and private sources.
- An analysis of full-time degree-seeking undergraduate and
graduate students in Fall 2001 (excluding Hershey, Dickinson, and Penn College)
||Undergraduate and Graduate (59,724 full-time
55 percent (32,654) receive some tuition
reduction from grants or scholarships.
30 percent (9,903) of
the 32,654 students who receive some reduction receive a full
reduction in tuition.
Undergraduate only (55,077):
percent (29,369) receive some tuition reduction from grants or
23 percent (6,752) of the 29,369 who receive
some tuition reduction receive amounts at least equal to their
full tuition charges.
50 percent (14,755) of
the 29,369 who receive some tuition reduction receive a reduction of 60
percent or more.
Graduate only (4,647):
percent (3,285) receive some tuition reduction from grants or
96 percent (3,151) of the 3,285 graduate
students who receive some reduction receive a full reduction in
- Private fund raising has become increasingly
important in providing student scholarship support. In 1996, 3,268 awards for
$6.1 million were supported through endowed scholarships and annual giving
funds. By 2000, these figures had grown to 4,632 awards for $12.1 million.
Funds from endowed scholarships will increase significantly over the next
several years as gifts through the Grand Destiny Campaign are received and
- The Task Force analyzed the amount of student aid
received and the unmet needs for full-time undergraduate students by family
income level for 2000-01. Students were grouped into three categories: (1)
Pennsylvania resident students commuting to one of Penn State's campuses; (2)
Pennsylvania residents living in residence halls or equivalent housing in the
immediate area; and (3) Non-Pennsylvania residents living in residence halls or
equivalent housing. In this analysis, "unmet need" is the balance of the direct
costs of tuition, room, and board after considering grants, scholarships,
federal Stafford and Perkins loans, and the expected family contribution. As
might be expected, the unmet need was greatest for families with reported
incomes of $65,000 and under. There were, however, significant differences by
type of student:
|| The unmet need for commuting
students averaged $170.
The unmet need for resident students living
on campus averaged $1,200.
The unmet need for non-resident students
living on campus averaged $6,450.
||These data indicate that
campuses other than University Park continue to be important points of access
to Penn State, especially for commuting students. They also indicate that if
significant tuition increases are implemented, additional University student
aid would be needed to help mitigate the increased costs for the neediest
- None of these figures include the possible benefits
families could receive through tuition tax credits for higher education. The
Hope Tax Credit and the Lifetime Learning Tax Credit, which were part of
Taxpayer Relief Act of 1997, are geared to middle-class families to assist in
making college affordable. Credits of up to $1,500 are available in the Hope
program and up to $2,000 (beginning in 2003) in the Lifetime Learning Program.
The Deduction for Higher Education was part of the most recent tax relief
package passed in 2001, and will begin in the 2002 tax year. A percentage of
the first $3,000 in tuition and fees is eligible for credit.
- The median debt for Penn State students who have debt
upon completion of their baccalaureate degrees in 1999-2000 was approximately
$17,125. A recent national survey regarding student borrowing, released by the
American Council on Education (ACE), indicates that the median amount borrowed
by bachelor's degree recipients in 1999-2000 was $15,375 at public
institutions, and $17,250 at private colleges and universities.
- ACE has concluded that borrowing is still an excellent
investment for students, considering the potential increase in their lifetime
earnings with a college degree. The added lifetime earnings that accrue to the
typical holder of a baccalaureate degree have been estimated at $1 million,
while the added earnings to those with a graduate or professional degree can
reach $3 million.
| Benchmarking studies in
virtually every administrative area show that Penn State ranks at the top of
our peer group in administrative efficiency, delivering the same services for
less cost. Some examples include:
- The University's Facilities and Administration (F&A)
rate for recovering indirect costs on research grants and contracts is the
lowest in the Big 10, reflecting lower administrative costs at Penn State than
most peer institutions. In a 1999-2000 survey of 136 universities receiving
federal grant and contract funding, Penn State ranked 130th in the overall
F&A rate and 132nd in the administration rate, a component of the overall
- Another aspect of administrative costs is demonstrated by
the ratio of the number of staff to number of faculty members in an
institution. Penn State has a ratio of 2.6 staff for each faculty member, which
ranks 9th out of 10 for Big 10 public universities. The average for the Big 10
is 3.2 staff per faculty member.
- The University Libraries at Penn State has increased
access to information resources at a faster rate than the average of the
Association of Research Libraries (ARL) institutions. From 1989-99, serials
titles increased by 9 percent at Penn State while they collectively dropped by
6 percent in other ARL member libraries; book titles added increased by 29
percent at Penn State while the ARL average dropped by 26 percent; and access
to electronic resources increased at nearly twice the rate as the ARL average,
thereby providing a wealth of information resources to Penn State students and
faculty on-line regardless of location.
- Penn State's costs to administer student aid programs on
a per-student basis are the lowest in the Big 10.
- The industry standard nationally in higher education for
cost per gift-dollar raised ranges from $0.08 to $0.16. Penn State's
fund-raising cost per dollar is at the low end of this range at $0.10.
- Penn State uses its available space very efficiently.
Among its Big 10 public counterparts, Penn State ranks 7th, 9th, and 9th
respectively in the number of square feet per student for classrooms,
instructional laboratories, and research laboratories. Penn State ranks 10th
out of 10 in overall space per student.
- Penn State employs continuous quality improvement (CQI)
to enhance administrative services and to reduce costs. Approximately 400 CQI
teams have identified ways to improve processes and increase customer
satisfaction, saving millions of dollars for the University over the past few
- Buying consortia and negotiated purchasing agreements
save Penn State millions of dollars annually. Examples include: $2.3 million
per year in software licensing agreements; $2.0 million in personal computers;
$750,000 for express package deliveries; $515,000 for scientific and office
supplies; $544,000 for travel and car rental; and $725,000 for audio visual
|Efficient Use of
| Through the strategic
planning and budget process, Penn State has taken aggressive steps for many
years to reduce costs and to create more effective and efficient ways of
operating while preserving academic quality.
- The University continuously and carefully reviews
expenditures to minimize tuition increases to the extent possible. We are
committed to following that practice in the future.
- Since 1992-93, Penn State has recycled over $87 million,
or 12 percent of its departmental operating budgets, for reallocation to areas
of higher priority or need.
- Throughout this ten-year reallocation process, the
University has shifted funds from administrative functions to support teaching,
research, and service; moved resources to the most promising and effective
programs; and eliminated duplication in programs and services.
- From 1996-97 to 2000-01, about $3.75 was added to
academic units for every $1.00 of budget recycling. This includes reallocated
funds plus any additional program funds that were available during that period.
On the administrative side, only $0.54 was given back for every $1.00 taken
through budget recycling.
by Location and Student Level
| Periodically, the
University undertakes a study to determine educational costs by location and
student level. To assist the work of the Tuition Task Force, this study was
completed in Fall 2001 using the latest available actual expenditure and income
data from 1999-2000. Following are the major findings of this study as they
relate to tuition considerations:
- The total educational and general (E&G) cost
per FTE student in 1999-2000, excluding the College of Medicine, the Dickinson
School of Law, and Penn College, is $12,135.
- The E&G cost per FTE student at University Park is
slightly higher, at $12,472. The cost per student at the other campus locations
varies based on campus type. Harrisburg and Great Valley, with primarily upper
division and graduate education missions, are somewhat higher than University
Park. The other campus locations, with primarily undergraduate education
missions, are somewhat lower than University Park.
- Non-resident students are more than covering the cost of
their education through the tuition they pay. In 1999-2000, for example,
out-of-state students at University Park paid an average of $13,596, compared
with the University Park E&G cost of $12,472. When all campuses are
included, non-resident students are paying an average of $13,076, compared with
a total E&G cost of $12,135.
- Looking at instructional costs by student level, many
state funding formulas across the nation use a ratio of 2:1 for the cost of
upper division compared with lower division, and 5:1 for graduate instruction
compared with lower division. Penn State's cost analysis shows ratios which are
close to this norm: 1.8 to 1 for upper division instruction, and 4.5 to 1 for
BUDGET PROJECTIONS AND
determine what level of appropriation and tuition increases might be necessary,
the Task Force estimated the University's potential average annual expense and
income increases over the next five years. On the expense side of the budget,
the primary cost drivers behind the increases in the budget include personnel
costs for salaries and employee benefits, facilities, program needs,
information technology and library materials, and student aid. On the income
side, the primary factors are the state appropriation and student tuition and
To project the
University's budget requirements, the Task Force developed a number of budget
scenarios using the best estimates for each of several expense and income
categories. On the expense side, certain projected increases, such as benefits
cost increases, facilities costs, and critical academic and support program
needs were common to all of the scenarios. The primary expense variable was the
level of personnel cost increases for faculty and staff. On the income side,
the Task Force considered varying projections for changes in the state
appropriation. The level of tuition and fee increases required to balance each
of the scenarios was then determined.
|Five-Year Budget Projections (Exhibits, Tab I)
| EXPENSE CHANGES:
- Personnel Cost Increases the budget
projections assume a continuation of the plan initiated in 2001-02. This
includes base salary adjustments plus one percent each for the President's
Excellence Fund and the Faculty/Staff Excellence Fund. The Excellence funds are
based on the filled position salary base for faculty and staff. Three levels
were tested and evaluated as to their possible effect on Penn State's faculty
salary rankings with peer Big 10 public institutions, as follows:
- Peer average - a base salary adjustment of 3
percent plus 2 percent for the Excellence Funds, which would likely maintain
Penn State's current ranking.
- Peer average plus 1 percent catch-up - a base
salary adjustment of 4 percent plus 2 percent for the Excellence Funds, which
would likely improve Penn State's current ranking over the five-year
- Further slippage - a base salary adjustment of
2 percent plus 2 percent for the Excellence Funds, which would likely result in
further slippage in Penn State's ranking.
- Benefits and Insurances Cost Increases
health care insurance increases averaging approximately 16 percent over the
five-year period are included. The budget projections also include providing
health care benefits for graduate assistants and fellows and their families
that correspond with benefits provided to faculty and staff. Retirement cost
increases reflect continued growth in the number of employees participating in
the TIAA/CREF retirement program over the five-year period. In addition,
provisions are made for possible increases in the SERS employer contribution
rate. This would bring the permanent budget for SERS up to 11 percent, or the
new "normal rate." (Note: the current SERS rate is 0.69 percent, but provisions
are included in the current permanent budget for a employer contribution rate
of up to 4.6 percent.) In line with national trends, significant cost increases
are reflected for property and liability insurances.
- Facilities the commitment to provide
additional funds for deferred maintenance at $1 million per year is continued
in each year of the plan. The current Capital Improvement Program has three
full years and one partial year remaining to fund debt service for the planned
$180 million capital program. Funds also are included for new and newly
renovated facilities scheduled to come on line during the planning period, plus
modest increases in fuel and utilities costs.
- Program Needs
- Academic initiatives - includes
completing the funding commitments over the next three years for the Life
Sciences, Materials Science, Environmental Studies, and Children, Youth, and
Families consortia. Funds are also included at approximately the same modest
level for future new initiatives as commitments to the current programs are
- Program investments - funds totaling $6
million per year have been included for program investments. This level of
program investment funding would permit the University to move forward modestly
in its academic programs. The funds would be used for: new faculty positions;
start-up packages and salary augmentation for replacement positions; more
competitive graduate assistant stipends; seed funds to stimulate emerging new
fields; funds for selected expansion of four-year degree programs at campus
locations; facilities modernization; life-cycle funding for leading-edge
technology improvements; enhanced outreach; and support for mission-critical
academic and administrative support systems.
- School of Information Sciences and Technology
(IST) The budget scenarios include $1 million per year to
complete the funding for the new School of IST. Note that the University's
state appropriation request includes a request for additional funds for IST. If
these funds are received from the Commonwealth, the amounts reflected in the
scenarios would be reduced accordingly.
- Libraries and Information Technology
$2 million per year for library information resources and student
computing and telecommunications needs will be provided from a $15 per semester
increase each year in the Information Resources and Technology Fee.
- Other Priority Needs $1.5
million per year has been included for continuing priorities such as
President's Opportunity funds, instructional workload funds, and the parking
and transportation program.
- Budget Reductions, Reallocations, and Enhancements
the equivalent of one percent per year in departmental operating funds
will be reallocated within each college, campus, and support unit as part of
the strategic planning process.
- Student Aid a total of $1.2 million per
year has been included for need-based student aid to help mitigate the effects
of tuition increases.
| INCOME CHANGES:
- State Appropriation Educational and General
(E&G) appropriation changes from the Commonwealth are included at -5
percent, -3 percent, 0 percent, +2 percent, and
+4 percent. No special line-item funding is assumed in the plan.
- Tuition academic-year income from the
tuition rate increases is included in each of the scenarios.
- Tuition - Summer Session Summer Session
income from previous year tuition rate increases is included in each of the
- Information Resources and Technology Fee
includes an increase of $15 per semester for each year of the five-year
- Enrollment-Related and Other Income Changes
this includes income from enrollment changes, increases in facilities and
administration cost recovery (indirect costs), and/or investment income.
to Balance Budget Scenarios
| A total
of 15 five-year budget scenarios resulted from using the income and expense
assumptions listed above. In the table that follows, we summarize the average
annual tuition and fee increases required to balance the budget scenarios at
the 3 levels of personnel costs and 5 levels of state appropriation changes.
- It can be seen from the table, for example, that
average annual tuition and fee increases of 14.7 percent would be required if
the appropriation was cut 5 percent and the personnel cost increases included a
1 percent catch-up with peer institutions.
- At the other end of the scale, if the appropriation
increased by 4 percent and personnel cost increases were below the peer
average, tuition and fees would need to increase by 7.8 percent.
- Mid-range scenarios, with either no change or a modest 2
percent increase in appropriation and personnel cost increases at the peer
average, still require increases of 10 to 11 percent.
Tuition and Fees Increases Required to
Balance 5-Year Budget
| The Tuition Task Force studied
the following possible tuition models as a means to generate the increased
tuition revenues required over the next five years:
- Incremental increases.
- One-time, significant increases for all students,
followed by more modest annual increases.
- Significant increases for incoming freshmen, with more
modest increases for continuing students.
- Expanded differential tuition by student level and by
Disadvantages of Possible Tuition Models
| The following is a summary of
some of the advantages and disadvantages of the four possible tuition models
identified by the Task Force:
|| tuition increases can be adjusted each year to meet
economic conditions and University needs.
|| no students receive disproportionately large increases
in any one year.
|| this option does not constitute a significant
departure from historical practice.
|| the incremental increases likely would need to be
significantly higher than inflation.
|| this option may not provide sufficient income to move
the University forward.
|| over time, annual higher-than-inflationary price
increases would be a more significant problem for campus college locations
whose competitors are local and regional institutions.
- One-time, significant increases for all students,
followed by more modest annual increases:
|| this option would provide immediate inflow of income
to address the University's needs.
|| it would accomplish the change in the tuition
|| a large portion of the new funds would be generated
immediately, while the best solution to addressing the University's program
needs would be more gradual increments over a period of time.
|| new funds would be committed initially, making it
potentially difficult to keep to inflationary increases in future years.
|| this option impacts current students more than the
|| it also has the greatest potential impact on access.
Student aid becomes an even more significant issue.
|| reaction by students and the public would likely be
the most severe for this option.
|| it would have a deleterious impact on the campus
locations, and perhaps price them out of the market compared with their local
and regional competitors.
- Significant increases for incoming freshmen, with more
modest annual increases for continuing students:
|| incoming freshmen can be advised of the increase
before making the decision to come to Penn State.
|| continuing students would experience more modest
increases, similar to those they have experienced in the past.
|| income from this plan would be spread out over a
four-year period, providing more effective use of the funds.
|| it can provide the funds to move the University
forward if the freshmen increase and the following annual increases are
|| this option would have an impact on accessibility for
new freshmen. Student aid would be an important issue.
|| it could be a serious problem for campus locations,
causing their prices over time to outstrip local and regional competitors.
- Expanded differential tuition by student level and by
|| expanded differentials between University Park and
other campuses would be the best solution to address the price competitiveness
issues facing the campus locations.
|| pricing at University Park could reflect the demand
and elasticity of prices at that campus.
|| further differentials by level would better reflect
the costs of upper division and graduate education.
|| the basis for further differentiation by location and
level was established in the earlier study by the University Planning Council
|| differentiation by level and location can be
implemented in conjunction with any of the other three alternatives.
|| expanded differentials could be an inhibitor to free
movement within the Penn State system. For example, the tuition increase from
the sophomore level at a campus to the junior level at University Park would be
|| under the cost center budget model, it will be
necessary to insure that each location covers its basic cost increases through
tuition and appropriation increases.
|| many times, students and parents do not understand
the differences in cost among locations, often associating lower cost with
|| students also do not always understand price
differences by student level.
|CONCLUSIONS AND RECOMMENDATIONS
| Following an extensive
review of the background information, potential five-year budget scenarios, and
tuition income requirements, the Tuition Task Force has reached two
- Strong student demand for admission and significant
tuition rate increases by peer institutions suggest that tuition adjustments
can be implemented, particularly at the University Park campus.
- Flexibility to adjust tuition is more limited at some of
the campuses other than University Park due to local economic conditions,
student demand, and the pricing policies of competing regional
| Considering the
advantages and disadvantages of several possible tuition models, the Task
Force endorses the following two overarching recommendations:
- The tuition model adopted by Penn State should be a
combination of increased tuition differentials by campus location and by
student level, and incremental increases as needed to generate the funds
necessary to meet the University's budget requirements.
- Higher tuition should be phased in beginning with
incoming freshmen, rather than substantial increases for current continuing
|Changes in Tuition Differentials
by Campus Location
- Differential tuition increases should be considered
by campus location and type. The Task Force considered three possible campus
groupings for further differentiation of tuition levels, as follows:
- Option A: There could be two basic
undergraduate tuition rates among the various Penn State campuses: (1) the
University Park rate; and (2) a lower rate, which would apply to all other
- Option B: There could be two basic
undergraduate tuition rates among the various Penn State campuses: (1) a rate
for University Park, Erie, and Harrisburg; and (2) a lower rate, which would
apply to all other campus locations.
- Option C: There could be three basic
undergraduate tuition rates among the various Penn State campuses: (1) the
University Park rate; (2) a somewhat lower rate for Erie, Harrisburg, and
perhaps other selected campuses; and (3) a lower rate for other campus
- Three basic undergraduate tuition rates (Option C)
seem to provide the most flexibility for meeting the various needs of the
respective campus locations in setting tuition rates. Care must be taken to
insure that information that is provided to the public with respect to
differential campus tuition levels reflects differing campus cost structures,
and does not lead to erroneous impressions of differences in educational
|Changes in Tuition
Differentials by Student Level
- The plan developed by the previous University Planning
Council (UPC) Working Group on Tuition recommended a differential between lower
division and upper division of approximately $600 based on the higher cost of
upper division education. Half of that plan was implemented. Therefore, there
is room to increase the differential between lower division and upper division
and still remain within the earlier proposed plan.
- The Task Force recommends that the balance of the earlier
differential tuition plan between lower division and upper division
undergraduate students be implemented. The current differential has grown to
$356 as a result of compounding increases over the last several years.
- The UPC plan recommended that graduate tuition be set
somewhat higher than upper division undergraduate tuition. The current
differential is $472, which is at about the level originally envisioned in the
UPC plan. This differential between upper division undergraduates and graduate
students should be maintained.
|Changes in Tuition
Differentials by Residency
- As resident tuition increases, especially through higher
increases for incoming freshmen, it may not be possible or desirable from a
market standpoint to maintain the current differential of 2.1 to 1 between
non-resident and resident tuition at University Park and 1.5 to 1 for the
Commonwealth College and other campus locations. Consideration should be given
to adjusting this ratio depending on the actual cost of instruction, state
appropriation, and student demand.
Laboratory and Clinical Surcharges
- The laboratory and clinical surcharges should be
folded into the basic upper division tuition rate, thereby creating a
two-tiered upper division tuition rate schedule.
- Exceptions would include higher differential tuition for
a few selected programs, such as Nursing, IST, and business administration
- Penn State should continue its philosophy of
limiting mandatory fees. The student activities fee and the information
resources and technology fee should continue as the only two fees assessed to
- Extensive tuition discounting for current or future
students, as practiced by many private institutions, is not recommended.
- If significant tuition increases are implemented,
however, additional funds should be budgeted for need-based institutional
student aid in order to provide balance and accessibility.
- The University needs to make students and parents more
aware of the benefits of federal tuition tax credit programs.
|PROSPECTIVE TUITION LEVELS
| The budget scenarios
reflect estimated annual expense needs over the next five years and the overall
tuition income levels necessary to fund them. The recommended tuition model
suggests that, in the future, the University further differentiate tuition
rates by campus location and student level, and phase in higher tuition
increases beginning with incoming freshmen.
To determine prospective
tuition levels, the Task Force overlaid the proposed differentials by location
and student level on the mid-range budget scenarios. Based on this analysis,
the following prospective tuition levels would be required over the next
- For 2002-03, all students would receive the same
- Beginning in 2003-04, tuition differentials would be
implemented by student level and by location, such that:
- Incoming freshmen would receive a higher increase in
2003-04 and again as sophomores in 2004-05. (Note: all incoming freshmen
beginning in 2004-05 also would pay the higher rates.)
- The existing differential for upper division and
graduate students would be increased by approximately $360 over two years.
- University Park students would receive higher
increases than students at other campus locations.
- Prospective differential increases for incoming freshmen
- For University Park freshmen, a basic tuition
increase plus an additional increase in the range of $400 to $600 in 2003-04
and again in 2004-05.
- For freshmen at other campus locations, a basic
tuition increase plus an additional increase in the range of $50 to $100 in
2003-04 and again in 2004-05.
- Prospective increases for continuing students, including
adjustments by student level, in 2003-04:
- For continuing students at University Park, a basic
tuition increase. Upper division and graduate students would have an additional
increase of $180 in 2003-04 and again in 2004-05.
- For continuing students at other campus locations, a
basic tuition increase. Upper division and graduate students would have an
additional increase of $180 in 2003-04 and again in 2004-05.
- The higher increases for incoming freshmen should be
announced well in advance so that students can consider the cost of tuition in
their admissions decisions.
| Over the past several
months, the Task Force on Tuition has studied a complex set of variables and
issues surrounding tuition policies and practices at Penn State and our peer
academic institutions. The Task Force has developed an extensive set of
financial models to estimate future tuition levels under different scenarios of
state appropriations and University expenditures, and to reconcile expenditures
and revenues under alternative tuition strategies. The following points
represent a summary and the major conclusions of our analysis:
- Penn State is seriously underfunded, operating with fewer
dollars per student than its peer institutions in Pennsylvania and in the Big
10. Although this measure is often used to express the efficiency of the
University, the comparative lack of resources reflects unfavorably on the
University's academic quality relative to other institutions, both public and
- Benchmarking indicates that, in virtually every
administrative area, Penn State ranks at the top of its peer group in
administrative efficiency, delivering the same or greater services for less
- Penn State has, out of necessity, undertaken a major
program of internal budget recycling and reallocation for the past decade.
There is little flexibility remaining to generate internal funds without major
reductions in programs and services provided by the University and adverse
impacts on the quality of academic programs.
- The Grand Destiny Campaign has been extraordinarily
successful, but private support does not provide funds for basic operating
costs. Rather, it provides funds for the margin of excellence in the
University's academic programs and vital support for its students.
- Because of state budget constraints, Commonwealth
appropriations now represent only 14.6 percent of Penn State's total budget and
less than one-third of the general funds budget. It is unlikely that state
appropriations will increase at a sufficient rate to provide the necessary
resources to support its educational mission in the future. Thus, Penn State
will be forced to rely to an even greater extent on tuition revenue to improve
or even to maintain its academic quality.
- Competition for students among Pennsylvania colleges and
universities will undoubtedly intensify in the coming years. Nonetheless, the
demand for a Penn State education will continue to be robust, and it should be
possible to sustain enrollments with tuition increases in the range of most
magnitudes considered in this report.
- The University's current and future efforts to enhance
the quality of its teaching, research, and service missions will depend largely
upon the ability to secure sufficient financial resources.
- Program investment funds are required to hire
additional faculty; to modernize classroom and laboratory facilities; to
address growing deferred maintenance needs; to sustain the University's
critical academic and administrative support programs and systems; to further
develop library resources; to provide necessary technology improvements; and to
enhance student life and learning experiences.
- Additional salary funds are required to stop the
slippage in Penn State's faculty salary rankings and begin to recover lost
- A strategy should be adopted that provides sufficient
funding from tuition to permit the University to enhance its academic quality
and reputation in the coming years. Peer public institutions are planning
significant increases in their tuition rates over the next several years to
support major academic quality enhancement initiatives. Holding tuition
increases at Penn State to levels below the mid-range scenarios provided in
this report would almost certainly result in an erosion of the academic quality
and reputation of the University.
- Questions concerning the rollout and impact of
significant tuition increases are critically important, and the Task Force
recommends consideration of a plan involving larger increases for entering
students over a two-year period with relatively lower increases than might
ordinarily be the case for incumbent students.
- The Task Force believes that an emphasis on greater
tuition differentials among campuses, programs, and student level (lower
division, upper division, and graduate) is justified based on the costs of
educational programming and other relevant considerations. Such differentials
would permit Penn State campuses across the Commonwealth to compete effectively
in regional markets while permitting the University Park campus to secure the
financial resources necessary to support the unique aspects of its educational
mission. Tuition levels for non-Pennsylvania residents should be set at or
above the costs of education while being sensitive to the competition from
private and other elite public universities.
- A Penn State education remains an excellent investment
for students even with significantly higher tuition rates. The Task Force
analysis indicates that a large share of Penn State students receive financial
aid from state and federal grant programs, scholarship endowments, and other
internal University resources. Loan indebtedness of Penn State students upon
graduation is only slightly higher than the national average for public
universities. Nonetheless, additional need-based financial aid must be budgeted
by the University under almost any tuition increase scenario, and a
well-rounded strategy to assist students and their families to secure the
maximum amount of grants and tax credits will become even more critical in the
next five years and beyond. Finally, Penn State's network of campuses across
the Commonwealth can continue to provide points of access to higher education
at relatively lower costs to students.
- To assure the greatest return to all who invest in the
University, Penn State must continue its strategy of cost containment and
continuous quality improvement, budget reallocation to address changing
priorities, and the critical assessment of strengths, needs, and special
| Penn State is at a
critical juncture in its evolution as a world-class university. Additional
financial resources will be required to support Penn State's continued
competitiveness and its development as a premier academic institution. While no
one likes a solution which raises tuition, the Task Force has concluded that
there appears to be no reasonable alternative if the University's goals are to
be achieved. Therefore, the Tuition Task Force endorses the tuition strategy
outlined in this report as a balanced and fair way to generate the needed
resources over the next five years.