Penn State's 2012-13 budget plan seeks modest increase from state

UNIVERSITY PARK, Pa. -- The Board of Trustees today (Sept. 10) approved a fiscal plan for Penn State that asks the Commonwealth to provide $14.7 million more than the University will receive in the current fiscal year. If provided, it would bring the University's state appropriation to a total of $293.7 million.

The request attempts to balance three factors: the Commonwealth's ability to support the University given its fiscal challenges; the University's responsibility to continue to make the case for additional state support in light of the increased costs of fulfilling its mission; and the burden that tuition increases place on students and their families.

"Penn State's 2012-13 budget plan and state appropriation request reflect our recognition of the continuing impact of the prolonged economic downturn on the state's finances and our continued efforts to fulfill our Land-Grant mission while keeping tuition increases at the lowest possible level," said Penn State President Graham B. Spanier.

The request includes an increase of $7.7 million for the University's Education and General Funds budget, an amount equivalent to the projected increase in the Consumer Price Index. The request also includes $2.8 million to maintain the level of services provided through programs in Agricultural Research and Cooperative Extension and an additional $3.5 million to restore a portion of the lost programming capacity resulting from this year's appropriation cuts to those two programs; and inflationary increases of 3.6 percent for both Penn College ($235,000) and Penn State Hershey Medical Center ($489,000).

In his presentation to the board, Spanier explained that the budget plan includes a 2 percent base increase for salary adjustments and related employee benefits, "in order to remain competitive in attracting and retaining top faculty and staff." Faculty and staff did not receive normal salary increases in July, the second time in three years that salary increases were suspended due to budget constraints. The plan also reflects a 1.5 percent increase for the President's Excellence Fund, to allow for merit, market and equity adjustments.

The budget request also includes funds to cover the projected increase in health-care costs, and in employer contributions on behalf of employees enrolled in the State Employees Retirement System, as well as funding for strategic initiatives and other program commitments. These include academic priorities identified in the University's strategic plan and increased costs in important support functions such as information technology systems, safety and security programs, and research infrastructure.

The proposal also targets $27.7 million in expense reductions for the University. "This includes $7.4 million achieved through a 1 percent across-the-board reduction in departmental operating funds from all administrative and academic units supported by the E&G budgets," Spanier said. "In addition, targeted operating and administrative cost savings of more than $20 million will be identified. This will mark the 21st consecutive year that Penn State has implemented a program of internal budget reductions and reallocations."

If the Commonwealth is able to fully fund the University's appropriation request, the tuition increase for Pennsylvania undergraduate resident students is projected to range from 2.9 percent at the Commonwealth campuses to 3.9 percent at University Park. Out-of-state students would see a 2.9 percent tuition increase at the Commonwealth campuses and a 3.5 percent increase at University Park. "These levels of increase, which aggregate to an average of 3.4 percent, reflect our continuing efforts to keep tuition as low as possible despite rising costs," Spanier said.

Spanier said the request being sent to the Commonwealth includes the beginnings of an outline of a possible broadening of the mission of a campus, with the goal of expanding the reach of Penn College. "I believe that this openness to change and innovation reflects the University's willingness to respond to the evolving needs of Pennsylvania's citizens. We look forward to conversations with the administration and Legislature on this approach," he said.

Spanier expressed hope that the Commonwealth will work to fund the University at the requested level. "A vibrant and financially healthy Penn State benefits all Pennsylvanians," he said. "We are hopeful that our partnership with the state can be strengthened in 2012-13 as Penn State strives to fulfill its commitments as the Commonwealth's distinguished land-grant research university."

The proposal the board approved today is the first step in the lengthy and complex state budgeting process. A number of variables could change and influence how the final budget will look next July.

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Last Updated September 13, 2011