July 10, 2009
Penn State faces an unprecedented dilemma created by the impasse in our state government over the Commonwealth's budget and appropriations. Because of this impasse, Penn State's Board of Trustees and administration has had to make some difficult decisions in order to put in place an operating budget and set tuition levels for the 2009-2010 fiscal year, which began on the first day of this month. I am writing to all in the Penn State family to explain the outcome of our deliberations.
Normally, when the legislature has not passed, and the governor has not approved, a budget by July 1, we would have the option of deferring pay increases or holding back certain expenditures until a budget is in place. But knowing of the depth of the current fiscal crisis in the state and beyond, we already made the decision months ago to forgo pay increases at the University this year. Moreover, we have already made significant cuts to University budgets in anticipation of current constraints. Based on the revised budget the governor proposed this spring and his initial filing with the U.S. government for the use of federal stimulus funds, we were able to hold layoffs to a minimum and plan for classes as usual for the fall.
On June 26, however, in an unexpected and draconian development, the governor proposed a cut of $61 million to Penn State's appropriation as part of a plan to present a balanced budget to the General Assembly. He also declared that Penn State would no longer be considered a public university for purposes of eligibility for federal stimulus funding and thus proposed to make permanent a cut of more than $20 million that was imposed on us in the middle of this past year. An additional cut of more than $40 million would be added, resulting in an 18 percent reduction in our appropriation. We have asked the U.S. Department of Education to reject the governor's determination that we be excluded from the American Recovery and Reinvestment Act of 2009 stimulus funding.
Even with the earlier cuts, we had hoped to be as sensitive as possible to our students and their families by implementing the lowest tuition increase in modern history. But the circumstances of our appropriation, the lack of an approved state budget, the need to send out tuition bills in a timely manner, and our commitment to maintain the quality of the educational experiences for our students has forced us to turn to a tuition increase that will be painful for many of our students and their families.
Our Board of Trustees has approved tuition increases ranging from 4.9 percent at campuses other than University Park to 7.9 percent for out-of-state students at University Park to 9.8 percent for in-state students at the University Park campus. However, should the state enact a budget at the previously proposed level by July 17, the date our fall tuition must be finally set, the Board of Trustees has authorized us to reduce this tuition increase to the previously planned range of 3.9 percent for all students at campuses other than University Park, 3.7 percent for University Park students from out of state, and 4.5 percent for University Park in-state students.
If the state budget impasse continues beyond the date when fall tuition rates need to be set but state officials subsequently implement a budget at a level more favorable than the governor's current proposal — and if this occurs before Nov. 9, when spring tuition bills need to be processed — we will implement a mid-year reduction in tuition commensurate with the appropriation and budget situation at that time. We also will seek to minimize the tuition increase for the following academic year accordingly.
Regardless of which tuition increase is enacted, the University will be operating on a constrained budget and will need to brace for the additional financial challenges in each of the next two years, when stimulus funds will disappear, significant increases in state-mandated retirement contributions will take effect, salary increases will need to be addressed, and increases in energy, insurance, deferred maintenance and student aid will need to be budgeted. I want to note that balancing our 2009-10 budget at either level of tuition increase requires the elimination of reserves we hoped to set aside for the year as a hedge against future uncertainties.
These are difficult financial realities we must face and carefully address if we wish to meet the high expectations for which Penn State is known. Despite these challenges, I am grateful to the Penn State community for your goodwill, hard work and understanding. Penn State continues to be among the most highly regarded universities in the nation for good reason, and we will continue to provide exceptional educational experiences and positive workplace environments for all.
Graham Spanier
President
For further clarification about Penn State's 2009-10 budget and tuition, please refer to online question-and-answer information at http://live.psu.edu/story/40496.