Penn State trustees approve 2013-14 University budget

LEMONT FURNACE, Pa. -- Penn State’s Board of Trustees today (July 12) approved a $4.42 billion University operating budget for 2013-14. The budget includes a $285 million appropriation from the Commonwealth of Pennsylvania, representing level funding for Penn State’s general support appropriation and increases in some key programs.

“Demand for a Penn State education continues to be high. Applications have remained strong and our first-year class for fall 2013 is shaping up to be larger than last fall’s entering class. It is our goal to keep the dream of a Penn State education within reach for Pennsylvania’s citizens. Achieving this goal is dependent in part upon our continued partnership with the Commonwealth and our state support,” said Penn State President Rodney Erickson in a presentation to the board. “Through the hard work and cooperation of those involved in building this plan, I am able to present a budget today that is balanced, provides for basic operating cost increases, and holds tuition increases to a low level.”

Agricultural research and Cooperative Extension received an additional $1.5 million in support from the Commonwealth, for a total of $46.2 million. Because these activities are not supplemented with tuition, appropriations increases are necessary to keep pace with rising costs. This year’s increase will help to mitigate an estimated $2.4 million increase in expenses.

“Penn State’s agricultural research and Cooperative Extension programs provide critical support for Pennsylvania’s principal industry,” Erickson said. “We are grateful to the governor and our partners in the state legislature for the additional $1.5 million in appropriations, which will help to offset an estimated $2.4 million increase for compensation and benefits increases.” He said some program reductions will be required to make up the difference.

The 2013-14 budget for Penn College, a wholly owned subsidiary of Penn State based in Williamsport, Pa., will see an increase of $6.7 million, including a $2 million appropriation increase to be used to expand instructional capacity in areas where demand is highest. This will bring its total budget to $146.5 million. Including this year's increase the Commonwealth’s total appropriation to Penn College is $15.6 million.

Medical Assistance funds appropriated to the Penn State Hershey Medical Center through the Pennsylvania Department of Public Welfare total $9 million, an increase of $2.5 million from 2012-13. The additional funding will support the development of the regional medical campus at University Park, with an emphasis on the preparation of medical students for careers in primary care and rural medicine. When combined with the Penn State College of Medicine, the budget for the entire medical center operation for 2013-14 is $1.57 billion.

Erickson said the top priority for the budget is to hold proposed tuition increases to a low level while maintaining Penn State’s quality of education. The budget sets an aggregate tuition of increase of 2.76 percent, which represents four levels of increases across Penn State’s 19 undergraduate campuses. Tuition for Pennsylvania resident and nonresident undergraduate students increased less than 2 percent at 15 of Penn State’s campuses.

“This is the second-lowest percentage increase in 45 years, after last year’s average 2.4 percent increase,” Erickson said. “We continue to be committed to keeping tuition increases at the lowest level possible without compromising academic quality.”

Almost $36 million in internal reallocations, deferments and targeted expense reductions were incorporated into the budget before tuition increases were considered. The budget funds only the most necessary increases for operating expenses and energy costs, Erickson said, though he noted that it will be important to increase funding for deferred maintenance and capital improvement as the University’s facilities age.

The end result, he said, is a budget that is balanced using nearly equal amounts of internal reductions and revenue from low tuition increases.

The general support appropriation is just under 1995 levels, when the University educated 20,000 fewer students. Erickson said the increase in the number of students being educated, combined with level state funding for Penn State’s general support appropriation (which is used to directly offset the cost of tuition for Pennsylvania residents), continue to present challenges. In addition, the University continues to face unavoidable cost increases in areas such as employee compensation and health care, retirement contributions and energy.

To meet these and other challenges, Penn State has cut nearly $298 million in recurring costs from its operating budget, including nearly $124 million in cuts to recurring costs in the past five years alone. Initiatives to identify areas of cost-savings and efficiencies continue through the work of the University’s Budget Planning Task Force.

Erickson said Penn State remains on strong footing, and is well positioned to continue to thrive as one of the nation’s top public research universities.

“With more than $800 million in research activity, Penn State is among the nation's key leaders in innovation, and the creation of new technologies helps to fuel the economy of the Commonwealth. The rapid expansion in cutting-edge health care and research taking place at the Penn State Hershey Medical Center is saving lives. Our Agricultural Research and Cooperative Extension activities benefit every citizen of the state,” Erickson said. “We are committed to demonstrating the economic benefits that Penn State brings to the Commonwealth. We also are committed to being good stewards of taxpayer and tuition dollars.”

Erickson’s budget presentation to the Board of Trustees will be posted to http://budget.psu.edu/ in the near future.

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Last Updated July 12, 2013