Board committee recommends 2017-18 operating budget and tuition, fees

Update: The full Board of Trustees voted to approve 2017-18's proposed budget, and tuition and fees structure, during their meeting on July 21.

MIDDLETOWN, Pa. — The Penn State Board of Trustees Committee on Finance, Business and Capital Planning today (July 20) recommended a 2017-18 University operating budget of $5.7 billion, including the tuition and fees schedule, as well as recurring cost savings of $21 million. The full board is scheduled to vote on the fiscal plan on Friday, July 21. 

The Pennsylvania Legislature has to date been unable to agree on portions of the Commonwealth’s budget and the Pennsylvania House of Representatives has not yet approved appropriations for state-related universities, such as Penn State. The general support appropriation plays a critical role in advancing Penn State’s mission, and is primarily used to reduce in-state tuition rates. Also tied up in the legislative delay is funding for agricultural extension and the Hershey Medical Center. Penn State leaders said they are hopeful legislators will soon resolve the fiscal issue, since students and families must receive tuition information shortly and the University’s 2017-18 fiscal year is already underway. 

“We have moved ahead with our proposed budget despite the uncertainty of our appropriation because the operations of the University must continue, as well as our commitment to students and their families,” said Penn State President Eric Barron. “If necessary, we will adjust our fiscal plan as we learn more from the Commonwealth. However, this is not something that is easily accomplished and would carry with it serious impact, not only to the educational mission of Penn State and affordability for our students, but also to our research and extension efforts, as well as our clinical operations in Hershey. 

“We are hopeful the Legislature will resolve its challenges soon and continue its pledged support to higher education for its citizens.”  

Within the proposed University budget, base undergraduate tuition in aggregate for Pennsylvania students is expected to increase by 2.45 percent. This year’s resident tuition increase is among the lowest at the University in 50 years and includes no tuition increase for Pennsylvania students at eight Penn State Commonwealth Campuses for the third consecutive year. The budget also freezes the student Information Technology Fee for the third year in a row.   

“In building the proposed 2017-18 operating budget, Penn State has placed the highest priority on keeping tuition increases as low as possible, while continuing to provide the highest quality educational experience for students,” said Barron. “The proposed budget, tuition and fees package reflects the University’s comprehensive and ongoing efforts to control the cost of a Penn State degree.” 

 While the University has a multi-year budget-planning process in place to control and monitor cost drivers, Penn State, like many universities, faces increasing costs outside of its control, including basic energy and facilities maintenance, utilities, employee health care and public pension obligations.  

The proposed budget includes $27.4 million to cover projected cost increases in the University’s benefits program. This includes $12.5 million to cover anticipated increases in the University's share of health care for employees, graduate assistants and fellows. The University also has budgeted an additional $14.8 million for mandatory employer retirement contributions — $12.3 million of which constitutes a required increase in the University’s contribution to the Pennsylvania State Employees’ Retirement System (SERS). The University’s mandatory contribution to SERS has increased from $10 million in 2007-08 to more than $100 million in 2017-18. 

In addition, the fiscal blueprint includes $24.8 million to adequately fund contractual amounts for the labor agreements that apply to Penn State’s technical-service employees and campus health professionals; centrally funded amounts for faculty promotions in the professorial ranks; a 3 percent increase in graduate assistant stipends; and a 2 percent pool to provide merit-based salary adjustments for faculty and staff, and to make equity or market adjustments. 

As part of the effort to monitor and control costs over the past several decades, Penn State has cut and reallocated funds within the budget rather than pass along all cost increases to students and their families. Penn State has enacted $404 million in cuts to recurring costs since 1992, including this year’s $21 million reduction. These cost-cutting measures have helped to defray costs to students, while ensuring the continued quality of Penn State’s academic programs.  

Tuition 

Under the fiscal plan adopted by the committee, the 2017-18 academic year would see Penn State’s base aggregate tuition rate rise by 2.45 percent for Pennsylvania resident undergraduate students and by 3.85 percent for nonresident undergraduate students. At University Park, lower-division, undergraduate resident students would see a 2.74 percent tuition increase ($232 per semester). This is the third-lowest percentage increase at University Park since 1967, behind only the 2.29 percent increase in 2016-17 and 2015-16’s action to freeze base tuition for all resident undergraduates. Nonresident, lower-division undergraduate students at University Park would see a proposed tuition increase of 3.85 percent ($605 per semester). 

As part of ongoing efforts to maintain access and affordability, for the third straight year the proposal includes no tuition increase for resident students at eight of the University’s 19 undergraduate Commonwealth Campuses: Beaver, DuBois, Fayette, Greater Allegheny, Mont Alto, New Kensington, Shenango and Wilkes-Barre.

The recommended proposal also suggests modest tuition increases for students at Penn State’s remaining Commonwealth Campuses and the World Campus. Resident students at the Brandywine, Hazleton, Lehigh Valley, Schuylkill, Worthington Scranton and York campuses, as well as those enrolled in the online World Campus, would see an increase of 2.35 percent ($155 per semester). Resident students at the Abington, Altoona, Berks, Erie and Harrisburg campuses would see an increase of 2.49 percent ($164 per semester at Abington and $173 per semester at the other four campuses). Like University Park, nonresident undergraduate students at the Commonwealth Campuses would see tuition increases of 3.85 percent, ranging from $370 to $421 per semester, depending on the campus.   

Fees 

In addition, for the third time in as many years, the student Information Technology Fee would be frozen at $252 per semester for full-time students under the proposed plan. The freeze is part of a long-term plan to eliminate the fee as a separate cost, with the eventual goal of incorporating funding for technology needs into tuition, as is the case with all other services that are integral to the academic operation of the University. 

Beginning in fall 2017, the Student Activity Fee and the Student Facilities Fee will be combined into one fee known as the Student Initiated Fee. The change from two fees to one fee is part of a student effort to be more directly involved in the creation and allocation of student fees. Two new Student Fee Boards — one for University Park and one for the Commonwealth Campuses — now oversee the new fee and allocation process. The Student Initiated Fee supports student-centered activities, services, facilities and recreation to improve student life. 

For full-time students at University Park, the Student Initiated Fee would be $258 per semester, an increase of $36 per semester over the combined Student Activity and Student Facilities fees in 2016-17. At the Commonwealth Campuses, the Student Initiated Fee will range from $173 to $236 per semester for full-time students. 

Tuition, fees not the only impacts on cost 

Keeping tuition and fee increases low is among the University’s highest priorities, according to Barron, however, these costs are just two of several key factors that impact the final cost of a degree.  

These factors include the length of time it takes a student to graduate. A student who spends an extra semester or year at Penn State pays far more for the same degree than peers who graduate on time, as well as the rate of borrowing for each student and retention and graduation rates.  

The University continues to focus on a holistic approach to controlling the cost of a degree. Penn State has enacted a variety of programs under the Plan4 Penn State initiative focused on increasing student retention and graduation, decreasing the total cost of a degree by ensuring timely graduation, decreasing the rate of student borrowing, and decreasing the rate of attrition due to financial challenges.   

Examples in this area include the Pathway to Success Summer Start program, which provides students with a scholarship to take summer classes while earning additional money through on-campus employment, and the Student Transitional Experiences Program, which offers financial, mentoring and networking support for students transitioning to University Park from a Commonwealth Campus.   

Operating budget 

While Penn State’s 2017-18 state appropriation has not yet passed the Pennsylvania House, the budget proposal was formulated based on indicated support from Gov. Tom Wolf and the Legislature for level funding of $230.4 million for Penn State’s general support appropriation.  

Penn State’s total anticipated state appropriation for 2017-18 is $318.2 million. This includes an indicated increase of $500,000 in state funding for Penn State Agricultural Research and Cooperative Extension, for a total of $52.3 million; an anticipated $2 million increase for Pennsylvania College of Technology — a wholly owned subsidiary of Penn State — bringing its support from the state to $22 million; and level funding of $13.4 million for Penn State Hershey Medical Center.  

“Support for Penn State and all of higher education remains strong in Harrisburg,” said Barron. “We are hopeful for a positive resolution to the current impasse over funding the overall state budget and swift action on the non-preferred appropriations bills that provide crucial funding for Penn State and our fellow state-related universities. In the meantime, the University must move ahead to put an operating budget in place and set tuition rates for the upcoming academic year.” 

The budget plan approved by the Board of Trustees in September 2016 as part of Penn State’s 2017-18 appropriation request to the Commonwealth reflected a $25.3 million increase in the University’s general support appropriation. This increase would have allowed the University to hold the line on base tuition for Pennsylvania resident undergraduates for the second time in three years.  

The board’s request for increased funding is in line with the governor’s support for restoring 2011’s across-the-board funding cuts for higher education. A full restoration to 2011 levels would return the University’s general support appropriation to $264.3 million. 

“After the governor’s executive budget settled at level funding due to the continued revenue challenges in Harrisburg, our planning efforts focused on minimizing the impact on Penn State’s students,” Barron said.

Last Updated July 25, 2017