Report updates Faculty Senate on budget, strategic plan

January 26, 2010

University Park, Pa. — A report from Rodney Erickson, executive vice president and provost, made available to the University Faculty Senate Jan. 26 on the Senate's Web site detailed Penn State's 2010-11 state appropriation request and the 2009-10 budget. It also addressed financial challenges facing the University and the implementation of the University's five-year strategic plan.

Penn State has asked the Commonwealth for an appropriation increase for 2010-11, through a combination of state and federal stimulus funds, of 3.9 percent, or about $13.5 million over the current year's $333.9 million appropriation. The increase would be used to moderate increases in health care costs and contributions to the State Employees' Retirement System (SERS), which are expected to see a sharp increase, and to offset further damaging reductions to agricultural research and Cooperative Extension.

The report noted that the University's budget plan for next year includes substantial internal cuts and budgetary reallocations. This year, units cut their operating budgets by at least 2 percent -- along with other administrative cost savings initiatives -- and Erickson noted the University will again need to engage in additional selective cost cutting for 2010-11.

He stated in the report that faculty and staff sacrificed pay increases for 2009-10, but that the University must plan for competitive salary increases next year.

Erickson explained that rising health care costs, an anticipated spike in SERS contributions and increasing utility costs are among the budgetary challenges facing Penn State, along with uncertainty in the long-term for the state and national economies.

"If we are successful in further controlling our costs, continuing a robust enrollment base, and securing the requested appropriation, Penn State will be able to keep tuition increases at moderate levels for University Park, and especially at the Commonwealth Campuses," Erickson said. "But I want to be very clear that the longer-term financial challenges for the University are indeed great. A significant amount of the University’s state appropriation is provided by federal stimulus funding, and those funds will not continue beyond next year unless Congress acts to provide additional assistance, which seems increasingly unlikely. As we look beyond next year, it is impossible to know what figure will be regarded in Harrisburg as the University’s base appropriation for 2011-12."

2009-10 Budget
Penn State began to receive its 2009-10 appropriation of $333.9 million in December, including $318.1 million from state funds and $15.8 million in federal stimulus money. The University also will receive about $17 million in stimulus funding for 2008-09 to mitigate the effects of last year's recission, in which the state took back about $21 million from the University's initial appropriation.

The Penn State Milton S. Hershey Medical Center will receive an estimated $13.5 million in state and federal Medical Assistance Funds, representing a 6 percent reduction that was not offset by stimulus funds. Agricultural research and Cooperative Extension, which receive no tuition dollars, saw total reductions in program funds totaling more than $2 million.

The University's 2009-10 budget was developed conservatively because of the downturn in Pennsylvania's economy. The current year's operating budget froze salaries and included significant internal reductions while keeping tuition at the lowest possible level without sacrificing quality.

Because of a growth in revenue, Penn State's operating budget for 2009-10 is $3.76 billion, up from $3.6 billion the previous year.

Further budget details for 2009-10 can be found in Erickson's report, online at http://senate.psu.edu/agenda/2009-2010/jan2010/appb.pdf.

Strategic Plan Implementation

A five-year strategic plan approved by the University's Board of Trustees in May aims to take on the great challenge for Penn State and its peers -- devising "ways to enhance student success and advance the frontiers of knowledge while significantly reducing the rate of increase in the costs of delivering that education," Erickson's report said.

The plan represents seven major goals with 38 total strategies and corresponding actions supporting those goals. One of the plan's goals is to control costs and generate additional efficiencies. Among the eight strategies to achieve this are instructional productivity improvement, better use of instructional and research facilities, introducing investment models for new initiatives and modifying central budget recycling, rewarding innovation and fostering sustainable environments.

The entire strategic plan is online at http://strategicplan.psu.edu/StrategicPlancomplete.pdf.

Erickson reported that progress is being made in first-year implementation. A new strategy is being implemented to build stronger research and educational linkages with partner universities in key global regions, while a higher education information technology consultant is advising on balance between central and dispersed services. The University has capped central allocations to Outreach and is working on ways to expand World Campus enrollment. Erickson said there are many other examples of progress in implementing the plan.

He also stressed the important role faculty will play in achieving the strategic plan's goal of advancing academic excellence and research prominence, particularly through the strategy of consolidating academic and administrative programs through targeted reviews.

"After 18 years of internal budget reductions and reallocations, Penn State is a comparatively efficient University," Erickson said. "Much of the 'low-hanging' cost- savings have been achieved. But we will have to do even better in the future. We must think deliberately about the need to shrink, consolidate or eliminate some programs or activities, in order to be able to invest in areas of existing strength or in promising new ideas."

With more than 575 degree programs and 100 research centers and institutes, it has become difficult for Penn State, or any university, to support such a range offerings at high quality and demand with sustainable cost of delivery. The Academic Program and Administrative Review Core Council, chaired by Erickson, and coordinating committees including faculty, staff and administrators are assessing a broad range of services with a target of identifying $10 million in permanent cost savings or non-tuition revenue enhancements during each of the next several years.

"The only way the University will have the resources to make future investments is to free existing resources through selectively reprogramming how we deploy those resources," Erickson reported. "The scope of the effort will be University-wide, and recommendations emerging from the council will be data-informed and deliberate.

"The council and the coordinating committees will focus on programmatic and process-based cost savings rather than across-the-board cuts. Both permanent, long-term budgetary savings and short-term cuts will be considered, as well as the impact that cost savings in one unit of the University may have upon other units. The goal is overall cost savings, not cost-shifting."

Regular progress reports on strategic plan implementation will be provided to Penn State's Board of Trustees and Faculty Senate.

(Media Contacts)

Last Updated September 04, 2020