Penn State trustees approve 2011-12 budget

Penn State trustees approve 2011-12 budget

Center Valley, Pa. -- Penn State's Board of Trustees today (July 15) approved a $4.1 billion University operating budget for 2011-12. The budget is supported in part by a $279 million in appropriations from the Commonwealth of Pennsylvania, a decrease of $68 million, or 19.6 percent, from last year.

"To say that it has been a tumultuous and unsettled few months leading up to this point would be an incredible understatement," said Penn State President Graham Spanier, who thanked state legislators for moderating the cut in the University's appropriation from initial proposed cuts of 52 percent. "Through the hard work of those involved in assembling this plan and the contributions and support of everyone in the Penn State community I'm able to present a balanced budget, despite the largest decreases to our state appropriation in our history. This budget assumes a tuition increase that would generally be reflective of a normal year."

The budget sets an average lower-division undergraduate tuition increase of 3.8 percent across the University. Tuition will increase 2.9 percent for resident and non-resident lower-division students at Commonwealth Campuses, 3.5 percent for non-resident, lower-division University Park students and 4.9 percent for resident lower-division University Park students. See http://live.psu.edu/story/54148 for more on tuition.

As economic struggles continue nationally and statewide, Spanier said the budget was drafted to offset the loss in state support and expiration of federal stimulus funds while also balancing the needs of students and their families.

To moderate tuition increases, the University has attacked expenses with $30 million in budget reductions through across-the-board cuts in every unit and targeted reductions through a variety of means, including the recommendations of Penn State's Core Council, a group charged with identifying millions in permanent savings since 2010.

Tuition and fees continue to be the largest portion of University income, providing 34.9 percent of Penn State's total revenue. Hospital and clinical revenues make up 28.7 percent, and restricted funds, primarily from sponsored research and grants, comprise 16.5 percent. Commonwealth appropriations represent 6.6 percent of the total budget.

The general funds budget, a subset of the overall budget which encompasses only the core academic and teaching-related elements of University operations, amounts to $1.7 billion and is funded by tuition and fees (78.4 percent), state appropriations (14.3 percent) and other smaller sources (7.3 percent).

To address the decrease in state funding, the University, in addition to budget reductions and expense cuts, suspended its normal salary increase program for the second time in three years and scaled back funding for facilities and strategic initiatives. Adjustments to the employee health care plan have allowed for moderation in expected cost increases for health care benefits.

The agricultural research and Cooperative Extension portions of the budget include reductions in state appropriations of 19 percent, or $10.5 million. Tuition cannot be used to support these areas, and Spanier said administrators and the College of Agricultural Sciences, led by Dean Bruce McPheron, have been working to identify the expense reductions necessary to offset the loss in funding.

A voluntary retirement incentive was offered to 120 employees, with two-thirds of those eligible accepting, resulting in more than $4 million in savings to future budgets. A significant gap still exists, Spanier said, and McPheron is working with administrators and financial staff to develop an effective strategic plan to balance the deficit.

"The net result, unfortunately, will be the reduction of scores of positions that can no longer be supported with the elimination of almost one-fifth of the Commonwealth's funding for these important activities," Spanier said.

The Penn State Milton S. Hershey Medical Center and the College of Medicine are projected to have a budget of $1.4 billion. State support for the Medical Center falls this year by 50 percent, to $6.6 million.

The Pennsylvania College of Technology, a Williamsport subsidiary of Penn State, will have a total budget of $141 million, a $1.5 million decrease. Commonwealth appropriations to Penn College decreased by 5 percent, or $715,000.

"Despite these difficult actions and the environment of financial uncertainty, it continues to be a very good time to be part of the Penn State family," Spanier said. "Our story of achievement is profound, and our stewardship of taxpayer and tuition resources is commendable. Penn State will continue to have a positive impact on the state and nation."