Spanier makes case for 2004-05 funding before state legislature

Statement by President Graham B. Spanier
House Appropriations Committee
February 25, 2004

It goes without saying that the Commonwealth has been through an extraordinarily difficult economic cycle. In the preparation of our budget for the past few years, we have been particularly mindful of the enormous challenges that this legislature has faced in trying to meet the many pressing needs of our citizens.

At Penn State we have done our part to help the Commonwealth deal with this challenge, absorbing nearly $30 million in permanent cuts from our appropriation and millions more in temporary cuts since 2001, while working diligently to ensure that those dramatic reductions did not erode the quality of education that the citizens of this Commonwealth expect Penn State to provide.

But there is indeed a limit to the reductions that any public university can absorb without either significantly reducing quality or raising tuition to a level that makes higher education inaccessible to increasing numbers of our citizens.

In 1970, the Commonwealth of Pennsylvania committed $7.71 of every $1,000 in personal income to support higher education. Last year, only $5.12 per $1,000 of income was allocated to higher education, a decline of approximately one-third.

The budget that we are presenting to you today asks that you return Penn State to the funding level for the 2001-2002 budget year.

This budget does not reflect extravagant new initiatives. The costs for health coverage, library materials, insurance, utilities, security, and technology have all risen. Deferred maintenance is a growing concern.

We have been careful stewards of the funding that this legislature has provided to us. And we have been diligent in keeping our costs down. Last year a cost-cutting task force that I appointed identified more than $14 million in permanent cuts and income enhancements. The savings from the work of the task force translated into a tuition savings of $200 per student for the current academic year.

But we can't cut our way to greatness. We spend less money per student than any of our peers nationally.

And yet a Penn State degree continues to be one of the most sought-after in the country, which we believe is a tribute to the efficiency and quality of our operations.

Last year we had 86,000 applications for admission to Penn State. We believe that to be the most of any university in the nation. We want to be able to serve as many of those students as possible. But we can't do it without your support.

In addition to asking that you return us to the funding level of three years ago, we are including just one strategic investment priority, and that is support for Penn State's College of Medicine.

Penn State's College of Medicine and the Milton S. Hershey Medical Center are important statewide resources, training many of Pennsylvania's physicians and providing the highest level of health care to more than half a million patients annually. We focus on this single special request because the only medical school outside of Philadelphia and Pittsburgh is in jeopardy. As members of this committee may be aware, Penn State ranks dead last in state appropriations for public colleges of medicine in the United States.

With such an extraordinarily low level of state funding for medical education, we have historically supported the College of Medicine from clinical revenue generated by the medical center. But changes in Medicare reimbursements, managed care, and operations have driven down the margin from the medical center to the point that it is impossible to support the college from these funds over the long term.

A recent economic impact report showed that Penn State Hershey generated 13,520 Pennsylvania jobs, both directly and indirectly. So in addition to being the primary source of health care for central Pennsylvania, the college and the medical center are huge economic drivers for the region.

We know that you have a difficult task before you as you attempt to sort out the priorities of the Commonwealth. At Penn State we like to say that we are making life better for the people of Pennsylvania. We hope that you will help us to continue in that noble effort.