Penn State Intercom......September 19, 2002

Appropriation request for
2003-04 gains board approval

By Tysen Kendig
Public Information

The University will ask for a 4.5 percent base state appropriation increase for the 2003-04 academic year, and $10 million for the first year of a three-year plan to increase funding for the College of Medicine at the Penn State Milton S. Hershey Medical Center.

The University's Board of Trustees on Sept. 13 approved the request for $347.1 million in state support. This request comes on the heels of a $12.2 million appropriation cut this year and a mid-year $10 million rescission in state funding the previous year.

"We are mindful of the financial challenges facing the Commonwealth, and we believe that this is a modest request in light of the 3.6 percent decrease in the state appropriation that we received last year," said President Graham B. Spanier. "As support from the Commonwealth diminishes, however, the burden of financing higher education has increasingly fallen on our students and their families. Although access to college education is critical to individual success, it also is paramount to the future success of the Commonwealth."

Spanier outlined the University's standard practice of bringing the budget plan and state appropriation request before the Board of Trustees for review and approval before sending it on to the legislature. The current year's state appropriation totals $322.6 million; in 2001-02, it was
$334.8 million.

An appropriation increase of $14.5 million (4.5 percent) is being requested to support basic operating costs. This represents a less than 1 percent increase in base operating support over the appropriation received two years earlier, in 2001-02. The budget emphasizes maintaining competitive faculty and staff salaries, funding rapidly escalating costs for health care and property and liability insurances, providing support for facilities improvements and deferred maintenance and addressing the most critical academic program needs.

Beyond basic operating cost needs, the University is requesting a special increase in base support for the College of Medicine to help offset the decline in income provided from hospital clinical operations and to bring the state's support of medical education more in line with that received by public medical schools nationwide.

Historically, the College of Medicine has received a much smaller share of its operating budget from commonwealth appropriations than any similar university medical center in the nation. The University's appropriation for medical education, which is just over $5 million for 2002-03, has for several years ranked dead last -- 75th out of 75 public medical schools in the United States. The average annual appropriation for other medical schools is now approaching $50 million.

Because of diminishing state funding, rapidly rising costs and changes in the managed health-care industry, it is estimated that within three years revenues from hospital operations that have traditionally subsidized medical education will no longer be able to support the College of Medicine.

To overcome this critical shortfall, the University is requesting $10 million in supplemental support for the medical school, the first of a three-year, $30 million plan to stabilize the financial base of the College of Medicine.

"We focus on a single special request this year because the only academic medical center in Pennsylvania outside of Philadelphia and Pittsburgh is in jeopardy, making an investment in the health and well-being of the citizens of the commonwealth a high priority," said Spanier.

Recognizing the turbulent state of the national and state economies, the University continues to aggressively pursue its own cost reductions and budget reallocations. Nationally recognized as one of the most efficiently run universities, Penn State has recycled more than $95 million since 1992-1993, and moved most of these funds from non-academic to academic functions. For 2003-2004, internal budget reductions will generate $5.5 million available for reallocation. In addition, the University has established a target of an additional $2.5 million from cost savings and enhanced income initiatives for the next fiscal year, with additional cost savings anticipated in following years as new cost-savings programs are put into place.

If the University receives the requested appropriation increase from the Commonwealth, the resulting base tuition rate increase for most Penn State students in 2003-2004 would be 6.5 percent. On top of this increase, supplemental tuition charges will be implemented for first-time freshmen and upper division and graduate students, based upon recommendations by the University's Tuition Task Force approved by the board earlier this year.

In addition to tuition changes, the information technology fee is planned to increase by $15 per semester to help support library resources and student computing and telecommunications needs, while the student activity fee would increase by $1 per semester.

To help meet the University's continuing goal that any student from the Commonwealth will be able to attend Penn State through a combination of institutional, federal, state and private philanthropic support, a total of $1.2 million is included in the budget plan for need-based student aid.

Tysen Kendig can be reached at tysen@psu.edu.

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