Psu Considers New Budget Strategies To Meet Costs

5-16-97
University Park, Pa. -- Penn State is adopting new internal budget strategies that link income more directly with program costs and may expand its differential tuition program to better reflect differences in program costs.

"Even with the good news about the state appropriation for 1997-98, our appropriation over the last six years in total has lagged behind inflation," said Gary Schultz, senior vice president for finance and business/treasurer in a report to the Board of Trustees today (May 16).

"At the same time, our costs continue to rise and funding for grants for education and research is increasingly competitive. We are concerned about keeping a Penn State education affordable to families of average means, and we do not want these fiscal challenges to limit academic quality or the educational experiences of Penn State students."

The Budget Strategies Committee of the University Planning Council, which was established in 1995 to strengthen Penn State's planning and budget process and guide its academic mission, has been studying Penn State data and data from other Big Ten universities to develop new budget strategies in light of the fiscal challenges projected for the next five years. "Cost centers as the basis of budgeting and differential tuition are two strategies that show promise," Schultz said.

In academic cost centers, a direct relationship is established between available funds and income generated. The Milton S. Hershey Medical Center and the Pennsylvania College of Technology already operate as separate cost centers and the Commonwealth Educational System has been operating on a modified cost center basis since 1984.

The University Planning Council has endorsed and the president has approved the idea of associating income more directly with academic program activity as practiced in the CES approach. Schultz said, "Cost centers will begin to operate in the 1997-98 fiscal year for the following locations: University Park, Commonwealth College, Erie, Harrisburg/Schuylkill, Abington, Altoona, Berks/Lehigh Valley and Great Valley."

A group working on differential tuition has been looking at further differentiating the University's tuition structure, considering additional course fees for more costly programs and examining differential tuition policies used by peer institutions.

Penn State currently has different tuition rates for University Park and CES locations, undergraduate and graduate programs and resident and non-resident students. It also has tuition surcharges for upper division and graduate students in specific areas such as engineering and related programs.

Providing background on instructional costs, Executive Vice President and Provost John A. Brighton explained to the board how costs vary by student level and academic program.

"In higher education, instructional costs are measured on a per-student basis and are determined by who teaches the classes, how many students they teach, and what subjects they are teaching. A small section of advanced students taught by a senior professor in a laboratory or clinical setting is more expensive than a lower division lecture taught by a junior faculty member in a large classroom," Brighton said.

At all Penn State locations, the average class size decreases from lower division to upper division and graduate courses. Instructional costs also vary by program relating to such factors as accreditation standards, the need for expensive laboratory equipment and supervision requirements for clinical experiences.

"We believe that students at a public, land-grant university such as Penn State should have the opportunity to explore different majors. As such, we want to minimize any tuition differentials that may affect student's academic choices," said Brighton. "At the same time, we recognize that there are differences in instructional costs and have concluded that Penn State should further differentiate its tuition rate schedule."

The Board of Trustees will consider a recommendation on differential tuition to be implemented over several years at its next meeting, July 13.

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Contacts:
Alan Janesch (814) 865-7517 (office) (814) 867-3621 (home) axj12@psu.edu
Christy Rambeau (814) 865-7517 (office) (814) 237-9046 (home) cmr7@psu.edu