Editor’s note: The Penn State Board of Trustees voted to approve operating budgets and tuition and fees schedules for both 2023-24 and 2024-25, as outlined below, during its meeting on July 21.
ERIE, Pa. — Tuition would be held flat for Pennsylvania resident undergraduate students at Penn State’s Commonwealth Campuses and increase by 2% for in-state undergraduates at the University Park campus each of the next two academic years under a new two-year fiscal plan approved today (July 20) by the Penn State Board of Trustees Committee on Finance, Business and Capital Planning. The full board will review and vote on operating budgets and accompanying tuition and fees schedules for both the 2023-24 and 2024-25 fiscal years during its meeting Friday afternoon (July 21) at Penn State Behrend.
In total, approximately 18,000 Pennsylvania resident students at the Commonwealth Campuses, representing 43% of Penn State’s total in-state undergraduate student body, would not see a tuition increase over the next two years. Additionally, last year’s one-time $14 million investment for income-based Access Grants would go permanently into student financial aid on a recurring basis, continuing Penn State’s efforts to remove personal finances as a barrier to earning a college education.
Penn State has implemented a two-year, data-driven budget model to enhance predictability, improve the strategic allocation of University resources, and better control costs in support of access and affordability. The proposed budgets for the next two years reflect the work that has taken place across the institution to lower the University’s deficit through strategic expense reductions and revenue growth, without compromising the quality of a Penn State education, according to President Neeli Bendapudi.
“I want to thank the entire Penn State community for its efforts as we’ve worked to respond to budget challenges,” Bendapudi said. “Our deficit today is lower than it was at this time last year, and we are forecasting progressively smaller deficits for each of the next two fiscal years. This work is not finished, but I am encouraged by what we have achieved thus far, and I am pleased to report that we remain on track for a balanced budget by fiscal year 2025-26.”
Operating budgets
For the 2023-24 and 2024-25 fiscal years, the committee advanced proposed University-wide operating expense budgets of $9.5 billion and $9.6 billion, respectively. These budgets are inclusive of all University operations, including the Educational and General (E&G) budget, which encompasses core teaching and research activities; Penn State Health; self-supporting units such as Housing and Food Services and Intercollegiate Athletics; Penn State Agricultural Research and Extension; Pennsylvania College of Technology; research; and capital projects, among other sources.
In a change from past practice, the Student Initiated Fee and self-supporting units such as Auxiliary and Business Services, the Applied Research Laboratory, Development and Alumni Relations, Intercollegiate Athletics, and the Land Scrip fund (which supports Penn State Agricultural Research and Cooperative Extension) have been moved from the E&G budget and are now accounted for independently. This change is intended to provide greater clarity, better reflect annual E&G expenditures, and properly account for some funding types that are designated for specific purposes and may not be used in a single fiscal year.
State appropriations and related budget impacts
Nearly three weeks after its June 30 deadline, the Pennsylvania General Assembly has not yet approved Penn State’s 2023-24 general support appropriation, funding that is used to help lower the cost of tuition for Pennsylvania students. The commonwealth provides Penn State with approximately $5,750 per Pennsylvania resident undergraduate, an amount that the University significantly amplifies, providing each in-state undergraduate an average discount of $15,000 annually on tuition costs.
With more than 42,000 Pennsylvania resident students and their families relying on the in-state tuition discount, Penn State will direct other resources to cover in-state tuition costs until state funding is approved. As a result, the University will put a temporary hold on planned funding for general salary increases and the compensation modernization initiative until the impasse in Harrisburg is resolved. The budgets include 3% pools for merit-based salary increases each of the next two years, as well as some funding for the University’s compensation modernization initiative, both of which will be implemented after state funds are released.
“As an economic engine for Pennsylvania and the top educator of its future workforce, Penn State provides an excellent return on the commonwealth’s investment,” said Bendapudi. “We are in continued conversations with the legislature, and we remain hopeful that state leaders will pass our funding bill with the increase that Gov. Shapiro has proposed, as this funding is vital to students and families across Pennsylvania. Despite not knowing what our appropriation will be, University operations must be maintained, which is why we are moving forward with our budget as planned — with the caveat that some critical steps must wait so that we can meet our commitment to our Pennsylvania resident students.”
Reducing deficits
Penn State has made important progress in reducing the deficit within the approximately $3 billion E&G budget. After originally projecting a $140 million deficit (excluding Penn College) for the 2022-23 fiscal year, the current projected deficit is $63 million, a $77 million improvement. The University is still working on closing the books and will report final results for 2022-23 later this fall.
The projected improvement is due to steps the University has taken to control spending and increase revenues, highlighted by:
- $27 million in collective savings on salaries and benefits from the University-wide hiring freeze. As the University works toward a balanced budget, Bendapudi said that the strategic hiring freeze will remain in effect for at least the next year.
- $17 million in health care savings compared to budget.
- A $22 million increase in investment income.
- A one-time $12.1 million COVID-19 relief grant from the commonwealth of Pennsylvania.
Other cost reductions were realized from deferred spending and capital projects, additional salary and benefit savings during employee transitions, and contract savings on a variety of equipment and services.
Over the next two fiscal years, the University is projecting that the E&G deficit will be reduced to $44.5 million in 2023-24 and $34.1 million in 2024-25.
“We are making progress toward reducing our E&G deficit because of the effort and commitment of many people across the University,” said Sara Thorndike, senior vice president for Finance and Business. “We have created a new data-driven budget model that aligns metrics with unit allocations; we are progressively reducing the dependency on reserves to reach a balanced budget; we are consolidating administrative unit carry-forward balances to maintain an appropriate balance of central E&G reserves; and we are prioritizing fiscal responsibility through continued efficiencies, expense savings and new income generation to arrive at a balanced budget by 2025-26.”
Employee salary increases and compensation modernization
The proposed budgets for the next two fiscal years include 3% pools for unit executives to award merit-based general salary increases (GSI) for employees. Actual individual percentage increases will be determined by the employee review process and reflect employee performance, so individual salary increases may be higher or lower than 3%. The University also is budgeting funds for the compensation modernization initiative, which Vice President for Human Resources Jennifer Wilkes said is critical to ongoing efforts to attract and retain the best staff in support of the University’s educational mission. If approved by the board, more information about GSI and compensation modernization will be shared with employees after the state appropriations process concludes. General salary increases would be retroactive to July 1.
Graduate assistant stipends
As part of the University’s commitment to maintaining competitive support packages for graduate students, the proposed budgets for both 2023-24 and 2024-25 include 3.5% increases in graduate assistant stipends, which would take effect beginning with fall 2023 appointments. Graduate assistantships at Penn State include a stipend; full tuition remission and fee waivers; and subsidized, high-quality health care.
Tuition and fees
The proposed tuition schedules for the 2023-24 and 2024-25 academic years include the following rate increases:
Commonwealth Campuses
- No increase for in-state undergraduates.
- 1% for out-of-state undergraduates.
- 1% for in-state graduate students.
- 2% for out-of-state graduate students.
University Park
- 2% for in-state undergraduate and graduate students.
- 4% for out-of-state undergraduate and graduate students.
World Campus
- 1% for all Penn State World Campus students (undergraduate and graduate).
Law schools
- 2% for all law students.
College of Medicine
- 4% for in-state medical students.
- 4% for out-of-state medical students in 2023-24.
- 14% for out-of-state medical students in 2024-25.
“When setting our tuition schedules, we are keenly aware that these decisions have real-world impacts on our students and families,” said Bendapudi. “I am very pleased that there will be no tuition increase for in-state undergraduates at our Commonwealth Campuses for the next two academic years. For most students we’ve been able to hold tuition increases below the rate of inflation and only to the minimum required to meet our own rising costs, and to continue providing our students the highest-quality experiences inside and outside of the classroom.”