Penn State sets $3.2 billion operating budget for 2006-07

Philadelphia, Pa. -- Penn State's overall operating budget will rise modestly to $3.2 billion in 2006-07 under a plan designed to support the high quality of the educational experience for students while significantly moderating tuition increases.

Excluding Penn State Milton S. Hershey Medical Center, the budget reflects growth below the benchmark Higher Education Price Index (HEPI) inflation rate of 5.0 percent for this year -- due in large part to a boost in state appropriation and the continuation of cost savings initiatives totaling nearly $15 million in reductions for 2006-07.

"All colleges and universities in this country are facing sharply increased costs to their operations," said Penn State President Graham B. Spanier. "This budget reflects our very best efforts to tighten our belts in the face of those increasing costs while still maintaining the quality that is critical for the success of our University."

In sum, the University's budget, excluding the medical center, grows by $99.7 million in 2006-07 -- or 4.3 percent -- while the budget at Penn State Milton S. Hershey Medical Center increases $63.8 million.

The 2006-07 state funding package provides 4.5 percent increases to the University's educational and general appropriation and the appropriation for the Pennsylvania College of Technology, and when coupled with increases of $2 million for both agricultural research and Cooperative Extension, the total funding increase for Penn State is 5 percent over last year.

For the second year, the state's support of Penn State does not include line-item appropriations for the College of Medicine. Instead, the commonwealth again will channel state and federal medical assistance funds to the Hershey Medical Center through the Pennsylvania Department of Public Welfare in the amount of $14.2 million.

The bottom line is a total state support package for the University of $341.9 million.

As a result, the University budget includes a 2.9 percent tuition increase for in-state and out-of-state undergraduate students at Penn State's 19 primarily undergraduate campuses -- where nearly half of the University's students are enrolled. The rate increase at the University Park campus will be 5.6 percent for in-state, lower division undergraduate students and 4.4 percent for non-resident students.

"This year, we will see the smallest increase in tuition that we have had in recent history," said Spanier.

In this year's budget, funds have been allocated for a select group of strategic investments and to provide for escalating health care and other insurance costs as well as modest salary adjustments for faculty and staff. The budget also includes funds for rapidly increasing fuel and utilities costs, maintenance and operation of new and newly remodeled facilities, the University's capital improvement programs, and for need-based student aid.

In particular, health-care costs continue to pose serious challenges nationwide, especially for people-intensive employers such as colleges and universities. Health-care premiums alone are projected to cost Penn State nearly $13 million more than last year. In sum, the increase to the benefits and other insurances budget totals $19.6 million.

Salaries in recent years have been brought into a more competitive position relative to peer institutions regionally and nationally. Although salaries increases this year will be relatively modest, payroll remains the largest portion of the University's general funds budget, and has been expanded by $23 million for 2006-07.

A 15th consecutive year of internal expense reductions have helped support budgetary priorities, with $14.9 million in reductions being the most substantial amount since 1994-95. The combination of budget reductions and $5 million in non-tuition income enhancements totals $19.9 million, or 3.0 percent in avoided tuition increase.

The full Penn State budget may be accessed at online.

Last Updated March 19, 2009