Penn State leaders share road map for University's future

UNIVERSITY PARK, Pa. — President Neeli Bendapudi and select members of her senior leadership team are outlining how several key initiatives announced this past year fit within the vision for Penn State's future, and are beginning to articulate a road map for the strategic direction of the University. Rooted in the University’s commitment to delivering the highest value to students and to creating an environment that provides opportunities for growth and empowerment for all faculty and staff, the leadership team is sharing updates on the challenges facing Penn State that are necessitating a modernization of its business model.

“I am proud of the work we have done together in the last year-and-a-half that has served to strengthen our University as we embark on the hard work of co-creating a sustainable future for Penn State,” Bendapudi said. “While we are facing considerable rising costs — like every other higher education institution across the country — we also will continue to make strategic investments where they will have the most impact on our mission and identify new revenue streams to build an even stronger future for Penn State.”

Bendapudi’s vision and goals focus the institution’s effort around six key areas. Her administration has embarked on numerous change initiatives aimed at modernizing Penn State’s business model and setting the institution up to be able to move toward these goals.

The road map for Penn State’s future will be grounded in:

• Prioritizing students at the forefront of every decision.
• Creating a sustainable future and business model that provides room to innovate and to respond to unexpected challenges in agile ways.
• Prioritizing continued excellence in teaching, learning and research — preparing students for success, supporting employees in their career paths, and impacting the world.
• Embedding regular opportunities and processes in our operations to consistently evaluate and make decisions around strategic priorities, efforts and investments to drive continual growth and improvements.

Concurrently, Penn State will continue to use data and the core mission as a guide to confront various financial challenges, including:

• The need to maintain a balanced budget, beginning fiscal year 2025-26; however, changes have already begun and will continue.
• Changing demographics in Pennsylvania.
• A projected $30 million increase in health care expenses in the fiscal year 2025-26 budget.
• The reality that 69% of the education and general funds budget is personnel costs, including salaries and benefits.
• Stagnant funding from the state and tuition rates that have not kept up with inflation.
• Inflationary cost increases for goods and services necessary to its mission.

“The need for change within our University is undeniable and must occur for Penn State to retain its status as a leading institution, to innovate, and to invest in greatness at scale in education and research,” Bendapudi said. “Our ability to respond to the multitude of challenges and our capacity to adapt is what will determine our success now and in the future.”

Investing in people

As part of Bendapudi’s goal to transform internal operations at Penn State, the University is making significant investments to continue to attract and retain top talent and keep employee salaries aligned with industry and role-based benchmarks. This ongoing investment in faculty and staff is an essential requirement for Penn State to continue offering the highest quality education and delivering on research and innovation. A recent and historic investment in staff salary alignment is just one of the many positive transformation initiatives the University is taking to strengthen its future during a time of significant change in higher education, according to Jennifer Wilkes, vice president for human resources.

Q: What investment is Penn State making in its employees?

Wilkes: The University has invested $42 million in merit-based salary increases (general salary increases) for the 2023-24 fiscal year for faculty and staff who are paid out of the educational and general funds budget. This figure does not include salary increases for employees who work in self-sustaining units — like Intercollegiate Athletics, College of Medicine, Office of Senior Vice President for Research, and Auxiliary and Business Services — whose salary increases are paid from their unit’s own budgets.

President Bendapudi has directed her team to bring the Compensation Modernization Initiative to a close this year. To do this, a substantial investment was required. While the numbers are still being finalized, the University anticipates investing $17.6 million through the Compensation Modernization Initiative to align staff salaries into the new salary structure. Additionally, a historic investment this year of an estimated $42.6 million will be allocated for salary adjustments for some staff positions.

Q: How is Penn State investing in diversity, equity, inclusion and belonging (DEIB)?

Bendapudi: We are continuing to make meaningful investments in areas that will bring greater equity for students, faculty and staff of all identities. I’m excited about recent efforts to further support LGBTQ+ and military-connected community members, which include two new employee resource groups and the hire of a gender diverse care role in Student Affairs. We’re also making investments in the Office of Student Disability Resources to increase the number of staff and are renovating and relocating both the testing center and offices where students seek support. Among efforts to support students, we are strategizing to address high DFW (the percentage of students who receive a D, F or who withdraw) courses that are critical for student academic success.

To support staff diversity, Human Resources recently launched a new DEIB resource page with information on inclusive hiring practices; partnered with Diversejobs.net to automatically post all Penn State job postings to the site (without cost to units); is working on comprehensive inclusive hiring training for those serving on search committees, hiring managers, and HR staff; and will soon be implementing the ability for employees to share their pronouns and name pronunciations in Workday early this year. HR and the Office of Equal Opportunity and Access are collaborating to implement a new standardized process to provide affirmative action plan data to units during job searches. To support faculty diversity, we are establishing new procedures for all academic units to create faculty recruitment plans for tenure-line searches that address how units develop diverse candidate pools and evaluate candidates.

Our decision-making must align with how we can make measurable progress in the four priority areas I’ve previously shared, to: close gaps in graduation rate outcomes across identity groups; increase faculty diversity; expand access to staff professional development; and improve a sense of belonging for all Penn Staters.

Business model

In July 2023, the University implemented a two-year, data-driven budget allocation model to enhance predictability, improve the strategic allocation of University resources, and better control costs in support of access and affordability. The budget allocation model is based on many factors, including student head count, student credit hours, and tuition and research expenditures, among other factors. It also includes subvention funds, which are dollars provided through executive discretion as an operating subsidy for academic units, and strategic funding for academic, administrative and student support units. Sara Thorndike, senior vice president for finance and business, and Justin Schwartz, executive vice president and provost, share the plan amid a variety of substantial challenges.

Q: When the budget is balanced, do you anticipate future years of continual reductions based on the projection you’re seeing?

Thorndike: Yes, and this is why our ultimate goal is not simply a balanced budget, but rather the creation of a sustainable business model for Penn State. Hurried reactions to financial challenges have become the norm rather than the exception in higher education. We will be different. At Penn State, we are fortunate to have a longer runway than some of our peers to create a more sustainable future. The need for a comprehensive analysis to set the institution up for continued success is not an option, but a necessity. We have 18 months to thoughtfully plan and execute. So, while we make reductions in certain areas, it is being done in a way that is mission driven with financial sustainability in mind, and unit leaders will also be planning to create resources that allow for investment and innovation.

Q: What is expected for the budget allocations for 2025-26?

Thorndike: For the fiscal year 2026 budget (July 1, 2025, through June 30, 2026) — which will go before the Board of Trustees in July of this year — the University began by asking administrative and student support units to submit plans to reduce their 2025-26 expenses by 5%. After reviewing each unit’s proposal, Penn State leadership made strategic decisions about reductions to be made, and what areas are unable to absorb reductions at this time. The result is a $29 million (3.8%) total reduction across all administrative and student support units. This is funding being cut from central administrative units that will now not need to be cut from colleges and campuses in the budget allocation model, lowering the burden on academic units most closely linked to the student experience.

Including $20 million invested strategically by the Office of the Executive Vice President and Provost, the 2025-26 overall central budget allocation for University Park colleges will be about $11 million less (1.4%) than the 2024-25 allocation. Based on the University’s budget model calculations and subvention funds, some colleges will see a net increase in their allocation from 2024-25 and some colleges will see a decrease.

The overall central budget allocation to the Commonwealth Campuses includes a $31 million subvention, and then is projected to be, in aggregate, $54 million less (14.1%) than the 2024-25 allocation.

Q: How will Penn State make decisions about future investments?

Schwartz: We are being strategic in our investments to bolster our research enterprise; to make strong, successful programs even stronger; to invest in new programs to increase overall enrollment and student demand for Penn State; and to invest in the academic, co-curricular and support needs of our students.

Expenses such as health care costs are expected to continue to rise tens of millions of dollars annually; simply budgeting for an annual General Salary Increase of 3% increases our annual budget by nearly $50 million. State funding, which is an important part of our budget, also has not kept pace with inflation — remaining flat for the last four years. Our appropriation also significantly trails the funding received by the commonwealth’s other public universities on a per-in-state-student basis, in a state that is second-to-last in per-student spending in higher education.

Even with rising costs and stagnant state support, we must keep pace with changes in higher education and the need to innovate our offerings and delivery of courses. That is the lens we must use to evaluate everything and, while we do have challenging decisions to make in the coming 18 months, they are necessary so that we can continue providing a world-class Penn State academic and student experience into the future.

Enrollment

As part of the financial challenges facing the University, Penn State, along with nearly all colleges and universities, is grappling with enrollment declines, especially at smaller campuses. While University-wide enrollment has remained relatively stable, mainly due to enrollment increases at University Park, overall enrollment at the Commonwealth Campuses has declined 20% since 2016 and nearly 30% since 2010. While seven campuses are projecting small enrollment increases for the next academic year, there continue to be significant declines at others — with some campuses enrolling only a few hundred students. According to Matt Melvin, vice president for enrollment management, the University’s access mission remains critical, but reaching enrollment critical mass also is important from an efficiency perspective, while also providing the type of rich and engaged academic experiences that students expect. Melvin said Penn State is focused on new strategies to grow enrollments at all campuses amid changing student expectations and preferences.

Q: How are we continuing to address the decline in enrollment across our Commonwealth Campuses?

Melvin: Our Commonwealth Campus structure, which provides affordable, close-to-home access to a Penn State education, is a critical part of our land-grant mission. We want to balance the new student portfolio at the campuses by exploring and expanding the nonresident, international, adult, online and transfer student markets. As cost has increasingly become a primary driver of college choice, efforts are being undertaken to align financial aid and scholarship awarding criteria with enrollment priorities to create even more affordable pathways to a Penn State degree. We also want to make strategic investments in successful and high-demand academic programs that align with the state’s workforce needs, so that we are preparing our students for sustainable careers here in Pennsylvania. Our commitment to student access will always be a central part of our mission, and our Commonwealth Campuses make higher education possible for thousands of Pennsylvanians. The way we look at our campuses is evolving, however, and we are continually exploring opportunities for our campuses to evolve based on student needs. Specific initiatives include:

• Analyzing the unique strengths of each of our campuses to create discipline-based hubs of excellence, for example, at certain locations that leverage faculty expertise, campus resources and infrastructure, and local community needs.  
• Increasing demand for the first-year class through expanded marketing and recruitment efforts designed to introduce students and their families to the Commonwealth Campuses earlier in the college search and selection process.
• Implementing a dual admissions program and expanded articulation agreements with Pennsylvania community colleges designed to create seamless pathways to Penn State degree completion.
• Adopting a test-optional admissions policy to focus on more retention-relevant admissions criteria.
• Expanding the current Discover Program to grow Commonwealth Campus reach in out-of-state markets.

Q: What’s the current enrollment strategy at University Park and the Commonwealth Campuses?

Melvin: Demand for University Park continues to grow, and we are planning to leverage that demand by increasing enrollment in the first-year class at University Park. We are looking to slightly increase University Park’s first-year class from 9,175 students this year to 9,500 students starting in fall 2024, as that is the current maximum with housing capacity, with the goal of moving toward 10,000 students across the next several admissions cycles. As part of this plan to increase capacity at University Park, we are looking closely at the investments that will need to be made, from physical infrastructure to additional faculty and staff, to accommodate a larger student body. We want to do this the right way, so we’ve already engaged in preliminary conversations with key groups on campus and within our community, and we are cognizant of factors such as admissions standards, class sizes, and faculty/staff ratios, which remain incredibly important. We also want to increase the racial/ethnic, socioeconomic and geographic diversity of the first-year class at both University Park and the Commonwealth Campuses, grounded in mission-based aspirations to provide opportunities to underrepresented, first-generation, Pell-eligible and rural students.

As part of our overall enrollment and academic strategies across campuses, as an institution, we are focused on developing and revising academic programs to ensure we have relevant offerings that relate to student demand and workforce needs, especially in local areas across the state. We also are focused, along with our academic partners, on increasing student retention — and ultimately degree completion — by improving academic performance and progress in the first year; prioritizing a stronger focus on a data-centric, research-based approach to enrollment management; streamlining financial aid and institutional grant programs with the goal of increasing need-based aid for Pennsylvania students; and creating a consistent, unified pre-enrollment experience for students and their families as they navigate a complex decision-making process.

Commonwealth Campuses

At this stage, individual campus allocations have not been finalized, purposely, so that the Office of the Vice President for Commonwealth Campuses can work closely with Penn State’s 20 Commonwealth Campuses and their chancellors. Margo DelliCarpini, vice president for Commonwealth Campuses and executive chancellor, and our campus chancellors have already started meeting, and DelliCarpini has reinforced they will be working collectively to identify innovative ways to meet the challenges.

Q: What steps are you taking to determine each campus’ budget allocations with a projected $54M reduction?

DelliCarpini: I have begun an analysis alongside the chancellors to first define the complex problem and get to the root of what’s preventing our growth. It’s important to understand that determining the appropriate strategy for each campus is a unique exercise. How we implement change will be fundamentally different across the commonwealth as we are individually analyzing enrollment, total facility costs, our physical infrastructure, our programs, our personnel, and our community engagement — to name a few. Some of the options we are exploring to offset costs may include what it would look like to partner with additional local community colleges and rent out our facilities for some of their programming; evaluating academic programs per campus and determining strengths to really lean into; and identifying where not to duplicate programming.

Aggregate Commonwealth Campus enrollment data

Data from OPAIR – Data Digest Dashboard

Excellence in teaching and learning

This semester, Penn State will begin an academic program and portfolio review (APPR) of all academic programs, including undergraduate and graduate majors and minors, offered at all of our campuses. This process will not include professional programs such as law and medical programs. By reviewing a variety of enrollment, performance, employer/community needs, competitors in the marketplace and other academic data, this effort is intended to understand how the University’s program offerings align with students’ desires and needs, as well as local, state and national employment trends. The project’s executive sponsors are Schwartz, DelliCarpini, and Michele Stine, chair of the University Faculty Senate and teaching professor in the College of Health and Human Development. The University will engage a consultant — and is currently in the RFP process — to complete this initial evaluation by summer 2024 before working through any potential changes in the 2025-26 academic year.

Q: Why is Penn State performing an academic program and portfolio review?

Schwartz: We are consistently looking at the academic programs we deliver and how we can be more efficient and impactful in delivering the programs that our students want and need — ultimately to prepare them for successful careers after graduation. This process will help us determine whether we are making appropriate investments in high-demand programs and fields, and where resources may need to shift, based on need, demand and viability. The review also will include assessing opportunities to leverage a reimagined approach to integrate online options for residential students in ways that truly expand access. At the end of the APPR process, we want to ensure that Penn State offers the right mix of residential, online and blended programs to best meet our mission, addressing the demands of our students and the needs of our society, to the greatest extent possible — this includes having the right programs, accessible where the demand exists.

While our academic program and portfolio review is just beginning, we’ve already started discussing this with our key leadership — deans and chancellors — and intend to go about this process with significant involvement from our colleges and campuses, as well as Faculty Senate, in every step of the process. It’s important to keep in mind that implementation will look different across each of our campuses, colleges and departments. Finding the right strategy for each campus will be a unique exercise and we won’t apply a one-size-fits-all approach. Over the summer, we’ll work with leaders on these plans, including Faculty Senate, to implement changes over the 2025-26 academic year.

Q: How are we adapting to the evolution of student preferences?

Schwartz: We have a pilot underway to reimagine how we provide students with curriculum and instruction to gain a broader understanding and a more dynamic skill set that is larger than just a specific major — in areas that are critical to the workforce of today, such as sustainability and artificial intelligence. We are committed to aligning program offerings with employment trends and employer experiences data, leveraging the resources of the University’s alumni network to support and mentor current students and aid in their job search, and prioritizing paid internship opportunities and undergraduate research experiences for all students. Just as the workforce is changing, Penn State has the breadth and depth of expertise across domains to change how we think about educating our students.

We are also aware that student attitudes toward online learning are continuing to evolve, and we aim to remain at the forefront of online education, building upon 25 years of World Campus’ success to look at how to implement blended program opportunities to further optimize our ability to provide access to students across the commonwealth and around the globe.

Excellence in research

The University maintains its commitment to prioritize and incentivize its research enterprise and to have the resources available for continued investments. Penn State’s research expenditures have grown and continue to do so, setting a record high of $1.239 billion in 2022-23. Andrew Read, interim senior vice president for research, shares his perspective on how the University is building on President Bendapudi’s goal to grow research excellence, investing in its research enterprise, and commitment to research being a cornerstone of the University.

Q: How will you remain committed to research being a cornerstone of our University?

Read: Research is part of Penn State’s DNA and that won’t change. Currently we are ranked among the top 30 research institutions in the country and among the top 15 public universities. We are in the elite group of AAU universities. As an R1 institution, we employ some of the world’s leading researchers that help deliver a rigorous academic environment for our students and create knowledge for the benefits of society. Yet, we won’t be complacent in our achievements and have strong ambition to grow. That means investing to stay great where we are already great, investing in areas where we can go from good to great, and investing in those areas that are absolutely essential table stakes for a 21st century land-grant University. To me, this means growing the research enterprise in a more focused way, which must include investments in research support staff and in the tools and resources our faculty and staff need to be efficient and effective.

Q. How is research prioritized and incentivized in our budget modeling?

Read: To ensure research remains a cornerstone of our University, the budget model ring-fences research in a way that arguably protects and incentivizes research investment better than at any time in Penn State’s history. The Office of the Senior Vice President for Research will be partnering with colleges and campuses even more closely than in the past so that we invest to maximize university-wide research impact.

Q: Are there any further updates on the Research Support Transformation project?

Read: Growing our research enterprise requires that we reduce the administrative burdens on faculty of doing research, and that the enterprise is supported by the right-sized and right-skilled staff that have the tools they need to do their job. Focusing on those things is a top priority.

There are three workstreams underway to make the University’s research support infrastructure more efficient by taking a more standardized, institution-wide approach to research support. The workstreams are focused on analyzing and making recommendations to: 1) streamline the invoice and payment process with funding agencies; 2) analyze the functional gaps within our current research information systems, including the portal researchers use to track financial progress; and 3) modernize research support moving forward, starting with research accounting. The project at its core is focused on better understanding the root causes of the administrative burdens that researchers face that prevent additional growth. We are ready to share more with you and ask that you stay tuned for an upcoming announcement in Penn State Today that will open up the opportunity for faculty and staff engagement. This feedback is critical to inform what actions we prioritize within the research support ecosystem.

Operational excellence

As part of President Bendapudi’s vision and goals, Penn State is positioning the University for future growth and success through organizational efficiencies and transforming its operations. Efforts such as Compensation Modernization, the budget model and optimized service teams are part of this transformation. Michael Wade Smith, senior vice president and chief of staff, provides an update.

Q: What are the next steps of strategic planning?

Smith: We’re excited to be kicking off the next phase of President Bendapudi’s vision, which will center on transforming the goals into an actionable plan for the institution. As we continue to focus on growth and innovation — in everything from teaching and learning to research — we need to be very clear on the direction we want to go as a university, and we need to set aside the resources to do so. Where our strategic planning work and teams will be so critical is in thinking about our six goal areas and determining what we want and need to do collectively as a University to move these priorities along. We are in the process of reaching out to appoint new teams to lead us through phase two work over the spring and summer to formulate our next institutional strategic plan — after this, units will begin to develop their own plans. We will be switching up our teams from phase one to make sure we continue to hear from a variety of people in different areas with different jobs, different skill sets and different experiences.

Q: What is the status of the optimized service teams?

Smith: In 2022, we began a multi-year effort to engage campuses, colleges, and administrative and academic units in an optimization exercise to create an ecosystem of shared support and services — called optimized service teams — in key areas across the University: IT, Development and Alumni Relations, safety and facilities, and finance. Our focus has been to take our time to understand the nuances in each of these areas so that we can make the right decisions, take the right steps and evaluate as we go — to create efficiencies while not losing critical support in our units. We will be phasing in these OSTs, which will not only allow us to move forward but also be able to assess and right-set changes as we proceed. At this time, the Development and Alumni Relations workstream is nearly complete with its work, and we will be focusing upcoming efforts on the IT and finance workstreams. Collectively, the OSTs are working on enhancing support and service offerings across the University in a way that serves our mission and unique interdisciplinary structure, but that also addresses strategic needs as well as compensation and career pathways for staff. Each project leader will continue to work closely with the Office of Enterprise Change and Transformation, Schwartz, and DelliCarpini throughout this process. We will continue to share updates as these workstreams progress.

Q: How is this work going to be completed with consistency and attention?

Smith: I see this as a collective exercise — it won’t be one single person or team’s responsibility to help enact change. It’s going to take all of us together to roll up our sleeves. Of course, to be successful and support people through times of transition, we are working on creating new processes and formal organizational structures to help drive, support and operationalize change across our large organization. One of these changes that I'm happy to share is the consolidation of the change management operations of the Provost’s Office, IT, and Finance and Business to a new centralized Office of Enterprise Change and Transformation, which will now report directly to my office. Led by Jeremy Bean, associate vice president of enterprise change and transformation, the team is composed of change management specialists and project managers who have joined the unit from other areas across the University. This team will help us modernize our operations and support the implementation of strategic priorities from the optimized service teams to the Research Support Transformation Project and more.

Future updates

“I am committed to working with our faculty and staff to co-create a sustainable future based on mission and performance as well as the needs of our communities and the commonwealth, our critical partners in this evolution,” said Bendapudi. “Our ultimate goal is to deliver on our greatness at scale to make Penn State the institution of choice for our current and prospective students and post-docs, the employer of choice for our faculty and staff, and the partner and investment of choice for our many external stakeholders. To do so, we must think, innovate, problem-solve and operate differently. This will take all of us, our talented students, faculty and staff, to be active participants in the changes to come — this is the only way we will be successful. We wanted to share this foundational information as an initial step. I know you will have questions and I look forward to sharing more about this vision with our community.”

Additional updates will continue to be shared with the Penn State community and there will be future opportunities for discussion as these efforts move forward.

Bendapudi has asked members of the community to share their thoughts and questions using the form at this link.