Administration

Penn State on strong financial path as revamped budget model enters third year

University releases budget allocations, model for fiscal year 2026-27

Credit: Patrick Mansell / Penn State. Creative Commons

UNIVERSITY PARK, Pa. — Penn State has released University-wide budget allocations for fiscal year 2026-27 as part of its two-year, data-driven budget process, which has the institution on a strong financial path as it enters its third year. According to Sara Thorndike, senior vice president for Finance and Business/treasurer and chief financial officer, the allocations were driven by the University's wider efforts to maintain a balanced budget, while focusing on strategic priorities, enhancing the student educational experience, and supporting those areas of the institution where additional investment is needed to meet student demand and realize opportunities for growth. 

“As our data-driven budget model enters its third year, it is supporting Penn State’s long-term success,” Thorndike said. “The model has helped to inform where we need to invest more to better align our spending with student interest and demand, while also helping to strategically reduce spending, more effectively allocate our financial resources in support of institutional priorities, and achieve our goal of a balanced budget. Critically, the model is fluid enough that we have been able to align it with the president’s strategic goals, our land-grant mission, and the needs and success of our students.” 

The allocations, based on the University’s budget model calculations and subvention funds, are available online from the Office of Budget and Finance. Of note, budget allocations for the University’s 20 Commonwealth Campuses are currently shown in aggregate, with subvention already included, as individual campus budgets will not be finalized until subvention is strategically allocated later in 2025. This funding is for the fiscal year starting July 1, 2026, through June 30, 2027; budget allocations for FY 2025-26 were announced in January 2024. 

Thorndike also noted that these are initial allocations for Education and General (E&G) funds based primarily on tuition and state funding projections. Additional funds will be allocated to unit budgets for annual salary increases and faculty promotions. 

Subvention and strategic funds for 2026-27

Central funds are again being allocated in FY 2026-27 to support strategic priorities and Penn State’s educational mission. This includes $40 million in provost subvention, or operating subsidies for colleges and campuses, to fund University priorities that cannot be fully captured by the budget model. The model also includes $11 million in permanent annual support for specialized instruction and facilities necessary to support the education mission of the Nese College of Nursing and the College of Arts and Architecture. 

Of the $40 million earmarked for provost-provided subvention in FY 2026-27, the Commonwealth Campuses will receive $30 million, and the University Park academic colleges will receive $10 million.  

“We continue to be strategic in our decision-making for distributing subvention dollars,” said Tracy Langkilde, interim executive vice president and provost. “These critical funds allow us to be responsive in our support for Penn State’s mission and priorities; opportunities for growth and success; areas that require smaller class sizes and/or specialized equipment; and a desire, when possible and feasible, to minimize budget reductions, particularly in situations where enrollments are expected to increase.” 

The model again includes $50 million in presidential strategic funds. Separate from subvention funding for colleges and campuses, presidential strategic funds are intended to support priorities like enrollment management or new programs, for example, although no decisions have been made as to how these funds will be used. 

Fiscal year allocation calculations for University Park colleges and Commonwealth Campuses are initially based on the University’s budget allocation model, which determines funding totals based on student credit hours, student headcounts, and scholarly research, before subtracting overhead costs for administrative and student support units. Additional permanent support and subvention funding, based on availability and assigned to units at the discretion of University leaders in response to strategic priorities, is then added to allocation totals. 

University Park budget allocations

The academic colleges at University Park received varied allocations for FY 2026-27, with most seeing modest increases, for an overall aggregate increase of 3.6%. Included in this overall funding picture are budget-model-driven adjustments to base budget allocations, plus permanent support and subvention.

Similarly, there is a small aggregate allocation increase in the central administrative and student support units of $1.8 million for 2026-27. The allocations for most administrative and student support units, however, remain flat/unchanged from 2025-26. 

“Our goal is to land in a place where we’re not seeing large fluctuations every year, and our budgets are balanced and appropriately sized to support our students’ success and our research mission,” Langkilde said.  

Commonwealth Campus budget allocations 

Including $30 million in subvention, the Commonwealth Campuses will receive a budget allocation of $314.9 million for FY 2026-27, an aggregate decrease of $25 million, or 7.3%, from FY 2025-26.  

“Our Commonwealth Campuses continue to be an important part of Penn State's identity, helping us to reach our students across Pennsylvania with transformative educational experiences,” said Margo DelliCarpini, vice president for Commonwealth Campuses and executive chancellor. “In higher education, student expectations, demographics, and the delivery of education in general have changed drastically since our 20-plus campus model took shape in the middle of the 20th century. The complex work to reimagine our campus ecosystem for the future — which has been underway for more than a year — is essential and continuing with many contributors from across Penn State.” 

Subvention decisions for the Commonwealth Campuses will be made later in 2025, as informed by the Future State process, and following additional review and conversation between the Office of the Provost and OVPCC. As a result, budget allocations for the Commonwealth Campuses are currently shown in aggregate and include subvention in aggregate as well. 

What has changed in the 2026-27 budget model? 

Penn State’s budget model will continue to evolve each year, and the 2026-27 model has been adjusted based on feedback received from the community and with input from faculty and staff experts as part of the Budget Working Group, Thorndike said. Thorndike noted the contributions of the faculty members who serve on the Faculty Senate Joint Committee on the University Budget.  

As part of Penn State’s commitment to investing in its research enterprise, the amount available for research funding incentives was changed to 1.5% of net tuition and appropriations (E&G), representing an increase of $4.2 million, for a total amount of $32.7 million — up from a flat $28.5 million in past years.  

Other updates to the FY 2026-27 budget model include:   

  • Student credit hour and headcount weighting has been adjusted to 50% in the most recent year (FY24), 30% in year two (FY23), and 20% in year one (FY22), instead of an equal 33% weighting each year previously.  This is intended to make the model more responsive to changes in enrollment and instructional commitment.  

  • Students with multiple majors are now split equally between colleges for purposes of student headcounts.  

  • Commonwealth Campus tuition rates were updated from an average program rate to be more precise based on enrollments and rates for each academic program.  

  • World Campus undergraduate headcount was added to the model at 0.25 per student, split for multiple majors. Previously, no allocation was provided for World Campus undergraduate headcount.   

  • The overhead charges to the colleges, campuses and auxiliaries for administrative and student support unit allocations have been adjusted to account for funding transfers for Optimized Service Teams that have been decided to date.   

As it was for 2025-26, the FY 2026-27 budget model is being shared publicly in the interest of transparency, Thorndike said.  

“We are again sharing the FY27 budget model and accompanying workbooks with the community so that they can see exactly how we determined the allocations for each unit,” Thorndike said. “We have had conversations with and shared the data with unit leads, and we welcome the community’s review and feedback, too, as we are committed to openness and clarity in the budgeting process. This feedback will help us to improve the model as it continues to evolve in the years ahead.” 

The FY 2026-27 budget model workbooks, along with supporting resources and FAQs, can be found on the University’s budget website

What happens next? 

Penn State is announcing Education and General fund budget allocations for FY 2026-27 as part of its two-year budget process, which is designed to enhance predictability and planning, improve the strategic allocation of University resources, and better control costs in support of access and affordability.  

Allocations have been shared with unit leaders, and additional conversations and budget planning will be ongoing throughout spring 2025 as all fund unit budgets are constructed and finalized. Penn State’s final 2026-27 budget, including accompanying tuition and fees schedules, will be presented to the Board of Trustees for approval at its July 2025 meeting. 

Penn State’s 2025-26 operating budget and tuition schedules, which go into effect on July 1, 2025, were previously approved by the board in July 2024

Last Updated February 3, 2025