Penn State University: Increased support for Penn State is critical to Pennsylvania’s families, economy

To support current and future Pennsylvania students and families; to benefit the state’s economy; to maintain the University’s quality as a top 1% global university; and to create parity between Penn State and all other public universities in Pennsylvania, Penn State is requesting significantly increased funding from the commonwealth for the coming fiscal year. University leaders are asking that Penn State’s per-student funding, which currently ranks last among the state’s public universities, be increased to align with that of the next lowest-funded Pennsylvania public university on a per-student basis.

The funding request, which was adopted by the Penn State Board of Trustees’ Committee on Finance, Business and Capital Planning today (Sept. 22) and will be voted on by the full board on Sept. 23, notes the significant disparity in per-student funding for Penn State compared to all other public universities in Pennsylvania. To close the per-student funding gap, Penn State is requesting an increase of $115.2 million, or 47.6%, for its 2023-24 general support appropriation. This funding is used to provide an in-state tuition rate that represents significant cost savings for Pennsylvania students and families.

Lowest per-student funding in the state
Penn State currently receives $242.1 million from the state to fund its education expenses. Divided evenly among 43,000 Pennsylvania undergraduates, that works out to about $5,600 in support per student, a funding level that ranks far below the national average and that lags behind the state’s other public institutions by between $2,600 and $3,400 per student. Based on each institution’s most recent state funding and enrollment data, Temple University receives $8,275 per Pennsylvania resident undergraduate student, the Pennsylvania State System of Higher Education receives funding of $8,378 per in-state undergraduate, and the University of Pittsburgh receives $9,049 per in-state undergraduate student.

“From the moment I arrived at Penn State, I have said my top focus is on our students and their success. Controlling costs and maintaining quality both are critical to that mission,” said Penn State President Neeli Bendapudi. “As I learned more about Penn State’s historical funding model and its growth over time as a core educator of Pennsylvania’s workforce, it became apparent that there is a need for Penn State and the commonwealth, as longtime partners, to revisit our budget for the benefit of Pennsylvania students and the state’s economy.”

An increase in general support funding will directly benefit Pennsylvania students, as these state dollars are critical to the University’s ability to offer a reduced in-state tuition rate. Even as state funding has lagged inflation, Penn State, in accordance with its land-grant mission to educate the citizens of the commonwealth, has continued to provide an in-state tuition discount that far exceeds the per-student appropriation. Penn State more than doubles the state’s investment, with the average Pennsylvania resident undergraduate paying about $13,400 less for their education annually than their out-of-state counterparts.

“As Pennsylvania’s only land-grant university, we feel strongly that Penn State students and their families deserve as much funding per student as the other state-related universities in Pennsylvania,” Bendapudi said. “To support our students at a lower funding level than those at other institutions impacts our ability to maintain access to and affordability of a world-class Penn State degree for all qualified Pennsylvanians.”

Bendapudi noted that while Penn State just concluded a record-breaking $2.2 billion fundraising campaign, the University’s endowment is not an alternative to state funding and the role it plays in keeping tuition low for Pennsylvania students.

“We are exceptionally grateful for our donors, as their generosity allows us to achieve a variety of priorities, such as lowering the cost of attendance for thousands of students through endowed scholarship programs and other designated student-focused support,” said Bendapudi. “However, 99% of the funds raised from our campaign are restricted and must be used for the purpose specified by the donor — be it a scholarship program, support for a new facility, or an endowed professorship. What this means is, at a fundamental level, we can’t use our endowment to cover basic teaching costs or to lower tuition. That’s where the state appropriation comes in and why it is so critical to our students.”

Penn State’s appropriation request by the numbers
Overall, Penn State is requesting total state funding of approximately $469.5 million for 2023-24, an increase of $125.5 million, or 36.5%, over 2022-23. The request breaks down as follows:

General Support: $357.3 million, an increase of $115.2 million, or 47.6%, over 2022-23. General Support funding covers core teaching costs in Penn State’s education budget, allowing the University to offer an in-state tuition rate that directly impacts thousands of Pennsylvania students and their families. These dollars also enable Penn State to invest in the quality of its academic programs so that it can attract the state’s top students and prepare them for successful careers in Pennsylvania.
Agricultural Research and Cooperative Extension: $60.6 million, an increase of $2.9 million, or 5%. Agricultural research and extension programs are not funded by tuition, so appropriation increases are necessary to keep pace with rising costs and to leverage matching federal and county dollars. This funding supports Penn State Extension and the vital research conducted by the College of Agricultural Sciences, benefiting citizens in every Pennsylvania county and helping the state’s agriculture industry combat challenges ranging from avian influenza to the spotted lanternfly.
In addition, Penn State is requesting $2 million in new funding to implement the Emerging and Advanced Technology Initiative within the College of Agricultural Sciences. This initiative is intended to enhance the efficiency, sustainability, growth, competitiveness and profitability of Pennsylvania agriculture through emerging technology integrations that are changing the way organizations do business.
Pennsylvania College of Technology: $31.5 million, an increase of $4.7 million, or 17.7%. Penn College, a special-mission Penn State affiliate, offers hands-on, applied-technology education that is critical to Pennsylvania’s workforce needs. This requested increase would place Penn College’s per-student funding on par with Temple and benefit the college’s 4,200 students, 90% of whom are Pennsylvania residents.
Penn State Health and the College of Medicine: $15.9 million, an increase of $756,000, or 5%. This funding is used for medical assistance to provide access to high-quality health care for citizens with limited financial means. This funding also helps to prepare medical students for careers in primary care and rural medicine through the Regional Medical Campus at University Park, as well as support programs to enhance the overall health and wellness of Pennsylvanians, particularly in rural areas.
Invent Penn State: $2.35 million, representing level funding from 2022-23, to drive economic development. Penn State is asking the state to renew this year’s inaugural investment in Invent Penn State so that work to strengthen and grow the LaunchBox and Innovation Network can continue, and to further expand access to the Pennsylvania Technical Assistance Program for small to medium enterprises, with an emphasis on the manufacturing sector. This investment would positively impact business creation and job growth, while also helping to decrease the impact of “brain drain” across the state.


Stagnant state support and a decade of cost control
As Penn State has grown through the years, the University’s state funding has not increased with it. State support for Penn State’s education mission remains below 2010-11 funding levels and essentially mirrors the University’s funding in the year 2000 — despite 22 years of inflation and rising instructional costs.

The absence of regular funding increases — the University’s general support appropriation has been flat for the past three years — has only intensified the pressures on its tuition and budget. Despite stagnant support, Penn State’s focus has been to reduce cost-to-degree by helping students graduate on time, decrease the rate of student borrowing, and promote the success of need-based students.

Penn State has been proactive in lowering its overall cost structure rather than relying on tuition increases to meet rising expenses. Over the last 10 years, Penn State has taken a hard look at its budget to find cost savings and efficiencies, resulting in the University saving or reallocating more than $400 million over that span. As a result of these efforts, tuition increases across Penn State’s campuses have been below national averages for more than a decade, and after accounting for inflation (using fiscal year 2021 dollars), Pennsylvania resident students are now paying less for their Penn State education than they were 10 years ago.

This commitment to managing costs for lower- and middle-income Pennsylvanians continued this year — despite an overall increase in tuition, Penn State put an additional $14 million toward financial aid, guaranteeing that any degree-seeking undergraduate student with an annual household income of $75,000 or less would not experience a tuition increase this year.

As examples of efforts to reduce costs, Penn State offered a voluntary retirement program in 2016 that resulted in $14.4 million in savings; pre-funded a portion of its future State Employees’ Retirement System obligations that will result in $533 million in net savings over 30 years; and implemented a new high-quality employee health care plan that is expected to save approximately $60 million over the next three years.

Coming out of the pandemic, Penn State is projecting a budget deficit this year of approximately $149 million, resulting from a variety of factors, including significant inflation; continued flat state funding; and increased costs, lost revenues and lower enrollments due to the pandemic. This follows pandemic-related deficits each of the last two years, which the University has covered using reserve balances.

Penn State is working to reverse this unsustainable trend, with the goal of having a balanced budget by 2025. To address the deficit, the University is focused on new revenue opportunities outside of tuition, maximizing enrollment capacity at its Commonwealth Campuses, continued expense reductions, and the creation of a new multiyear budget allocation model. For the 2022-23 academic year, Penn State has implemented a strategic hiring freeze and a 3% University-wide budget rescission. Including this year’s cuts, across-the-board rescissions over the last four years have resulted in $113.4 million in recurring cost savings.

Penn State’s statewide impact
With 24 campuses and an online World Campus that provide unparalleled access to a world-class education, a growing health system that is expanding the availability of high-quality medical care, and a $1 billion research enterprise that is solving some of society’s most pressing challenges and translating those discoveries into new Pennsylvania businesses, Penn State’s impact is felt daily in every Pennsylvania community.

For many students, Penn State represents a path to opportunity and upward social mobility, as Penn State graduates are highly sought after by employers and become important contributors to Pennsylvania’s economy. In a 2019 survey, corporate recruiters ranked universities based on which best trained, educated and prepared graduates for success once hired, and Penn State tied with MIT for fifth in the nation.

With its size and breadth of academic offerings, Penn State educates more Pennsylvania students — and has a greater impact on the state’s workforce — than any single institution in the state. Each year, approximately 20,000 new Penn State graduates enter the workforce, and most of these students choose to live and work in Pennsylvania after graduation. In total, nearly 390,000 Penn State alumni — representing more than half of the University’s worldwide alumni base — live in Pennsylvania.

Penn State also is an economic engine that provides a great return on the state’s investment. A 2019 study found that Penn State contributes $11.6 billion to Pennsylvania’s economy and directly and indirectly supports more than 105,000 jobs. With a Commonwealth Campus structure that places a Penn State location within 30 miles of 96% of the state’s population, the University’s economic impact is felt in communities statewide.

Penn State will submit its appropriation request to the state later this month, and the University will be engaged in discussions with leaders in Harrisburg until a final appropriation is set by the General Assembly and governor as part of the state budget process in late June 2023.