The Pennsylvania State University

2015-16 Budget Presentation

Prepared for the General Assembly of

The Commonwealth of Pennsylvania

Penn State’s 2015-16

Appropriation Request

Table of Contents

Page

Press Release:

Campus tuition freeze part of president’s access and affordability plans 1

Appropriation Request:

Penn State’s 2015-16 Appropriation Request – The Budget Plan 3

Highlights of Penn State’s 2015-16 Budget Plan and Appropriation Request 10

Details of Penn State’s 2015-16 Budget Plan and Appropriation Request 11

Table 1 – Summary of Proposed Changes, 2015-16 Budget Plan and

State Appropriation Request 16

Table 2 – 2015-16 Appropriation Request 17

Exhibits:

Summary of Appropriations – 2001-02 through 2014-15 18

Total Credit Enrollment – Fall 2014 19

Enrollment by Pennsylvania County of Residence – Fall 2014 20

Alumni Residing in Pennsylvania – December 2014 21

Income Budget – 2014-15 22

Expense Budget – 2014-15 23

Organized Research by Fund Source 24

PRESS RELEASE: Campus tuition freeze part of president's access and affordability plans

January 16, 2015

UNIVERSITY PARK, Pa. — As part of his initiative to help students and families facing financial pressures, Penn State President Eric Barron today (Jan. 16) proposed to the Board of Trustees a freeze of tuition rates for eight of the 19 undergraduate Commonwealth Campuses for next year, in addition to presenting five other recommendations.

“Our University is committed to access and affordability, so any student in Pennsylvania who is qualified to receive a Penn State education should be supported to the extent we have that ability,” Barron said. “This includes putting into practice practical initiatives to help increase retention and graduation rates while decreasing the cost of a degree and the rate of student borrowing.”

Under Barron’s plan, tuition would be held flat for Shenango, Beaver, DuBois, Fayette, Greater Allegheny, Mont Alto, New Kensington and Wilkes-Barre campuses for the 2015-16 academic year. Additionally, six other Commonwealth Campuses, including Brandywine, Hazleton, Lehigh Valley, Schuylkill, Worthington Scranton and York, would only see a modest increase of 1.8 percent in tuition for the year. Also proposed is a 2.4 percent increase for remaining campuses, Abington, Altoona, Berks, Erie and Harrisburg.

“Penn State remains committed to keeping our tuition increases as low as practically possible, and we are pleased that this year we may favorably impact students at these 14 campuses,” Barron said. “Penn State’s Commonwealth Campuses provide educational opportunities for a diverse population of students, many from families with fewer financial resources. The campuses also serve nontraditional students, and about 60 percent of all students work 22 hours a week on average.”

The campuses were identified based on factors such as higher percentages of need-based students, socio-economic and demographic challenges in the surrounding communities and Penn State’s potential to give relevant career path opportunities to students living in those areas of the Commonwealth. The University also continues toaggressivelypursue opportunities for strategic reduction of expenditures at all campuses that can benefit our studentsand their families.

“Having access to a Penn State campus close to home provides a tremendous financial benefit to our students and families,” said Madlyn Hanes, vice president for Commonwealth Campuses. “Eighty-five percent of our students are Pennsylvanians. Many come from households of modest resources and are the first in their family to attend college.”

Penn State is receiving a record amount of applications, and a large percentage of students — 39 percent at Commonwealth Campuses and 21 percent at University Park — are the first in their families to attend college. Simultaneously, the average student debt has grown from $20,000 a decade ago to $35,429, and family income continues to have a significant impact on retention and graduation rates.

Penn State’s Commonwealth Campuses provide students the ability to spend two years at one campus and then transition to another through the University’s 2+2 program. The steady tuition rate would give many students the financial benefit of paying a lower tuition for two years before moving to another campus to complete their Penn State degree. Students who choose to remain at their initial campus may realize additional financial benefits.

Access and affordability is one of thesix imperatives outlined by Barron when he took office in May.

At Friday’s meeting, Barron suggested five other recommendations for creating accessibility for students, many of which were established by the Penn State Enhanced Education Pathways Committee, charged by Executive Vice President and Provost Nick Jones. The group was challenged to explore ways to provide high-quality education at a cost that ensures expanded access for citizens. The remaining recommendations include:

—Math, English and foreign language preparation for incoming studentsto assist in their successful transition from high school to college, while providing students the opportunity to begin college study at the appropriate level for their intended major.

—Summer school/on campus employment for first- and second-year studentsto shorten time-to-degree and lower overall cost; students will make progress toward degree while working on campus or in the community.

—Expanding theStudent Transitional Experiences Program(STEP II)to provide financial, academic and social support for students who change campuses to ensure satisfactory academic progress.

—Increased emphasis on financial literacy and well-beingto improve student and family understanding of the cost of an education, its benefits, and the long-term consequences of debt.

—Increasing institutional support for theProvost Awards scholarshipprogram by $5 million in summer-fall 2015.The program, implemented in 2013, uses an allocation of central funds to provide initial financial aid awards of $4,000 per student and annual renewals through graduation. After committing $20 million each of the first two years, Penn State will increase the amount to $25 million.

Additionally, Penn State has partnered with theRaise.me programto offer micro-scholarships to students in five key public high schools in the city of Philadelphia and the nearby area. The program allows students to earn scholarship support toward their tuition at Penn State by achieving various success factors while still in high school, including achieving high grades in core coursework, taking honors courses or advanced placement, participating in leadership roles and studying world languages.

For a full look at President Barron’s presentation to the Board of Trustees, visithttp://www.psu.edu/ur/2014/President_Report_BOT_1_16_2015.PDF.

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Penn State’s 2015-16

Appropriation Request

The Commonwealth’s investment in Penn State’s appropriation is an investment that transforms lives, promotes upward economic mobility, and provides the Commonwealth with citizens who have the knowledge and skills to drive economic growth and innovation. Penn State, with its twenty four campuses and cooperative extension programs that serve every county, is in an unparalleled position to advance the priorities of Pennsylvania’s residents and elected officials. As Penn State’s 18th President, I am committed to creating and implementing new ways to leverage the partnership between the Commonwealth and Penn State to stimulate economic development in Pennsylvania and to ensure the career success of our students.

The Budget Plan

Penn State is not satisfied with simply addressing normal operating increases though the appropriation request. Penn State’s multiple campuses, agricultural research and cooperative extension programs, and other outreach activities have the potential to bring economic vitality to communities all across the Commonwealth. We propose to do much more.

In addition to addressing the normal operating increases, Penn State’s budget plan and appropriation request for fiscal year 2015-16 proposes an investment in the Penn State-Commonwealth partnership with a strategic goal of transforming Pennsylvania’s economy. With focused investment, the partnership between Penn State and the Commonwealth has extraordinary potential to stimulate the economy in ways that will launch our students and others into successful careers in new companies that, with adequate investment, would be attracted to Pennsylvania and also in startup companies based on the commercialization of intellectual property generated by Penn State’s researchers.

Penn State’s proposed 2015-16 budget plan and appropriation request reflects basic operating cost increases of $53.5 million. This increase would be considerably more if not for the internal reallocations and targeted costs savings of $34.4 million that are also reflected in the plan.

The revenue to fund the $53.5 million of operating cost increases would be composed of three sources: modest tuition and fee increases, additional non-tuition income from investment returns and indirect cost recovery, and our request for increased investment from the state.

A Penn State Strategic Priority: Stimulating Pennsylvania’s Economy and Student Career Success

As the Commonwealth’s land grant research university, Penn State proposes a state investment in a methodical and specific plan to promote student career success and to create jobs through economic development. It is an imperative that Penn State consciously and purposefully seek ways to increase the value of our intellectual capabilities to serve the state, the nation and the world. We have identified three targeted areas that can generate substantial economic activity.

  1. Investment in Technology Commercialization and Entrepreneurial Education: Entrepreneurs-in-Residence (EiR)

Our proposed Commonwealth-Penn State entrepreneurial partnership is a plan to expand our current efforts to promote the career success of our students and to create jobs through economic development and innovation. Penn State is a discovery engine, but we are not content to leave the considerable intellectual property we generate on the laboratory bench. As part of a comprehensive approach to improve our technology commercialization efforts, we would like to build, with the support of the Commonwealth, an Entrepreneurs-in-Residence program that recruits seasoned entrepreneurs into our faculty ranks at Penn State colleges and campuses. The EiRs would work with faculty, staff and students to facilitate, not only the development of discovery and knowledge creation into companies, but also to provide unparalleled educational opportunities for our students at all levels. Our objective is, quite simply, a deliberate culture transformation that promotes the transition from invention and creativity to the marketplace, while simultaneously ensuring student success.

Penn State requests an additional investment of $1.8 million from the Commonwealth to support this agenda. This will allow for the recruitment of eight Entrepreneurs-in-Residence for the first phase of this program. These EiRs will be funded to colleges and campuses based on requests through a competitive proposal process that will require cost sharing from the submitting units.

Elevating entrepreneurial engagement of students and faculty will require additional investment in the Offices of Technology Management, Sponsored Programs and General Counsel. We request an additional $600,000 to recruit and support new personnel who will provide critical support to guide and enhance transformation of Penn State ideas into products and jobs. New positions required include an experienced attorney specializing in intellectual property and two additional licensing officers, or their equivalent.

2.  Investment in Student Success: Engineering, Business, and Nursing Education

We have identified in this year’s budget request three disciplines where investment is needed to enhance Penn State’s ability to continue to contribute not only to student success but also workforce needs in the Commonwealth. These are Engineering, Business, and Nursing. While we are committed to student career success in all fields, these three fields are where our aspiration coincides with key work force opportunities and needs in the Commonwealth. In order to assure that elements of student success are imbedded in all curricular components, strategic investment in our faculty is necessary.

The College of Engineering and the Smeal College of Business are both in need of new permanent budget lines to fund investment in full-time faculty in both the tenure and non-tenure tracks to respond both to the rising demand from undergraduate students in these fields as well as the opportunities that exist to provide expanded high-quality graduate education at the masters level and beyond, both residential and online through our highly regarded World Campus. While Penn State has for many years responded to this emerging demand through allocation of temporary resources for fixed-term faculty, the need to make some of these hires permanent to better serve our students is compelling. Graduates from both colleges will contribute directly to the advancement of the State’s economy through their post-graduation career activity. Faculty are also central to our knowledge-creation/discovery enterprise, which is at the core of our commercialization agenda.

The College of Nursing is also in need of investment in its full-time faculty to respond to high, and increasing, demand for nursing graduates throughout the Commonwealth. As the nursing program is offered at multiple campuses of the university, this investment will have a profound impact across the state. The U.S. is projected to experience a shortage of Registered Nurses (RNs) that is expected to intensify as Baby Boomers age and the need for health care grows. Adding to the need for registered nurses is the launch of the ACA which will provide access to health insurance for 32 million Americans who were previously uncovered. The Bureau of Labor Statistics projects the total number of job openings nationwide for nurses due to growth and replacements to be 1.05 million by 2022. Further, the need for advanced practice nurses (those prepared as nurse practitioners, clinical nurse specialists, nurse midwives, and nurse anesthetists) is also projected to increase in response to three challenges: increased demand for care from an aging population, the passage of the ACA and a stalled growth in physician supply. Nurse practitioners (NPs) play a critical role in extending access to primary care, especially in rural settings. If we are to achieve the goal of a patient centered, high quality, seamless and affordable health care delivery system, the future of health care must include the provision of community-based episodic care and chronic care management led by nurses. While the number of graduates of NP programs has grown dramatically over the last several years, we have not produced an adequate supply to address the upcoming need. Pennsylvania is an exemplar of this increasing challenge, but Penn State’s newest College is poised, with the right investment, to respond strongly and effectively.

Penn State requests an additional $3.5 million (Engineering $2.0M, Business $720K, Nursing $780K) from the Commonwealth to support investments in these programs. While Penn State has invested considerable internal resources in them to date, we have not been able to keep up with the resource needs that have resulted from the rapidly increasing demand. Of all our programs, these three arguably will have the most direct positive benefit on the economic development of the Commonwealth as graduates are employed in these priority areas. Complementing this request for operating support, we will seek to open discussions about obtaining a special capital appropriation for the project authorized by the Commonwealth in section (4)(ix)(V) of the “Capital Budget Project Itemization Act of 2013-14” for state-of-the art research and teaching space for the College of Engineering as well as the project included in the Proposed Capital Budget Request for 2015-16 to expand and renew the Health and Human Development East Building that houses the College of Nursing.