Appendix B

10/18/16

SENATE COMMITTEE ON UNIVERSITY PLANNING

2016-2017 Operating Budget

(Informational)

Provost Jones will present the 2016-2017 Operating Budget

SENATE COMMITTEE ON UNIVERSITY PLANNING

  • James Adair
  • Kevin Cockroft
  • Peter Eberle
  • David Gray
  • Hengameh Hosseini
  • Nicholas Jones
  • Rodney Kirsch
  • Binh Le
  • David Lieb
  • Frantisek Marko
  • John Marsh
  • John Messner
  • Laura Pauley, Chair
  • Vansh Prabhu
  • Gavin Robertson
  • Jeff Robzen
  • Ira Saltz
  • Shuang Shen
  • Steinn Sigurdsson, Vice-Chair
  • Rachel Smith
  • Ford Stryker
  • Ming Wang
  • Jong Yun

Slide 1: 2016-2017 Operating Budget Report to the University Faculty Senate – Presented by Dr. Nicholas P. Jones, Executive Vice President and Provost (All Text Slide)


Slide 2: The total operating budget for 2015-16 was just over $4.9 billion. For 2016-17, budget changes for all Penn State units across General Funds, Restricted Funds, and Auxiliary Enterprises total $85 million. In addition, budget changes total $154.7 million for the Milton S. Hershey Medical Center. Those adjustments put Penn State’s total operating budget at $5.142 billion for the fiscal year that began on July 1, 2016.

October 18, 2016 Agenda, Appendix B, Slide 2


Slide 3: This pie chart shows the sources of Penn State’s revenue for this fiscal year. Tuition and fees provide 32.8 percent of operating revenue. For the first time, hospital and clinical revenues, at 35.1 percent, exceed those from tuition and fees. Auxiliary enterprises and restricted funds activities are self-supporting and mostly externally funded. They also provide reimbursement to the University for the General Funds-based services that provide support for all units. The Medical Center also provides support to the College of Medicine.

 October 18, 2016 Agenda, Appendix B, Slide 3


Slide 4: The General Funds budget comprises four main areas: Educational and General, Agricultural Research and Cooperative Extension, the College of Medicine, and the Pennsylvania College of Technology.

October 18, 2016 Agenda, Appendix B, Slide 4


Slide 5: This pie chart shows three sources of revenue support the General Funds budget. Tuition and fees represent the significant majority at nearly 76% percent, and the Commonwealth of Pennsylvania appropriations account for 13.4 percent. Other sources combine to contribute the remaining 10.9 percent. These include support from the Medical Center for the College of Medicine, contracts, indirect cost recovery from grants, and income from the short-term investment of the University’s operating cash.

As described above: October 18, 2016 Agenda, Appendix B, Slide 5


Slide 6: Historically, we have presented the General Funds budget without including the Medical Center and College of Medicine, so the breakdown shown here is provided for comparative purposes. With that support excluded, the General Funds budget totals $1.971 billion. Tuition and fees still represent the significant majority of that amount, contributing more than 79 percent; the Commonwealth of Pennsylvania appropriation provides 13.6 percent; and other smaller sources combine to contribute the remaining 7.3 percent.

As described above: October 18, 2016 Agenda, Appendix B, Slide 6


Slide 7 – Table 1: 2016-2017 State Appropriation ($000s)

-2015-2016 AppropriationChanges 2016-17 Appropriation
Total$306,393$9,330$315,723
Direct State Appropriation General Support$224,816$5,620$230,436
Direct State Appropriation Pennsylvania College of Technology19,58449020,074
Direct State Appropriation Sub-Total244,4006,110250,510
Agricultural College Land Scrip Fund Agricultural Research and Cooperative Extension50,5491,26451,813
PA Department of Public Welfare M.S. Hershey Medical Center11,4441,95613,400

Slide 8: This chart shows the state appropriations for the past 15 years, including this year’s total of $315.7 million.

As described above: October 18, 2016 Agenda, Appendix B, Slide 8


Slide 9: The Educational and General, or E&G, subset of the General Funds budget is heavily dependent on tuition and fees, at more than 81 percent of the total.  With this year’s increase in state support, the percentage of the E&G budget provided by our state appropriation is 11.2 percent of the total, and that supports the cost of attendance for Pennsylvania resident students.

As described above: October 18, 2016 Agenda, Appendix B, Slide 9


Slide 10: 2016-17 E&G Budget Planning: State Appropriation (All Text Slide)

  • November 2015 Appropriation Request: $39.5 million increase
  • February 2016 Governor’s Executive Budget:
    $11.2 million increase
  • July 2016 Final Appropriation: $5.6 million increase

Slide 11: 2016-17 E&G Budget: Parameters and Priorities (All Text Slide)

  • Lowest possible tuition increases and increased student aid
  • Identify expense reductions and budget reallocations
  • Invest in innovation toward Strategic Plan priorities
  • Fund mandated increases for health care and retirement
  • Advance the Capital Plan and address facility maintenance
  • Satisfy contractual obligations and provide salary increases to address inflation and to maintain competitive position to attract and retain top talent

Slide 12: 2016-17 E&G Budget ($000s)

2015-2016 Budget$1,858,282
2016-2017 TOTAL$1,915,657
Budget Increases77,191
Budget Reductions(19,816)
Net Increase57,375

Slide 13: Summary of E&G Expense Changes (All Text Slide)

  • Budget reductions
  • Contractual and inflationary (merit-based) salary costs
  • Benefits: employer share of health care and retirement
  • Facilities, utilities, property and liability insurances, and the
    Capital Plan
  • Innovation- and Strategic Plan-related initiatives
  • Remaining budget gap from 2015-16
  • Student aid and grants-in-aid

Slide 14: E&G Expense Changes: Reductions (All Text Slide)

Budget Reductions: $19.8 million

  • Restructuring the post-retirement health care liability
  • Capping and reducing the subsidy to the World Campus
  • Increasing the overhead tax on Auxiliary Enterprises
  • Capturing savings from prior efforts to reduce worker’s compensation, health care, and dependent grant-in-aid costs

Slide 15: E&G Expense Changes: Salaries (All Text Slide)

Salary Costs: $25.0 million

  • Contractual and 2.0 percent pool: $20.1 million*
  • Summer Session and Faculty promotions: $1.4 million
  • Salary-related benefits costs: $3.5 million

* Includes Dickinson Schools of Law


Slide 16: E&G Expense Changes: Benefits

Employee Benefits: $11.8 million

  • Health care: $6.5 million
  • Mandatory contributions
    to retirement plans: $5.3 million

As described above: October 18, 2016 Agenda, Appendix B, Slide 16


Slide 17: E&G Expense Changes: Insurances, Facilitates, and Utilities (All Text Slide)

  • Property and liability insurances: $750,000
  • Maintenance and operation of new
    and newly renovated facilities: $4 million
  • Utility costs of new and newly renovated facilities
    and loan amortizations for the waste water treatment plant
    and energy savings projects: $5.0 million
  • Capital Improvement Program: $5.0 million

Slide 18: E&G Expense Changes: Other Key Areas (All Text Slide)

  • Innovation and the thematic priorities outlined
    in Penn State’s Strategic Plan for 2016-2020: $8.0 million
  • Student aid and grants-in-aid: $4.4 million
  • Instructional resources for higher-cost programs: $2.0 million
  • Recurring funds to close the 2015-16 budget gap: $5.2 million
  • Dickinson Schools of Law budget changes: $5.4 million
  • Programs supported by student fees: $600,000

Slide 19: E&G Income Changes (All Text Slide)

Tuition = $48.7 million

Rate Increases = $33.6 million
Rate Increases – Law Schools = $6.1 million
Enrollment Increase = $6.0 million
Upper Division and Summer Session = $3.0 million

State Appropriation = $5.6 million
Student Fees = $600,000
Indirect Cost Recovery and Other = $2.5 million
Total = $57.4 million


Slide 20: No. 1 Priority: Keep Tuition Increases Low or at Zero

  • The aggregate base increase for Pennsylvania resident undergraduates is 1.76%.
  • There are no tuition increases for Pennsylvania resident undergraduates at eight Commonwealth Campuses.

As described above: October 18, 2016 Agenda, Appendix B, Slide 20


Slide 21 – Table 2: 2016-17 Tuition and Fee Increases

Tuition Increases per SemesterPA
Residents %
PA
Residents $
Non-PA
Residents %
Non-PA
Residents $
Lower Division University Park2.29%$1903.39%$515
Lower Division Altoona, Berks, Erie, Harrisburg 1.54%$1052.25%$241
Lower Division Abington1.54%$1002.25%$229
Lower Division Brandywine, Hazleton, Lehigh Valley,
Schuylkill, W. Scranton, York, World Campus
1.25%$811.99%$201
Beaver, DuBois, Fayette, Greater Allegheny, Mont Alto, New Kensington, Wilkes-Barre, Shenango0.00%$01.00%$97

Upper Division: Dollar amounts are higher, same %
Upper Division Program Differential: Small additional increase per semester

Student Fees Increases: Student Activities Fee: $1 or $2 per semester, Facilities Fee: $2 per semester, Information Technology Fee: No increase


Slide 22: Information Technology Fee

  • First assessed in 1990-91
  • Technology infrastructure supported with IT fee revenue is essential
  • Students want to allocate fee revenue annually

As described above: October 18, 2016 Agenda, Appendix B, Slide 22


Slide 23: 2016-17 Tuition Increase Percentages for Select Public Universities (resident) (All Text Slide)

Connecticut 6.70%
Kentucky 5.00%
West Virginia* 5.00%
Massachusetts* 4.90%
Iowa 4.40%
Colorado*3.97%
Michigan 3.90%
Utah 3.90%
Cornell – Contract Colleges 3.75%
Michigan State 3.70%
North Carolina* 3.70%
South Carolina   3.25%
Arizona 3.20%
Clemson* 3.14%
Texas 3.10%
Virginia 3.00%
Virginia Tech* 2.90%
Temple 2.80%
Minnesota 2.50%
Nebraska 2.50%
Pittsburgh 2.30%
Maryland 2.00%
Indiana 0.00%
Ohio State 0.00%
Purdue 0.00%
Illinois 0.00%
Missouri 0.00%
Wisconsin 0.00%

* Tuition and Fees
Note:  Gathered from legislative, university, and web news sources.


Slide 24: 2016-17 Agricultural Research and Cooperative Extension ($000s)

Agricultural College Land Scrip Fund: $50,549
2016-17 Appropriation Increase
Inflationary Costs: $1.034 (est.)
Program Needs: $230
Total appropriation increase: 1,264
2016-17 Total Budget: $51,183

As described above: October 18, 2016 Agenda, Appendix B, Slide 24


Slide 25: 2016-17 College of Medicine and Hershey Medical Center ($000s)

College of Medicine

General Funds: $137,694
Restricted/Auxiliary Funds: 101,700
Total College: 239,934

M.S. Hershey Medical Center: 1,804,431

2016-17 Total Budget: $2,043,825

As described above: October 18, 2016 Agenda, Appendix B, Slide 25


Slide 26: 2016-17 Pennsylvania College of Technology ($000s)

2015-16 Adjusted Budget: $154,187
Total Changes: (3,772)
2016-17 Total Budget: $150,415

As described above: October 18, 2016 Agenda, Appendix B, Slide 26


Slide 27 – Table 3: Proposed 2017-18 State Appropriation Request ($ in 000’s)

-2016-17 Anticipated
Appropriation
Projected
Increases
2017-18 Requested
Appropriation
TOTAL APPROPRIATION$315,723$34,729$350,452
Direct State Appropriation: General Support$230,436$25,348$255,784
Direct State Appropriation: Pennsylvania College of Technology20,0742,20822,282
Total Direct State Appropriation250,51027,556278,066
Agricultural College Land Scrip Funds:51,8135,69957,512
SUBTOTAL302,32333,255335,578
M.S. Hershey Medical CenterDepartment of Human Services: Medical Assistance Funding (estimate)13,4001,47414,874

Slide 28: Thank You. Question? Comments?

As described above: October 18, 2016 Agenda, Appendix B, Slide 28