Anatomy of a University Tuition Increase
Why did Penn State pit students against employees?
Last week I attended my first Penn State Board of Trustees meeting as a trustee*. I was joined by fellow alumni-elected newcomer Dr Christa Hasenkopf, seven other alumni-elected trustees, and the rest of the Board of Trustees. The meeting was held at the Penn State York campus on Thursday and Friday, July 21-22, 2022. The July meeting of the Board routinely features two items: approving the University’s next fiscal year budget (which we were informed before the meeting was moved to the September meeting) and setting tuition levels for the coming academic year.
For historical perspective, over the last ten years tuition increases have averaged 2.5% which includes four years (2015, and 2018-2020) when tuition for in-state students remained flat. During that time, Penn State increased tuition revenue largely by shifting enrollment to out-of-state students (whose tuition is nearly double that of in-state students). Every proposed tuition increase in recent history has passed with broad trustee support, and tuition has never been reduced.
This year, for the first time, the tuition increase proposal was specifically coupled with a 2.5% across-the-board salary increase proposal for Penn State faculty and staff, who hadn’t had a broad-based raise in over two years. The Finance Committee gave no explanation for the logic behind linking these two wildly disparate items—tuition is revenue and salaries are expenses—into one proposal. At the public Finance Committee meeting on Thursday, the committee chair refused to recognize questions and comments from non-voting trustees in the audience, myself included. Every other public committee meeting I attended did welcome questions and comments raised by non-voting trustees in attendance.
Along with COVID and inflation, two main rationales were posited to justify the proposed tuition increases:
The University is in dire financial straits. (Note: In fact we just finished the last fiscal year nearly $200 million in the red.)
A lower than desired level of appropriation from the Pennsylvania legislature. (Note: Since the conclusion of the July Board meetings, the Governor of Pennsylvania, Tom Wolf, increased funding to Penn State without the approval of the PA Assembly, which effectively forwards an additional 5% appropriation to Penn State. This is the amount Penn State originally expected to receive.)
Both of those rationales are true, and at this point you might be asking yourself, “But Barry, if the University is in dire financial straits, what can be done that wouldn’t require increases to tuition?”
This is an excellent question that deserves thoughtful and thorough consideration. There are several painless solutions:
Correct inefficiencies in the Capital Projects administration. These inefficiencies often lead to Penn State neglecting building maintenance, which then requires replacing buildings decaying before their time. Ironically, this was demonstrated just moments before approving the tuition increases, when the Board approved the proposal to tear down Oswald Tower (50 years old) and replace it with the new $128 million Liberal Arts building.
For building projects that we have committed to, make strenuous efforts to keep the cost per square foot within the range being paid by our peer institutions, instead of regularly overpaying by 20-30% or more.
Penn State must re-evaluate the endowment administration fees it is currently paying, which are proportionally the largest in our peer group, the Big10.
These are just a few examples of “low hanging fruit” actions that Dr Bendapudi and her administration can address and quickly see real results in Penn State’s financial position.
At the general Board meeting Friday afternoon, I made public comments [full text here] regarding the problems created by combining the tuition increase proposal with the salary increase proposal. I was the only trustee who spoke out about this. Another trustee spoke in favor of the salary increase, and Trustee Kleppinger gave assurances that the tuition increase was not a knee-jerk reaction to the less-than-hoped-for state funding, but instead a carefully planned decision.
In the end, I voted No for the combined tuition increase and staff raise, although I wanted to vote for the 2.5% salary increase for the faculty and staff. Five other alumni-elected trustees agreed with me and also voted No: Anthony Lubrano, Ted Brown, Alice Pope, Alvin de Levie, and Jay Paterno. Three alumni-elected trustees voted Yes: Brandon Short, Christa Hasenkopf, and Steve Wagman. The rest of the board voted Yes with two abstensions.
Why did the Finance Committee decide to pit the students' tuition expenses against faculty and staff income? No one on the Finance Committee was prepared to answer that question, so your guess is as good as mine. Perhaps the most obvious reason is the correct one: they wanted to save Board members the embarrassment of voting on the record solely to increase tuition at Penn State, which is already the most expensive public university in the Big10, and ranks in the top five of most expensive public universities in the United States.
Source for the meeting agendas: 2022-23-July-BOT-Schedules.pdf (psu.edu)
Read my full notes on the meeting here.
I was pleased that media outlets provided coverage of the meeting’s events, and that to the best of my recollection all seem to have quoted me and everyone else accurately.
*As a member of the Penn State Board of Trustees, I will from time to time be made aware of certain confidential information. I will also engage with Trustees and administrators in private, off-the-record conversations, with the expectation of privacy on both parties. I take these expectations seriously, as they are required in order to catalyze important discussions.
As a fiduciary, it is also important that I engage in conversations with all stakeholders of the University. Stakeholders like you. Discussions will involve publicly available information and issues before the Board, as well as my personal thoughts, concerns, and ideas. I also will continue to solicit your thoughts, concerns, and ideas, and plan to engage in meaningful conversations with you on those topics. I hope that you will continue to share your concerns and ideas with me.