Don’t Cry for PSU

Posted by By at 9 March, at 15 : 05 PM Print

The loud wailing you heard coming from the old Mitchell Mansion, one of the nicest pieces of property in State College, was the sound of Penn State President Graham Spanier losing his ever loving mind over the proposed state budget. In case you missed it or did not hear the scream, the Governor’s proposed budget takes, well, a battle ax to the higher education budget – a fifty percent cut across the board for the 14 state system schools, Pitt, Temple and the aforementioned Penn State. In real dollars, it adds up to $650 million in cuts.

Now, let me acknowledge the obvious: I have a family history with dear old state. I grew up a mere three blocks from campus, all of my family went there, and I hold two degrees from the original land grant University. More than that, my parents have donated millions to the school, and their name adorns the library where I (for now – we’ll see after this) serve on the development board. So, for good bad or indifferent, I am inextricably linked in many ways to the school. And I am, frankly, going to hear it from friends and family for what I am about to say:

Not only should the state cut $152 million from Penn State’s general appropriation – it should cut all $304 million. Every dime.

And I have good policy reasons why, which I will explain. But before I do, let me identify the over aching reason: I want to shift the money cut back to the state system schools – the 14 schools that, frankly, serve the broadest swath of the commonwealth’s children.

In a perfect world, no cuts would be necessary. We live in tough times, and that means we have to make tough choices. Penn State, with its proven ability to raise private funds, is plainly in a better position to absorb these cuts than the other players at the Education table.

So let’s put the cuts Penn State faces in perspective, because I am certain we will hear wailing about “cutting half our funding” and what this means for “the kids – we’ll have to raise tuition.”  Heck – they even claim the loss of expiring federal ARRA funds are a “cut” in “state” funding.

Viewed objectively a cut of $152 million is only a 3.8 percent cut in Penn State’s overall budget. Penn State annually operates on a budget in excess of $4Billion (athletics is self funded, by the way). By comparison, the state system’s 14 schools have an aggregate budget of just over $2billion.

Look at it another way: at $304M, the State’s contribution to Penn State’s budget is under 8 percent. The $465M the state system gets from the taxpayers represents over 23% of their budget. In that light, the cuts proposed disproportionately impact the state system dramatically, as they will see a 11.6 percent cut in their overall budget while Penn State has a modest 3.8 percent cut.

Now let’s assume that the cuts remain and that each has to increase tuition to obtain the shortfall. At that point, the disparity becomes even greater.

With over 94,000 students in campuses across the Commonwealth and in its professional schools (the medical and law schools), a cut of $152 M would mean an increase in tuition of $1617 dollars – steep, I will grant. But as a percentage increase at University Park – where half of the 80,000 undergraduates attend – it would mean an increase of 12% for freshman and sophomores and a 10 percent increase for juniors and seniors. At the law and medical schools it would be less than 5 percent. On the Commonwealth or “branch” campuses for Penn State, it is steeper – about 14 percent — and even that is NOTHING compared to the State System hit.

The state system schools have 120,000 students across 14 campuses. The cut of $232M means that tuition would have to rise by $1938 per student, a number that represents a staggering 35 percent increase for in state students – which 90 percent of the state system kids are.

So when you ask “why cut Penn State more than others,” the question should really be “why are we asking so much more from the state system?”

And then there are the market forces to consider. Penn State – and I am not demeaning any institution by saying this as I am firm believer that you get out of any school what you put in and some of the smartest and  some of the most successful people came from small schools — is a premium product and can afford to increase price tags more easily than the state system. And I can prove it.

I am a graduate of the first Penn State’s first law school class. I started in the first year of the phase in period, and the merger was finalized at my graduation ceremony. In 1996, when the merger was announced, Dickinson was nice regional law school with a great reputation for training lawyers. It was affordable at $14,500 a year – by comparison Penn was over $35K a year then, Harvard $40K, and Pitt over $22K. When I graduated three years later, tuition was still only $15,000. That was 2000.

Today it stands at over $35,000 a year. The addition of the Penn State name was akin to slapping Disney Pixar on a movie. The ability to increase the cost of the good (education) is far more elastic than the same ability at the lesser-known state system schools.

That is why I make the case that all of Penn State’s state funding should be cut IF there are cuts to be made in higher education. Surely Penn State can find a mix of cost savings, private giving and resource re-allocation to survive such a hit – especially when you consider that they have a business department ranked in the top 25 full of smart people to help.

Conversely, imagine the sticker shock a 25 year old returning student will feel when her tuition goes up by 35 percent — heck, even if it goes up 20 percent? She will suffer much more than a Penn State student who will face a 12 percent increase – about twice the increase she would normally see at University Park.

The fact is the only fair way to approach this is to view the cuts in terms of the institutions total budgets. If we cut Penn State by $304M and the State System by only $80M, the result is much more equitable: Penn State would see a 7.6 percent cut in their total budget vs. a 4% cut in the State System.

There are many other reasons to start weaning Penn State off of the public’s trough. It is a huge corporation, it has a president making more than, well the President, and it has gone from being an affordable option for Pennsylvania kids to the MOST expensive state school for in state kids anywhere in the United States. It has thrived – and expanded – during that time.

It has also had a number of high-profile failures (remember the Hershey/Geisinger merger? That cost millions of dollars), built on an aggressive scale, and it raised billions of dollars in private funds. In many ways, it is only a state school in its origins; it is now so large and state funding is so small a part of the budget that it more closely resembles Penn than Bloomsburg – something that 30 years ago was NOT the case.

In that light, and understanding that the mission of state taxpayer higher education dollars is to educate first and foremost the children of the commonwealth, it is only logical that Penn State take the biggest cuts in lean times as it has the ability to take them more easily. President Spanier and the administration should look at it this way – we ask the richest Americans to pay the most taxes, largely because they can take the hit. Likewise, Penn State will thrive even without $304M of our dollars.

I don’t like the cuts and I wish they didn’t have to be. But as a matter of policy, once we determine the cuts have to be made shouldn’t they be allocated in light of the TOTAL financial picture of these institutions? After all, Penn State is as strong as it is because we built it – now we are asking it to move out of the house and live on its own, secure on the foundation we gave it.

(NOTE:  This is edited from the original version.  As I noted below, the numbers I was able to obtain originally for PASSHE also included the ARRA funds and other sources that made the previous version less accurate that this one.  I have left the comment explaining my numbers below.  GSP.)

This post was written by:
- who has written 77 posts for Rock The Capital
Scott Paterno is an accomplished policy analyst and political consultant based in Hershey, PA. Mr. Paterno, never one to sit still, has practiced law, run for a house seat, and worked as lobbyist in Harrisburg and Washington. Paterno is Vice Chairman of the Sustainable Energy Fund and is currently pursuing a master’s degree in Political Science. He is happily married with three children. - Email scottp

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