I have to start by saying, as much as I wanted to simply say my peace on this issue last week and move on, that the response by Penn State necessitates a response. “Bloggers” may not know all of the facts, but even a layman can find potential savings in PSU’s $4B budget.
So in the words of Cicero, I return to the field to attempt to “stimulate those who, possessing a liberal education and the power of arguing with precision, can deal orderly and methodically with philosophical questions.” Like balancing competing interests – both within a state budget and a University one.
So, channeling the Charles Grodin character from the movie “Dave,” I pulled up PSU’s budget and tried to find some cost savings. And I found that there might just be a way to spare the students from the full brunt of the cuts. Will it have to change? Yes. No question. Everybody who relies on any state funding is going to see changes.
And Penn State – like so many other programs – is going to have to cut back. Dramatically. And like the thousands of business who have also had to do the same, the cuts can either be spread around (salary freezes, benefit cuts, not filling vacancies) or you can target whole programs.
I am here to make the case that – assuming the proposed $167M total state cut level stands – these numbers can be found without shutting down programs such as the Cooperative Extension, without massive layoffs, and while keeping tuition within the normal annual increase range. All of the numbers I use are Penn State’s,
Let’s start with the two biggest items in Penn State’s budget: employee salaries and employee benefits.
In Penn State’s last budget they included a 2% salary increase pool for faculty (modest enough after a year of salary freezes). The resulting increase was $22,055,00 to Penn State’s total academic salary number. This was coupled with “The President’s Excellent Fund,” a pool of $8,302,000 that, at the President’s discretion, “will be used for special merit, market, and equity considerations.” These two pots of money from last year’s budget – if frozen in 2011-2012 – would result in a savings of $30,357,000 – around 20% of the proposed cut.
Just that freeze alone saves each of the 70,000 in state students Penn State has $433 in tuition increases. Or, looked at another way, we can fund the Cooperative Extension for the year, save the 440 jobs Penn State is threatening with the proposed cuts, and spread the pain more equally.
And while those affected by salary freezes have every reason to resist them – proposing such a freeze is in no way an indictment of performance, just economics – the fact is a stable and secure job in this economy might be all the raise you can expect.
And these are professors (a group I hope to join someday – obviously not at PSU, most likely – but still), so these are not below median salaries. According to the PSU Faculty senate, Penn State associate professors made around $80K (depending on discipline – the Business profs make $140K) and full Professors making on average well over $120K, plus benefits.
The freeze is hard to ask for, but these are lean times. And currently Penn State salaries generally rank in the upper half of comparable institutions – again, according to their own available data. As much as I understand the desire to keep Penn State at or near the top of the salary bands for comparators, the fact is it is really hard to ask a farmer in Elk County to subsidize that in hard times.
The freeze also looks a lot more palatable when you look at this number: $490,966,925. That was the total for academic salaries last year – 12% of the total budget and nearly half a billion dollars. Against that number a $30M freeze — not even a cut – seems doable.
Then there is the benefit costs, something that makes everyone squirm. Last year there was an increase of $23,161,000 in benefits costs for the faculty positions. Any increased costs this year might just have to be borne by the faculty.
In fact, the benefits could be reduced. Let’s look at what Penn State’s own website says it offers.
There is a top shelf health care plan: “The University’s comprehensive coverage includes medical, prescription drug, dental, and vision options. Penn State is extremely competitive when it comes to employer contributions toward the cost of employee health care coverage, with the University paying 80% of premiums for individuals and 70% of premiums for family coverage. Health care coverage is available for all full-time employees, their spouses, same-sex domestic partners and dependent children.”
They don’t lie – those benefits are certainly competitive. They are markedly better than the private sector benefits I earned at one of the largest law firms in the world. In fact, the only time I had better benefits I was a State employee – but that’s for another day.
In terms of vacation days, they are very generous as well: “Most full-time staff employees annually earn between 18 and 24 vacation days plus 12 paid holidays per year, allowing you to enjoy life as you please.” Indeed.
It’s even better in terms of sick leave: “Nobody wants to be sick. But if you should feel under the weather, Penn State’s sick leave allows you time to recover. Staff employees accumulate one sick day each month with no designated maximum. Currently, many of our long-term employees have well over 200 available sick days.”
And then there is the grand mother of them all: “Penn State offers two premier retirement options to all full-time employees. TIAA-CREF and the State Employees’ Retirement System. In addition, Penn State offers variety of different supplemental retirement plans including, 403(b) and 457(b) plans offered by Fidelity, Vanguard, TIAA-CREF, AXA Equitable, and VALIC.” No too shabby.
These are great benefits – and well deserved, I do not contest – but they have a cost associated with them. $387,738,165 in costs. A 10% cut in benefits (or an increase in employee contributions) would result in a savings of $38.7M.
Add to that the $30.5M we saved above in faculty salary increases. Throw in the $3.9M that was set aside in last year’s budget for future contingencies – heck, throw in all $15.1M that you have in that fund. Now we are at $83M – more than half of the state cuts – and without a single dollar in tuition increase.
Now, we have a couple ways to go from here. Last year tuition rose between 3.9% and 5.8%, generating an additional $54M. The same increase this year will yield roughly $60M (higher base pool plus increased enrollment) – and would be consistent with the tuition increase pattern.
That gets us to $143M with no more than the usual annual increase in tuition – an increase Penn State was planning anyway.
Now, where do we get the last $24M – or more?
Just read the budget document:
“The University established an ongoing general funds budget to support the capital improvement program. These funds enable the University to incur debt for building renovations and construction. A total of $3,695,000 is included in the budget for 2010-11, increasing the amount budgeted for the capital improvement program to $49,600,000.”
Cutting in half the capital improvement budget during lean years seems responsible. And doing so yields another $25M – a number that, when added to my $143M in savings and planned tuition increases, gets you to $168M – enough that you could cut the tuition increase pool by $1M and still replace every dollar of lost state funding. And that’s without a single layoff or unfilled vacancy being eliminated.
I will admit that this is a surface review. But in these simple steps – and ones that in reality are infinitely more complicated than this, I know – we at least found some pools of money that can be tapped to survive the cuts. At the very least we can dramatically mitigate their effect.
These are just suggestions, and I am sure that many of you have reasons to cut other places to get the money – both in the state and Penn State’s budget. You should engage if you do – these are decision we MUST make, and simply wailing about the circumstances will accomplish nothing. We need ideas, not targets of blame.
Finally, a pet peeve: Penn State’s state appropriation is not being cut by $182M or 52% as they claim. Its overall funding is being cut by $182M, but $15M of that were one time ARRA funds. You would think a major University could tell the difference between state and federal funds. Oh wait, they do – just not publically. Their own financial statement from 2010-2011 notes:
“Through funds available to the Commonwealth of Pennsylvania via the American Recovery and Reinvestment Act of 2009 (ARRA), Penn State would receive $15.8 million in federal stimulus funds for 2010-11.”
Federal. Not State. Please play the numbers straight – its driving me NUTS. And it’s a tactic not befitting a great University.
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