State System’s Board of Governors approves 2016-17 appropriation request; flexible pricing plans


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Oct. 8, 2015

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HARRISBURG, Pa. - The Board of Governors of Pennsylvania's State System of Higher Education--seeking the restoration of deep funding cuts made five years ago and new investment to support operational enhancements at the state's 14 public universities--today agreed to ask the state for an appropriation of $521.2 million next year.

The System's annual appropriation was cut by more than $90 million in 2011-12 as the Commonwealth struggled through the throes of recession. Since then, the System has been funded at the reduced level for four consecutive years. It has not received an increase in state funding in seven years, and last year received essentially the same amount as in 1997-98--17 years ago.

"This is not a typical budget request," said Ronald G. Henry, chair of the Board's Finance, Administration and Facilities Committee. "We have the chance to fundamentally change the way we approach this issue, and this is the first step."

Even though the State System has not yet received its current fiscal year appropriation because of the absence of a 2015-16 state budget, it is required to submit next year's appropriation request to the Governor's Budget Office by the end of this month. The submission is the first step in what usually is a nearly year-long budget process. The Governor presents his budget proposal, which includes his recommendation for funding for the State System, to the Legislature in February.

As a result of the flat or reduced state support combined with declining enrollments--largely the result of a smaller number of high school graduates in the state--the State System universities are facing severe fiscal challenges. The universities rely almost solely on student tuition and fees along with the state appropriation to fund their operations.

While revenues have been stagnant, many of the System's costs continue to rise, despite the universities' significant efforts to become more efficient, which has resulted in nearly $300 million in expenses being trimmed from their combined budgets over the last decade. Healthcare and pension costs continue to rise faster than the rate of inflation and are expected to go up again next year by a combined $22.5 million. Pension contributions alone, which are mandated by the state and for which--unlike K-12 school districts--the System receives no additional funding, are projected to increase by 21 percent.

Assuming the State System receives a $433 million appropriation this year, the funding total still would be about $70 million less than what was received in 2010-11. Projected mandatory cost increases for next year would add another $37.2 million to the budget shortfall, without factoring in any salary increases for any State System employees.

All seven of the System's labor contracts--which, combined, cover about 87 percent of its employees--are either expired or will expire by June 30, 2016. If any of their successors include wage or salary increases, the System's projected deficit would grow even higher.

The appropriation request approved by the Board today includes additional funds to support both operational enhancements at the universities as well as potential changes in employee compensation.

Board approves four new flexible pricing pilots

The Board approved new flexible pricing pilots proposed by Mansfield, Shippensburg, California and Edinboro universities.

Under its pilot program, Mansfield University of Pennsylvania will offer all incoming undergraduate students a guarantee their tuition will not increase for four years or eight semesters. Tuition will be charged on a per-credit basis rather than the current flat rate. The tuition guarantee represents a "new approach" in the State System," according to Henry.

"This is an ambitious program," he said. "It is linked inextricably with a very aggressive enrollment management effort. This is very different from anything else we have seen before."

Shippensburg University of Pennsylvania will switch from a flat rate to a per-credit charge for in-state, undergraduate tuition. Both universities will provide need-based financial assistance to students who might see their tuition costs increase as a result of the pilots, both of which will begin in fall 2016.

The Board also approved separate proposals submitted by California and Edinboro universities to revise certain student fees. Cal U will switch to a per-credit charge for its academic support fee, which is now levied at a flat rate for full-time students, and Edinboro will charge a new course-specific instructional fee for students enrolled in certain high-cost, high-demand science, technology, engineering, mathematics and health courses.

The Board began approving the flexible pricing pilots in January 2014. They are proposed by the universities on a two- or three-year trial basis. The pilots will be evaluated during that time to determine their effectiveness. If successful, the pilots could be continued, and even duplicated at other universities. If not, they could be redesigned or discontinued.

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