During the meeting, senior leaders provided an overview of the University’s current budget outlook as Penn State, like many other institutions, navigates a difficult fiscal environment that includes significant inflation; flat state funding; tuition freezes in three of the last five years; and increased costs, lower revenues and lower enrollments at least partially due to the pandemic.
Bendapudi outlined a multi-pronged approach to reduce costs, find efficiencies and enhance revenues, including with a new commercial partnership program, and Thorndike reiterated that while there are challenges ahead, Penn State is not in a crisis.
“We need to be good stewards of our resources so we can invest in students, faculty and staff. I know we can do this because part of what makes us Penn State is that we say ‘we are’ — not ‘I am.’ I feel very confident we can tackle these challenges and come out stronger than ever,” Bendapudi said. “It’s important to me that we all have a common understanding and have a forum to hear from you and share.”
To meet the objective of having a balanced budget by the summer of 2025 and to fund the Compensation Modernization Initiative, the University is focused on saving an estimated $250 million. To reduce the University’s operating deficit, Penn State has implemented a 3% budget rescission for the 2022-23 fiscal year as well as a temporary strategic hiring freeze through at least summer 2023. In addition, Penn State is partnering with the National Association of College and University Business Officers to analyze the current budget and develop a new strategic budget allocation model.
Amid high inflation, the University has provided an across-the-board 2.5% general salary increase for most employees, along with budgeted funds to cover faculty promotions in the academic ranks.
During the meeting, Thorndike said that the University has already made “wonderful progress” bringing the deficit down through central and unit savings thanks to the dedicated efforts of employees.
“We have a lot of expertise and people who have been working at this University for a long time, and we need all of the voices and all their input,” Schwartz said. “We need to get to the right distribution of our resources, the right budget model for allocating to support our programs, and this really needs the voices of everyone to be involved.”
Along with the town hall, senior leaders have been hosting ongoing conversations on this topic with groups like Faculty Senate, the University Staff Advisory Council, Academic Leadership Council, Council of Academic Deans, Financial Officers and other units.
During the meeting, the group answered a range of questions that faculty and staff members submitted both before and during the town hall. The following represent the most frequently asked themes:
Q: What is the long-term plan for the Commonwealth Campuses, particularly those that have seen declines in enrollment? Is Penn State planning to close any campuses?
Bendapudi: There are no plans to close any of the Commonwealth Campuses. I really think they are a strength — the fact that 96% of the citizens of this commonwealth are within 30 miles of one of our locations. These campuses are the social, economic, cultural centers of those communities. So, what we do need to do is make sure they continue to stay vibrant, to make sure that we realize the strength of the Commonwealth Campuses and invest in them to grow.
Q: Are there any plans to make cuts in specific programs, units or departments at University Park and across the Commonwealth Campuses?
Schwartz: We will take a period of time where we plan and assess and ask ourselves the question of are all these programs the right programs. Every one of those conversations really does center around how do we build a budget that supports our students and supports our faculty to meet our mission, our vision and our values. We know that our mission is to ensure that all of our students have the academic opportunities so they can really build the lives and careers that they’re aspiring to. That’s really the driving force of how we look at what programs do we have and what programs should we add or eliminate. These will not be top-down decisions.
Q: Are there any plans for any mass layoffs or furloughs as an attempt to balance the budget?
Wilkes: There may be some personnel changes in units largely based on attrition or not back-filling vacant positions. While some reductions in some units are possible, we are not planning for any mass layoffs. We all value our employees so much — I care about our employees deeply — and we realize we cannot meet the mission of our University without our employees. We certainly want to minimize the impact that something like this would have on our University workforce. Budget executives in each of their units will be tasked with making decisions that are in the best interest of their unit to support our students.
Q: Penn State just raised $2.2 billion during its latest campaign — why can't we use some of that to offset the deficit?
Thorndike: Penn State’s balance sheet is very healthy. We have strong donor support; we have excellent funding for major research. You probably recall hearing that we just raised $2.2 billion in the capital campaign, which is fantastic. The challenge before us is only 1% of those contributions are unrestricted. So, although they’re wonderful for scholarships and for other donor-specified needs, they don't help us actually operate the budget. We're very grateful for the research money — we have over a billion dollars — but again, research dollars are also restricted. Really what we’re trying to do is get our operating budget in order.
Q: Many staff feel like they are taking on more responsibilities due to other positions not being filled. Why are they not being compensated for that work?
Wilkes: We realize that there are a lot of people that are doing more with less right now, and we appreciate your efforts in that regard. We know that we’re asking a lot of people to chip in in areas that maybe they haven’t before. We have a process in place to give employees additional compensation if they have taken on additional duties, and we do that frequently, but every situation has to be looked at on an individual basis. If any of you have questions about this, I would really encourage you to talk with your supervisor. Please reach out to your HR Strategic Partner to talk through these individual situations and we’d be happy to walk you through it.
Q: Raises have not kept up with inflation meaning that staff are essentially making less than when they started at Penn State. Is there a plan to address that and will there be a return to merit-based raises?
Bendapudi: I certainly hope so. I am very committed to making sure that over time we come back to fiscal health so that everybody can be compensated appropriately and feels valued. The point about pay compression, where people have been here a long time not keeping up with inflation is very real. Over time, I’m hoping we get to both cost-of-living adjustments, but just as importantly, some sort of merit increases so that we can recognize and retain the people who are going above and beyond.
Q: What is the status of Compensation Modernization Initiative and when will staff see recommendations and tangible results from the initiative?
Wilkes: The goal of this program was to modernize our job classification and compensation program. To date, we have met with over 1,700 staff employees, we have reviewed thousands of job descriptions, and we have written hundreds of new job profiles. One of the great things about this project is that we will have more job profiles than we do now that more accurately describe what our employees do, which I think is a great thing. Once we finished all of that work, we mapped all of our staff employees into this new job structure. We sent that information out to the leadership teams throughout the University to review the data. We’re in the process now of getting the feedback from that review, and we’re taking that information and finalizing the job classification part of the program. The next part will be for us to build out the compensation components of the plan. We expect that we will have more information for employees, including training on how this new program will work, in the early part of 2023.
Thorndike: It’s a great question and I know it’s on everybody’s minds. Once we have the Compensation Modernization Initiative results — as far as what we need to increase our compensation expenses to be — we’ll have a better sense.
While a number of questions were addressed during Wednesday’s event, stay tuned to Penn State Today for additional coverage on other topics and questions around the budget. Faculty and staff members with specific questions about individual circumstances should reach out to their supervisor, department head or HR Strategic Partner.