Editor's Note: The full Board of Trustees approved the 2022-23 operating budget at its meeting on Sept. 23.

UNIVERSITY PARK, Pa. — At its meeting today (Sept. 22), the Penn State Board of Trustees Committee on Finance, Business and Capital Planning advanced a proposed $8.6 billion operating budget for the 2022-23 academic year. The revised budget is part of a broader effort to reduce the University’s general funds deficit as Penn State works toward a balanced budget by summer 2025. 

The full board will consider the proposed budget at its meeting on Sept. 23. 

“This new operating budget makes strategic expense reductions that are necessary to shrink our operating deficit while we continue to provide our students with an affordable, high-quality education,” said Penn State President Neeli Bendapudi. “Reducing costs, finding efficiencies and identifying new revenues are all critical as we work to achieve a balanced budget.” 

Penn State has been operating under an interim operating budget approved by the board in May. In July, trustees approved the 2022-23 tuition and fees schedules and a 2.5% general salary increase for most employees. 

The approval of the 2022-23 operating budget is the culmination of University-wide efforts to revise unit budgets that have been impacted by inflation, flat state funding, and ongoing pandemic-related enrollment and revenue pressures. Penn State leadership worked with budget executives and financial officers throughout the summer on a 3% rescission for 2022-23 and developed a fiscal plan that trimmed the University’s general funds deficit to approximately $149 million, which will be funded from reserve balances.  

“I want to thank all of the budget executives and financial officers across Penn State who worked so hard to shrink the deficit and bring the University a step closer to achieving a balanced budget,” said Sara Thorndike, senior vice president for Finance and Business/treasurer. “There’s still a great deal of work to be done, but we would not have gotten this far without their dedicated efforts.” 

A more detailed primer on the University’s general funds budget is available here.  

The 3% rescission is expected to generate approximately $46.2 million in cost savings, and follows several years of budget rescissions and cost-cutting measures to reduce Penn State’s overall expenses. Including this year’s cuts, across-the-board budget rescissions over the last four years have saved Penn State $113.4 million in recurring costs. 

In addition to the rescission, the University implemented a temporary strategic hiring freeze through at least summer 2023 to help reduce costs. 

Ongoing budget challenges 

During a pair of virtual town hall events on Sept. 14, University leaders outlined Penn State’s current budget outlook and challenges. The University, like many institutions, has had to navigate 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.  

While Penn State has managed to reduce its overall expenses for 2022-23, the University is projecting a number of cost increases for the coming fiscal year, including: 

• $46.5 million for employee salary increases, as well as $2.2 million for faculty promotions and related benefits; 

• $15.2 million for employee benefits, including $12.6 million for employee health care and $2.6 million for retirement benefits; 

• $5.2 million for maintenance of new or remodeled facilities; and 

• $3.6 million for fuel and utility costs. 

The University also is investing $39 million for student financial aid this year as part of its commitment to maintaining access and affordability. Included in this number is $14 million to fund new Access Grants, guaranteeing that degree-seeking undergraduate students with an annual household income of $75,000 or less would not experience a tuition increase this year. 

Included in the operating budget is Penn State’s 2022-23 state appropriation for educational and general, which remained flat-funded for the third consecutive year. Penn State’s general support funding, which supports the University’s in-state tuition rate and helps to cover a portion of core teaching costs, has held steady at $242.1 million since 2019. 

Achieving a balanced budget 

University leaders have been examining all aspects of Penn State’s budget, and have embarked on a comprehensive budget review process to create a new multiyear budget allocation model. 

Penn State has partnered with the National Association of College and University Business Officers to analyze the current budget model and develop a new strategic budget allocation model that should offer greater financial predictability, including setting tuition rates earlier so students and families can better plan. 

To achieve a balanced budget by 2025, Bendapudi said the University is taking a multi-pronged approach. She said Penn State will continue to seek to reduce costs, find efficiencies and enhance revenues, including a new commercial partnership program.  

The committee also advanced a proposed $469.5 million appropriation request from the state legislature for the 2023-24 fiscal year, which seeks a significant increase in Penn State’s general support appropriation. 

The final operating budget will be available at budget.psu.edu.