Penn State grapples with new era of funding cuts

STATE COLLEGE, Pa. - As they ambled across the green and blooming campus during a tour of Pennsylvania State University, excited soon-to-be freshmen and their parents had lots of questions.

Their guides filled them in on everything from the schedule of the university buses to the holdings of the art museum to the water pressure in the dormitory showers.

But one important question hung in the air, unspoken: Will the university seen by the newcomers be the same when they arrive for classes in August?

"I can only imagine what is going to be gone, and what won't be offered for students anymore," said Penn State-loving senior Rachel Louie, who helped lead the tour as a Lion Ambassador.

Gov. Corbett wants to cut state appropriations to higher education in half, the biggest one-time reduction in U.S. history, to help close a chasmal $4 billion budget deficit. And he wants to do it fast - with the budget that starts July 1.

Penn State estimates it will lose $182 million - an amount some political leaders say the school can absorb. University officials insist the loss would be disastrous, warning that layoffs, tuition increases, program cuts, and even the closing of some branch campuses could follow, fundamentally altering an institution known for top-quality education.

Aides to school president Graham Spanier said he had no time to be interviewed on the topic. His initial reaction was defiant - the spending plan amounted to "the near-total abandonment" of state support for higher education.

"Abraham Lincoln is weeping today," Spanier declared at a March news conference, referring to the 16th president's support for giving federal land to create state universities, including Penn State.

In response to e-mailed questions from The Inquirer, Spanier took a milder stance, saying he was hopeful of seeing "some moderation in the size of the cut proposed for Penn State."

"Many members of the legislature are supportive of trying to help in this regard," he said, "and the governor has said that he would be supportive of a more moderate cut if the legislature can still find a way to balance the commonwealth's budget at the level he has proposed."

Penn State isn't alone in its misery. A 50 percent cut looms for the three other state-related institutions, Temple University, Lincoln University, and the University of Pittsburgh, and the 14 state-owned schools, which include West Chester University.

More than 40 states have cut funding for higher education since the recession began, with spending slashed 19 percent in California and 22 percent in Florida.

Once unthinkable, double-digit cuts have become common.

On the University Park campus - essentially a small, dynamic city set in the isolation of central Pennsylvania - anxiety over the budget infects everyone from students who see course offerings shrinking to teachers who see projects ending.

"We're coming under the hit," said James Garthe, an engineer in the Agricultural and Biological Engineering Department, who on a visitors' day showed off his technology that turns plastic bottles and bags into fuel.

To the public, dire predictions of job losses and campus closings can seem silly.

Penn State is among the biggest and most economically influential entities in Pennsylvania, employing 47,000 faculty and staff, with an annual budget of about $4 billion - twice the gross domestic product of Greenland.

A year ago, Penn State received the largest private gift in its history - $88 million to build an ice-hockey arena. Its president was the fifth-highest paid public college president in the nation last year, with salary and benefits at $800,592, according to a study by the Chronicle of Higher Education.

Moreover, the proposed cut amounts to 4 percent of the school's total budget. Surely, say observers such as the conservative Commonwealth Foundation, at a time when many Americans are out of work and struggling, Penn State can survive on 96 percent of its current income.

"Most large organizations can manage to handle a 3.8 percent cut without closing shop or dramatically curtailing their operations," said Senate Majority Leader Dominic Pileggi, who represents parts of Delaware and Chester Counties.

Penn State administrators and outside analysts say, though, that the broad figures can mislead.

The money that flows from government, research, and private sources usually comes with restrictions. Billionaire businessman Terry Pegula and his wife didn't give $88 million for the school to use as it saw fit. They gave it to develop Division 1 hockey programs.

That's where the state appropriation becomes key, school officials say, going to offset the cost of educating Pennsylvanians, who pay lower tuition than out-of-state and international students.

Though the proposed cut constitutes 4 percent of the total budget, it accounts for nearly 10 percent of the general funds budget, which pays for instruction.

Pileggi said there was no question the cut represented "a serious amount of money, and it will put pressure on Penn State to reexamine their operations and their financial plan."

He said he expected to see some restoration of funding. And though he had not reviewed Penn State's instructional-budget breakdown, he said, "in any large organization, money is fungible," and surpluses in one place can cover deficits in another.

Daniel Hurley, director of state relations for the American Association of State Colleges and Universities in New York, disagreed, saying state aid goes "to keep the buildings open, for keeping faculty in the classroom."

He called the proposed cut "devastating" - and most devastating for the smaller campuses in places like Abington, which offer local, mostly undergraduate students a chance at a Penn State education.

"We really don't know what to expect," said Helene Bludman, spokeswoman for Penn State Brandywine in Media.

At Penn State, trims already have been made in English courses and staffing as part of ongoing cost-saving efforts - minor compared to what could come.

"The majority of students, I don't think, have picked up on the significance of what is about to happen," student-government leader Mohamed Raouda said. "If we lose all funding, you'll see Penn State become a more targeted institution - engineering, the sciences. The bigger question is what does this mean for next year? And the year after that?"

Penn State was founded in 1855 as an agricultural school, aimed at finding ways to apply scientific techniques to farming - a radical departure from college curriculum of the time.

Today, it's among the nation's biggest schools, with 44,817 students at University Park, and 51,016 at 23 other sites and the on-line World Campus. It holds an esteemed reputation as a "Public Ivy."

Its components include the Dickinson Law School, the Hershey Medical Center & College of Medicine, and the Pennsylvania College of Technology. Its agricultural roots endure in operations such as the creamery, where ice cream goes from cow to cone in four days.

Alumni include Nobel Prize chemist Paul Berg, former CIA officer Valerie Plame Wilson, Sears CEO Lou D'Ambrosio, and numerous NFL stars. Penn State graduates have operated shuttles in outer space and puppets on Sesame Street, invented the Waring blender and the Slinky, probed the complexities of cancer, weather, and the human brain.

Wealthy alumni may now be called upon more than ever. No one is sure whether the proposed cut represents a trough, painful but passing, or a redefinition of support for higher education. Supporters fear it's the latter, cut to follow cut, year after year.

At the center of the dispute lies a philosophical query: Is higher education a public benefit to be subsidized by the citizens of the state, or a private benefit to be bought by individual consumers?

Education officials say the answer is a no-brainer: Using public money to make colleges better and more affordable leads to a more vital state. College graduates earn more, pay more in taxes, and depend less on social services.

But others - including taxpayers who have posted on websites - say that sending public money to universities is a misallocation, and that Corbett is right to cut funding way back.

"My taxes should not be raised to send some other person's kid to college," wrote "Tea Party Patriot."

State appropriations to Penn State have been flat across a decade, but higher in the last five or six years. Legislators have said they're weary of increasing allocations then seeing tuition go up.

Jane Wellman, director of the nonprofit Delta Cost Project on college spending, said they had a point. A recent Delta study found that schools raised tuition when faced with reduced state support during 1998 to 2008.  

"The Penn States and the research universities around the country have been most likely to cover reductions through cost-shifting," she said. "There's the least evidence that they've done belt-tightening as well as cost-shifting."

Penn State ranks as the costliest public university. This year, an in-state full-time freshman at University Park would pay $15,250 in tuition and fees. An out-of-state student would pay $27,114.

It's unclear how those numbers might change under the governor's plan, which would drop state funding to $165 million. Spanier has warned that tuition would have to go up.

Sympathy for the state schools' predicament extends only so far among their private-school brethren.

"They are heavily subsidized, and we are not," said Lex McMillan, president of 1,625-student Albright College in Reading. "It puts us at a huge disadvantage."

He and other leaders of private colleges see merit in Corbett's proposal for a new funding model in which more money would go to individual, needy students.

"It would be helping low- and middle-income families have more choice in selecting a college," McMillan said. "It would make Albright and other independent colleges more affordable."

The cuts that Penn State and other colleges face are forcing administrators to think hard about what their schools do, how they do it, and where to get the money to pay for it.

"There isn't one thing that will replace the state support," said David Creamer, vice president of finance at Miami University in Ohio, which faces a 17 percent state funding cut. "You have to do a variety of things."

One of them: Recruit more out-of-state and international students, who pay higher tuition. Hurting colleges are opening their campuses to students from India, China, and elsewhere where parents see an American degree as the gold standard.

Last year in the United States, the number of international students reached a record high of 690,923, up 3 percent, driven by a 30 percent increase in Chinese students.

At Miami, main-campus enrollment increased 4 percent in the last decade - but international enrollment nearly tripled to 794. Miami runs a European Center in Luxembourg and recruits actively.

"We're thinking about the foreign program as a way forward," Creamer said.

At Penn State, international students are 6 percent of the enrollment. Officials say making up dollars through higher-paying students could be an option. The university also wants to become more global.

Paul Jenkins and his son Michael drove from Houston so they could tour the campus.

"I was iffy," said Michael Jenkins, who will study petroleum engineering. "Now I'm in love."

His father said funding cuts would be worrisome - especially if they bring higher tuition. But seeing his son go to college is a dream, he said, and if he has to work longer to raise money, he'll do it.

Nearby, Kenneth Wangner and his parents, Steve and Linda, from North Caldwell, N.J., exulted after a tour that felt like a victory lap. All three were impressed by the professors they met - and they expect those teachers to be on the job in the fall.

"Budget cuts are a poison pill," Steve Wangner said. "If you're not going to invest in the future, what are you going to invest in?"