Frequently Asked Questions

The new data-driven budget model creates a clearer picture of the University’s overall revenue and costs and will help to better inform spending priorities and investments to support Penn State’s mission and values. The previous budget was based on an incremental model where each year, the same allocation was distributed with slight changes. Over time, the origin of an incremental model is often lost, and it is unclear whether the base budget is still relevant, appropriate, and based on current data. While the previous model has served the University well, it is an outdated method that many institutions have moved away from.

To determine a unit’s budget allocation, the model uses activity-based data, including student headcount — which is the number of degree-seeking students enrolled in a college or campus — student credit hours, tuition, and research expenditures, among other factors. Any increases or decreases in a unit’s allocation are based on the various types of data that were input into the model. Student-supporting and administrative units are also funded through the model. In addition, strategic funds are allocated to the president, provost, and vice president for Commonwealth Campuses to supplement allocations, especially for units where the model doesn’t account for complexities or extra costs in those units.

The new model is a tool that will use data to calculate what allocations should be for each unit, and as always, units will use their allocations to determine their own budgets and strategies for their areas. Unit leaders will use the budget allocation model to help inform decisions about strategic investments, personnel, and other priorities for their areas.

The University is moving away from across-the-board budget cuts because they are not strategic. While across-the-board cuts may be easier and appear to be more fair, they don’t address the evolution and changes in student needs, student demands, and student interests over time. The University is committed to aligning resources with the needs of our students by using data and metrics to inform annual allocations.

The model does not generate savings but will help the University strategically allocate tuition and appropriations and support budget planning so units can create balanced budgets.

The allocation model includes revenues from tuition and state appropriations. Other revenues generated by units, like gifts and endowments, are not included in the model.

To help keep Penn State on track with its financial goals and to protect institutional finances, monthly financial reports will be distributed to budget executives, financial officers, the president, and the Board of Trustees.

Like many universities in Pennsylvania and across the country, Penn State is navigating a finite financial environment marked by enrollment declines, pressure on tuition revenue, rising costs for employee compensation and benefits, and flat or uncertain state support.  

These challenges are not temporary. Higher education is undergoing significant change, and the need to manage expenses carefully while identifying new revenue sources has become an ongoing reality. While Penn State remains resilient and well positioned for the future, our traditional funding streams — primarily student tuition and state appropriations — are not growing enough to keep pace with our increasing operating costs.  

Consider that:

• In fall 2025, overall University-wide enrollment was down 1.6%, or 1,438 students, including a 5.8% aggregate decrease across our Commonwealth Campuses. This disrupts projections for both current and future tuition revenues, as follows:  
  • Non-closing campuses: $21 million decline to FY26 budget.
  • Non-closing campuses: $12 million decline to FY27 budget.  
  • Closing campuses: $46 million, net, decline to FY27 budget.
  • Total FY28 budget impact: $79 million.  
• Increases in health insurance costs have also been a major cost driver for the University. The University remains committed to a 75%/25% cost-sharing agreement with employees. As health insurance costs continue to rise nationally, Penn State has seen a 9.4% increase in health care costs in 2025 alone, on par with the national average. For FY28, the University is projecting a $78 million increase in employee compensation and benefits, including an additional $49 million for proposed annual salary increases, $6 million for faculty promotions, and $24 million for benefits — primarily driven by an expected increase in health care costs.  
• For a sixth consecutive year, Penn State’s general support appropriation from the commonwealth has remained flat at $242.1 million — despite inflationary cost increases over this time — putting significant pressure on our budget. Unadjusted for inflation, Penn State’s general support funding is less today than it was in the year 2000 — when the University received a general support appropriation of $242.9 million — despite nearly a quarter century of inflation and significant increases in instructional and operational costs. Had the University’s funding kept pace with inflation over the past 25 years, Penn State’s appropriation today would be more than $450 million, a difference of over $200 million annually.  

Every year, initial budget allocations are primarily based on projected revenues from tuition and state funds. Final tuition and state appropriation revenues usually differ somewhat from these projections, which are purposely conservative.    

These initial allocations also do not include funds for cost increases related to annual salary increases, faculty promotions, and graduate assistant stipends. The 2027-28 budget projects $78 million in additional central costs to cover these compensation and benefit increases. Final allocations for the 2027-28 budget will be considered by the Board of Trustees in July. These funds are not included in our initial budget allocations, but, if they are approved by the board, they will be added to college, campus and unit budgets for the 2027-28 fiscal year.  

After these initial allocations have been shared with the University community, any changes will be posted on the Office of Budget and Finance website in the roll-forward report.  

Importantly, E&G funds are only a portion of a unit’s total budget. Unit budgets also include items such as grants, contracts and gifts, which are not reflected in our model-based budget allocations.    

The budget model was intentionally built to be adaptable, allowing it to evolve as conditions change and as the University refines its approach. With seven Commonwealth Campuses scheduled to close following the spring 2027 semester, the University needed to change how costs for unified services and administrative and student support units are distributed across the remaining campuses and academic colleges, so no individual campus or college bears a disproportionate share of these expenses. These are central services that benefit everyone and allow academic units to focus on their academic mission. As these units do not generate student headcounts or credit hours, they are not funded in the same way as colleges and campuses.  

FY28 allocations for these units are now deducted from revenues at the top of the model before revenues are allocated to the colleges and campuses based on student credit hours and headcounts, instead of being deducted from colleges, campuses and auxiliary units at the bottom of the model. With this change, the administrative overhead fee charged to auxiliary units changed to a flat 3% increase. Auxiliary units are not supported with E&G funds but benefit from the services provided by E&G-funded administrative units like Human Resources, Information Technology and the Office of Physical Plant.  

Research is incentivized in the budget model by allocating to colleges and campuses funds proportional to research activities. This funding is an annual allocation ($24 million in FY28) supported by investment income. Now referred to as Graduate Research Incentive Funding, or GRIF, these funds are distributed based on the dollars a unit spends on graduate students from sponsored awards. This approach is unambiguous and easily calculated. It also aligns with Penn State’s research and education mission and incentivizes units to externally support graduate students and their research.  

Under this structure, tuition and state funding are directed primarily toward teaching and instructional activities, while investment income within the budget model supports research. The total amount available for research has increased by $6 million compared to the previous year because the funding is no longer reduced by overhead assessments. Importantly, any unspent funds at the end of the year may be carried forward to support future research activities, reflecting the use of unrestricted investment income rather than Education and General resources.  

The budget model is a flexible, strategic framework that evolves alongside changes in the environment and institutional priorities, and it was designed to evolve from the very beginning.  Each year a team comes together, in consultation with faculty and staff members of the Joint Committee on the University Budget, to review the model and make adjustments based on community feedback, shifting priorities and new realities.  

For FY28, the projected changes are modest, with an overall decrease of 1.1%, or $24.6 million, in unit-based allocations, out of projected Education and General budget model revenues of $2.2 billion.  

All changes to the model are carefully considered, with community discussion and feedback central to the process. Penn State has sought annual community feedback since the new budget model was launched in 2023. Prior to making any adjustments, the University seeks feedback from deans and chancellors, as well as input from faculty and staff experts in this space, including the Joint Committee on the University Budget, which includes members of the University Faculty Senate and University Staff Advisory Council. 

Roughly half of Penn State’s approximately $10.2 billion budget is comprised of the budgets for Penn State Health and Pennsylvania College of Technology.    

• Penn State Health ($4.6B): No tuition dollars or the University's general support state funding are used to support the clinical enterprise of Penn State Health.  Penn State Health contributes more than $70 million annually to the College of Medicine.
• Pennsylvania College of Technology ($189M): A Penn State affiliate, Penn College manages its own operating budget and is self-supporting, and it receives its own line-item state funding.    

The other half of the University’s budget, roughly speaking, is the $5.4 billion “all funds” revenue budget, which can be divided into three main buckets:    

• Self-sustaining units ($1B): Penn State Intercollegiate Athletics, Auxiliary and Business Services, and the College of Medicine. These units do not receive a budget model allocation of tuition or state funding.
  • Intercollegiate Athletics ($290M): Unlike most universities, no tuition or state funding is used to support our Intercollegiate Athletics programs at University Park. Penn State is among a select few institutions where this is true.
  • Auxiliary and Business Services ($393M): No tuition or state funding is used to support expenses associated with on-campus housing and dining, or other auxiliary entities like the Bryce Jordan Center and Transportation Services.
  • College of Medicine ($367M): Unlike other academic colleges, the College of Medicine is supported by the revenues it generates and does not receive a budget model allocation.    
• Designated funds ($2.2B), comprised primarily of grant/contract revenues, investment income, gifts, student-initiated fees, Land Scrip appropriation (for the College of Agricultural Sciences), and law school tuition. These dollars are designated for specific units or purposes and are not available to allocate via the University’s budget model but provide additional critical resources in support of teaching and research.  
• E&G budget model revenues, net of student aid ($2.2B), including student tuition, minus student aid; Penn State’s general support appropriation from the state; and some investment income (graduate research incentive fund allocated to colleges). This funding supports Penn State’s core teaching and research activities and is the only part of our approximately$10.2 billion budget that is distributed to academic colleges, Commonwealth Campuses, and central administrative and student support units via the University’s budget model.  

You can learn more about Penn State’s annual budget process by reading this simple primer here at: How Penn State Funds its Mission

Penn State Intercollegiate Athletics, as an important part of the larger University enterprise, is one of just a few athletics programs in the country that is self-sustaining and therefore does not use any tuition or taxpayer dollars. Other self-sustaining units also are not funded via the E&G budget model, including Auxiliary and Business Services, which includes Penn State Housing and Food Services; the Penn State Health clinical enterprise; and the Applied Research Laboratory.   

We are continuing our multi-year effort to change the way we do business, partnering with our employees and unit leaders to build efficient and coordinated approaches to common business functions such as Finance, IT, Physical Plant and Human Resources, for example. Diligent efforts have gone into finding efficiencies through centralization and review of historic spending to determine the appropriate level of funding. These efforts are meant to allow our colleges and campuses to focus more of their time on our students and academic mission, while relying on Penn State to provide the University-wide services needed to achieve that mission.  

Across the budget model for FY28, we have accounted for unit-level costs for IT, finance and the web, and shifted them to the Office of Information Technology, Finance and Business, and the Office of Strategic Communications, respectively. This will allow units to focus more of their time on their students, and ultimately, we believe these changes will result ingreater strategic impact and improved operational efficiencies for all of Penn State.   

Every unit works to identify areas of growth and opportunity.  

For example, our research enterprise looks at opportunities for increasing research expenditures in areas of need for the nation; our faculty are looking at new opportunities to attract more students by expanding high-demand academic programs and majors; and across the institution we are looking at opportunities to grow revenues — and support the student experience — through corporate sponsorships and industry partnerships. The University also has been monetizing real estate (land sales, pursuing public-private partnerships for student housing and leasing space) and other assets (such as the hotels).  

Initial FY28 budget allocations for units supported by Education and General funding can be found on the budget allocation page on the University's budget website.    

Yes, as in years past, Penn State Finance and Business has shared the budget model with the community as part of its commitment to transparency in the budgeting process. The fiscal year 2027-28 budget model is available on the University’s budget website.   

Subvention, otherwise known as a one-time operating subsidy, is determined by the provost, who is the chief academic officer. The University has been awarding one-time subvention to help smooth reductions in units with larger budget cuts.    

For FY28, $31 million in subvention has been awarded to the University Park academic colleges and the Commonwealth Campuses. This includes $10 million in provost academic subvention for the University Park academic colleges (College of Earth and Mineral Sciences, College of Education, College of the Liberal Arts, Nese College of Nursing, Smeal College of Business, and the School of International Affairs); $10 million for the Commonwealth Campuses, to be awarded on a one-time basis from the president’s FY28 strategic funds; and $11 million in permanent annual support for specialized instruction and facilities necessary to support the education mission of the Nese College of Nursing ($7 million) and the College of Arts and Architecture ($4 million).  

The provost takes an intentional and strategic approach to allocating these critical funds. Subvention decisions are guided by Penn State’s mission and priorities, opportunities to support student demand and program growth, the needs of disciplines that require smaller class sizes or specialized equipment, and a desire, when feasible, to lessen the impacts of individual unit budget reductions — especially in areas with expected enrollment growth.  

The seven Commonwealth Campus closures have resulted in total annual savings of $46 million — $25 million of those savings were included in the FY24-FY27 budget models, and $21 million is in the FY28 budget model.  

Yes, the FY28 budget includes $50 million for presidential strategic funds — resources provided to a college, campus, or administrative or student support units to cover short-term strategic initiatives. President Bendapudi has allocated $10 million of her FY28 strategic funds for subvention for the Commonwealth Campuses. For FY28, these funds will be partly funding the University’s AI transformation, for example. In the past, these funds have been used for strategic needs like enrollment management, web centralization, capital projects, student support, and new positions and programs, for example. 

Yes, built into the FY28 budget is contingency funding of more than $4.2 million.

There are several factors that will impact final budgets each year. Every situation is different, but broadly these factors include student credit hours and headcounts, which shift from year to year.  

Specific to FY28 budget allocations, updates to the budget model this year, particularly related to the new graduate research incentive funding and funding for central administrative and student support units, also are impacting college and campus budget allocations.  

Throughout the spring, University leaders will meet with each budget executive and their strategic financial partner to review their FY28 budget plan.    

We are not considering a mid-year rescission, as we recognize that this can obviously be very disruptive. However, as with any institution, we will need to be agile if there are new circumstances that were not anticipated and have a significant impact on our financial standing. As always, we are striving to be conservative with our spending, and to be good stewards of our resources, to avoid the need for any mid-year cuts.    

Penn State’s budget allocation model will continue to evolve, and the 2026-27 model has been adjusted based on feedback received from the community, and with input from faculty experts. Updates to the FY 2026-27 budget model include the following:   

• The amount available for research funding incentives was changed to 1.5% of net tuition and appropriations (E&G), representing an increase of $4.2 million, for a total amount of $32.7 million. 

• Student credit hour and headcount weighting has been adjusted to 50% in the most recent year (FY24), 30% in year two (FY23), and 20% in year one (FY22), instead of an equal 33% weighting each year previously.  This is intended to make the model more responsive to changes in enrollment and instructional commitment.  

•  Students with multiple majors are now split equally between colleges for purposes of student headcounts.   

• Commonwealth Campus tuition rates were updated from an average program rate to be more precise based on enrollments and rates for each academic program.   

• World Campus undergraduate headcount was added to the model at 0.25 per student, split for multiple majors.  Previously, no allocation was provided for World Campus undergraduate headcount.  

• The overhead charges to the colleges, campuses and auxiliaries for administrative and student support unit allocations have been adjusted to account for funding transfers for Optimized Service Teams that have been decided to date.  

$40 million is being allocated for subvention, or operating subsidies, for colleges and campuses in the FY 2026-27 budget. The Commonwealth Campuses will receive $30 million, and the University Park colleges will receive $10 million. Subvention is not being allocated to administrative and student support units. 

Individual subvention decisions for the Commonwealth Campuses will be made later in 2025, as informed by the Future State process, and following additional review and conversation between the Office of the Provost and Office of the Vice President for Commonwealth Campuses. As a result, all Commonwealth Campus budget allocations are currently shown in aggregate and include subvention in aggregate as well. 

At University Park, subvention allocations include $7 million for the College of Earth and Mineral Sciences, $1 million for the College of Education, $800,000 for the School of International Affairs, $600,000 for the College of Engineering, and $600,000 for the Nese College of Nursing. 

The budget allocations for University Park colleges and administrative units in FY 2026-27 can be found on the Penn State budget website. Including $10 million in subvention and $11 million in permanent support, University Park colleges will see varied allocations, with most receiving modest increases, for an overall aggregate increase of 3.6%. Four colleges will receive allocation increases of more than 6%. There is a small net aggregate increase in the administrative and student support units of $1.8 million, but most administrative and student support unit allocations remain flat/unchanged from FY 2025-26. 

The FY 2026-27 Commonwealth Campus budget allocations are currently shown in aggregate and can be found on the Penn State budget website. Individual campus budget allocations will be shared later in 2025 once all campus subvention decisions have been made. Including $30 million in subvention, for 2026-27, the Commonwealth Campuses will see an aggregate year-over-year budget decrease of $25 million, from about $339.9 million in FY26 to about $314.9 million in FY27, or 7.3%. 

These are the initial budget model allocations for Education and General funds based primarily on tuition and state funding projections. Additional funds will be allocated to unit budgets for annual salary increases and faculty promotions. Subsequent changes may also be made for reorganizations like those related to Optimized Service Teams. Education and General funds are only a portion of a unit’s overall total budget. Units may also budget increases in other funds like grants, contracts and gifts.   

Any changes made after these allocations have been shared will be posted online in the roll-forward report. 

Support for the Commonwealth Campuses is part of the University’s overall commitment to its mission. As Penn State works toward a balanced budget environment for the Commonwealth Campuses, $30 million in provost subvention will be provided to the campuses in FY 2026-27, with no additional central subvention planned from the Office of the Vice President for Commonwealth Campuses or from the president’s strategic funds. 

The University is continuing to be more strategic with how it allocates these critical funds. Decisions for awarding subvention are multifaceted and based on a variety of factors, including Penn State’s mission and priorities; opportunities for growth; supporting areas that require smaller class sizes and/or specialized equipment; and a desire, when possible and feasible, to minimize budget reductions, particularly in situations where enrollments are expected to increase.  

Subvention has been allocated to the University Park colleges for FY 2026-27. Individual subvention decisions for the Commonwealth Campuses will be made later in 2025, as informed by the Future State process, and following additional review and conversation between the Office of the Provost and Office of the Vice President for Commonwealth Campuses. As a result, all Commonwealth Campus budget allocations are currently shown in aggregate and include subvention in aggregate as well. 

Yes, $50 million is available for strategic funding, although no decisions have been made yet as to how these funds will be allocated. These funds are used for strategic needs, such as enrollment management and/or new programs, for example.  

Graduate education is a cornerstone of the University, and Penn State is committed to providing the necessary support so graduate students can succeed in their academic endeavors. The budget model supports graduate education by more heavily weighing graduate student credit hours based on in-state graduate program tuition rates, which helps to provide funding back to colleges and campuses to support their graduate programs, and by recognizing research activity, which is an important part of our graduate education. 

In FY 2026-27, the amount of research funding incentives was changed to 1.5% of net tuition and appropriations (E&G), representing an increase of $4.2 million, for a total amount of $32.7 million. In past years, this was a flat $28.5 million. 

OST changes that have already been made are reflected in the FY 2026-27 budget allocations. This includes a $48.5 million OST transfer from the Commonwealth Campuses for OPP, IT, Finance and HR, as well as an $18.5 million OST transfer from University Park colleges for IT.  

Any changes made after these allocations have been shared will be posted online in the roll-forward report. 

Yes, Penn State is again sharing the budget model with the community as part of its commitment to transparency in the budgeting process. The budget model is available on the University’s budget website. 

The model uses activity-based data including student head count — which is the number of degree-seeking students enrolled in a college or campus — tuition-weighted student credit hours, and research expenditures, among other factors to determine a unit’s budget allocation. Increases or decreases in a unit’s allocation are based on the various types of data that were input into the model. Student-supporting and administrative units are included in the model; however, their allocations are not determined by the model but instead through conversations with budget executives and senior leaders. 

Budget decisions are not based solely on formulas and figures. Penn State also allocates subvention and strategic funds for factors not captured in the model and for priority investments. A total of $101 million is being set aside in FY26 for strategic allocations, with $51 million going to the provost for subvention (operating subsidies) for academic units and $50 million to University senior leaders for strategic needs and other priorities, enrollment management, DEIB initiatives, capital projects and new program investments.   

For FY26, individual Commonwealth Campus allocations are yet to be determined. Even though the model has calculated allocations, subvention has not been determined yet for each campus by the Office of the Vice President for Commonwealth Campuses. Individual campus allocations for FY26 are expected to be finalized later in 2024. The Office of the Vice President for Commonwealth Campuses also has $25.5 million in FY26 for additional campus subvention and other strategic needs, which will be allocated to individual campuses once individual budget allocations have been determined. 

While the model uses data to calculate specific allocations, as always, individual colleges, campuses and units will use their allocations to determine their own budgets for their areas. 

Subvention is an operating subsidy provided to a college or campus at the discretion of University leadership. This additional financial support is allocated in the budget model for the Provost, Vice President for Commonwealth Campuses and President to allocate for strategic needs and to provide resources for costs that aren't captured fully in the budget model. 

Strategic Funds are resources provided to a college, campus, administrative or student support unit by the Provost, President or other senior leader for strategic needs or priorities and to provide resources for costs that aren't captured fully in the budget model.  

Decisions will be made by the president, provost, vice president for Commonwealth Campuses, senior vice president and chief of staff and senior vice president for Finance and Business/Treasurer after talking with units and considering strategic needs. These decisions are being made now and will continue throughout fiscal year 2026 until all funds are allocated.

Like every year, unit leaders will continue to make decisions about their area’s budget and planning and will use the budget allocation to help inform decisions about strategic investments, personnel and other priorities. While individual FY26 Commonwealth Campus budget allocations are not yet available and will be determined by the Office of the Vice President for Commonwealth Campuses later in 2024, all other budget allocations were previously shared with budget executives across the University in December. Unit leaders are now in the process of developing their budgets for fiscal years 2025-26, which will be used to present a budget to the Board of Trustees for approval in July (all Commonwealth Campus budgets will be reported to the board in aggregate). Following board approval, the new budget is slated to go into effect on July 1, 2025.

Yes, some updates to the model were made for FY26. Examples include permanent subvention of $11 million for the Nese College of Nursing and the College of Arts and Architecture; adjustments to a couple of the individual administrative/student support overhead percent allocations to colleges/campuses/auxiliaries; there is no cap for UP college decreases, although the Smeal College of Business and Bellisario College of Communications had their increases capped; OPAIR made some changes to how student credit hours/headcounts were categorized; and the carryforward allocation is being determined in early 2025 instead of as part of the model, as was done in past years. Another important factor that is indirectly tied to the model is the provost received more than $15 million in strategic funds from the president’s strategic funds in FY24 and FY25. No funds were received in FY26. 

While the formulas in the model did not change when it was run for fiscal year 2025-26, there is inherent flexibility built into the model to make adjustments based on unit and University needs and priorities each year. Each of Penn State’s academic units are unique, and the budget model has flexibility built into it to account for these differences. That is one of the key reasons the University created a budget model that incorporates subvention, strategic funds, and carryforward, and not something more rigid.

The budget allocation model is designed to be flexible and is a tool to help Penn State leaders make budget planning decisions. The model will continue to evolve as University leaders work through and analyze data. The model will be run annually, so future allocations (for example, for fiscal year 2027) will change as new data is incorporated into the budget model.  

Following approval of the 2025-26 budget by the Board of Trustees in July 2024, the new budget is slated to go into effect on July 1, 2025.  

Original budget allocations for FY26 are available at https://budgetandfinance.psu.edu/budget-allocations. 

More detailed allocations can be found here: https://budgetandfinance.psu.edu/budget-allocation-model

As Penn State works toward a balanced budget, for the 2025-26 fiscal year, the University will need to reduce or reallocate $89 million in expenses, which will come from administrative and student-support unit ($29 million), college ($11 million) and campuses ($49 million).  

There are no maximum decreases this year, although two University Park colleges – the Smeal College of Business and the Bellisario College of Communications – had their increases capped. In total, before salary increases, four University Park colleges received an increase, with the largest being Smeal at +5%; eight University Park colleges received a decrease, ranging from -0.7% (College of HHD) to -5.5% (College of Agricultural Sciences), with the average being -1.4%. Penn State Law and Dickinson Law also saw decreases of 15%.  

Commonwealth Campus allocations won’t be decided until later in 2024; however, in aggregate, the campuses received a -14.1% decrease initially which was revised to -12.8% after the spreadsheet error of $5 million was corrected 

Carryforward dollars are one-time surplus funds that units, colleges and campuses can request to use for strategic investments that promote growth in alignment with Penn State’s mission. The total amount of carryforward for fiscal year 2025-26 is $26 million, with the expectation that $20 million will go to the colleges and campuses and $6 will go to administrative and student support units. It is anticipated that FY26 carryforward will be allocated in early 2025.

The University is focused on making the right decisions. A one-size-fits-all approach isn’t strategic and OVPCC is working closely with each campus to determine its unique strengths and challenges. In the meantime, we will use the aggregate Commonwealth Campus budget to prepare the University budget that will go to the Board of Trustees in July 2024 for approval in lieu of individual campus budgets. Part of this process also includes working through how to allocate $25.5 million provided to the Office of the Vice President for Commonwealth Campuses for strategic subvention.

The Commonwealth Campuses are significant to Penn State’s mission and the University is investing in numerous ways to support the campuses and lessen what could have been a much larger budget reduction. This investment includes: 

1. $31 million in subvention, or operating subsidy, to lessen the impact.  

2. $25.5 million for the Office of the VP of the Commonwealth Campuses to allocate to the campuses. 

3. Carryforward funds that will be determined in early 2025. 

4. Access to request funds from $50 million Senior Leadership strategic funds.  

5. Two new research funding opportunities exclusively for the Commonwealth Campuses: The Presidential Public Impact Research (PPIRA) program The Commonwealth Campus Undergraduate Community-Engaged Research Award (UCERA).  

6. New agreement with the state’s community colleges; new dual admissions process, scholarships and articulation agreements to expand pathways to a Penn State degree, increase enrollments, and serve transfer students as a strategically valuable market. 

7. Additional student financial aid to recruit students and support enrollments. 

8. Strategic funds are being used for marketing to support Commonwealth Campus enrollments.

Penn State is committed to transparency in the budgeting process, which is why we have sought input from so many members of our community. Budgeting is an iterative process, and we value our community’s feedback. That involvement is what brought this error to light, and we have worked quickly to fix the problem. What’s important to note is that we caught the mistake early, and no unit has been adversely impacted.  

Due to a last-minute format change in the spreadsheet for student-credit hour data, an error was discovered in the fiscal year 2025-26 budget allocation model in which World Campus graduate student credit hours were double counted for 2021-22. This resulted in artificially increased FY 2025-26 budget allocations for some University Park colleges and in turn decreased the allocation for the Commonwealth Campuses.  

This mistake has been corrected and the budget allocation for the Commonwealth Campuses has been adjusted, resulting in an increase of nearly $5 million. Following this correction, the previously reported $54 million reduction in aggregate Commonwealth Campus budgets has been reduced to approximately $49 million. In addition, the College of Arts and Architecture, the College of Health and Human Development, and the Eberly College of Science also were underfunded due to this error, by a combined amount of just more than $600,000, and their budget allocations also have been adjusted accordingly.  

The University is funding the approximately $5.6 million budget increase for these four units with contingency funds built into the budget model. Additionally, those colleges that were overfunded will be held harmless, meaning their original FY 2025-26 budget allocations will remain intact due to this error being no fault of their own. Those units that were overfunded in FY 2025-26 are being advised to plan accordingly for FY 2026-27 allocations. 

After careful analysis, we have confirmed that the mistake occurred in December 2023 and, as such, had no impact on fiscal year 2023-24 or fiscal year 2024-25 budgets. After the oversight was discovered, all other data inputs were double checked, and no additional errors were found.  

University leadership has discussed this error with academic leadership and with the Commonwealth Campus community during a conversation event at Penn State Altoona on April 24. 

Note: The error is still visible in the Student Credit hour tab in the workbook. Since neither the original budget model allocations nor the workbook were changed, a new row titled “Student Credit Hour Adjustment” (row 23) in the “Colleges Campuses” tab shows the total $5.6 million adjustment for the four underfunded units (Commonwealth Campuses, College of Arts and Architecture, College of Health and Human Development, and Eberly College of Science). 

The APPR is about realigning our programs based on student and workforce needs and is not directly tied to the 2025-26 budget. The University is looking at the APPR not as a budget initiative but rather as a way to make sure Penn State is doing its very best to serve students, provide high-quality programs, and be innovative to meet their needs. The goal of the initiative is to set Penn State up for the future and is a practice every university should do on a regular basis.

Student headcounts (the number of students) and student credit hours (the number of hours students receive credit for a class) are both important elements of the budget allocation model. Headcounts (35%) are part of the formula; however, they receive a smaller weighting than student credit hours (65%). The higher weighting of student credit hours creates a higher allocation for the colleges that produce high numbers of general education courses. These units have been underfunded in the past since many students taking gen ed courses often do not reside in those colleges. The model weights student credit hours based on in-state upper-division undergraduate and in-state graduate program rates.

Strategic funds may be available for colleges that have smaller enrollments and for units with higher costs to offer specialized facilities and training and more hands-on and time-intensive instruction. For example, $11 million in permanent subvention has been provided to the Nese College of Nursing and College of Arts and Architecture to support specialized instruction and facilities necessary to support the educational mission of those colleges. 
 

This model funds research better now than how it was previously funded. The University maintains its commitment to prioritize and incentivize its research enterprise and to have the resources available for continued investments. The model includes $28.5 million in research allocations to college and campus budgets based on their F&A generating research expenditures. The Office of the Senior Vice President for Research (OSVPR) is not funded by the budget model but instead receives an amount equal to what the University receives from F&A (facilities and administration) recovery so as research expenditures grow, so does the allocation to OSVPR. Also, OSVPR doesn’t pay administrative overhead fees and keeps its carryforward at year end. 

Along with identifying new revenue streams, we are also assessing our investments in graduate education to make sure we continue to invest wisely in the backbone of the research enterprise. We also have launched a Research Support Transformation project to make the University’s research support infrastructure more efficient by taking a more standardized, institution-wide approach to research support. 

Graduate education is a cornerstone of the University, and it’s crucial that Penn State provides the necessary support to graduate students so they may succeed in their academic endeavors. The new budget model supports graduate education by more heavily weighting graduate credit hours in the model that provide funding back to colleges and campuses to support their graduate programs. This is true for all enrolled graduate students that generate student credit hours, including doctoral students who have completed their course work and are focusing on developing their dissertation. Consistent with past practices prior to the implementation of the new budget allocation model, deans and chancellors decide how to allocate funding within their colleges and campuses, including graduate student funding and support packages such as graduate assistantships. Penn State continues to provide additional support to graduate students through faculty start-up packages and support for graduate student insurance plans. 

Along with efforts to cut costs, Penn State is working to identify new revenue streams to help build a strong future for the University. Among these efforts are intentional enrollment planning and our enrollment mix, continuing to advocate for increased state funding, identifying corporate sponsorships, and implementing new commercialization and fundraising opportunities.

Penn State shares many centralized services critical to the function of each campus and needs to fund those operations accordingly. These include functions and offices that directly support the student experience such as Undergraduate Education and Student Affairs, and those that administratively enable the educational mission of the University such as Finance and Business. Each of the administrative and student support units are funded by a specific percent assigned to the University Park colleges, campuses, and auxiliaries. When added up, in aggregate, the University Park colleges pay 67% of the administrative and student support costs, or $603 million. This equates to 43.9% of each college’s allocation of tuition, appropriations and investment income. The campuses pay 29% of the administrative and student support costs, or $256 million. This equates to 46.2% of the campus's allocation of tuition appropriations and investment income. The reason the percentage is higher for the campuses is because the total amount of tuition, appropriations and investment income allocated to the campuses is lower than the University Park colleges. The reason the campuses only pay 29% and not something closer to 67% like the University Park colleges do is because we recognize that the campuses incur costs that they fund themselves that the University Park colleges do not. More than 19% ($49.5 million of $256 million) of the Commonwealth Campuses allocation funds the Office of the Vice President for the Commonwealth Campuses and includes costs that are not in the University Park overhead allocation, including $25.5 million for additional campus subvention, chancellor salaries, financial officer salaries and HR Strategic Partner salaries.

World Campus student credit hours are allocated in the model to colleges/campuses. World Campus headcount is not included in the model.

No. The weighted student credit hours input used in the model are based on in-state upper-division undergraduate and in-state graduate program rates, but the model itself does not distinguish between in-state and out-of-state students as a matter of fairness.

Colleges and campuses receive supplemental funds for salary adjustments outside the model until the model is run again. For example: FY24 and FY25 merit increases are funded annually as supplemental funds until they are run through the FY26 model. FY24 compensation modernization and FY26 merit increases are funded annually as supplemental funds until they are run through the FY27 model. FY27 merit increases are funded annually as supplemental funds until they are run through the FY28 model.