COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE HEARING BUDGET HEARING
STATE CAPITOL MAJORITY CAUCUS ROOM HARRISBURG, PENNSYLVANIA
WEDNESDAY, FEBRUARY 22, 2006, 10:40 A.M.
VOLUME II OF V PRESENTATION BY PENN STATE UNIVERSITY
BEFORE: HONORABLE BRETT FEESE, CHAIRMAN HONORABLE DWIGHT EVANS, CHAIRMAN HONORABLE GIBSON ARMSTRONG HONORABLE MATTHEW BAKER HONORABLE STEPHEN BARRAR HONORABLE STEVEN CAPPELLI HONORABLE GENE DiGIROLAMO HONORABLE PATRICK FLEAGLE HONORABLE DAN FRANKEL HONORABLE HAROLD JAMES HONORABLE JOHN MAHER HONORABLE KATHY MANDERINO HONORABLE EUGENE McGILL HONORABLE FRED McILHATTAN HONORABLE PHYLLIS MUNDY HONORABLE SCOTT PETRI HONORABLE DOUGLAS REICHLEY HONORABLE SAMUEL ROHRER HONORABLE CURT SCHRODER HONORABLE JOSH SHAPIRO HONORABLE JERRY STERN HONORABLE MIKE STURLA HONORABLE THOMAS TANGRETTI
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1 BEFORE: (cont'd.) HONORABLE KATIE TRUE 2 HONORABLE GREG VITALI HONORABLE DON WALKO 3 HONORABLE JAKE WHEATLEY HONORABLE PETER ZUG 4 ALSO PRESENT: 5 MIRIAM FOX EDWARD NOLAN 6
7 JEAN M. DAVIS, REPORTER NOTARY PUBLIC 8
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1 I N D E X
2 WITNESS
3 NAME PAGE
4 PRESIDENT GRAHAM SPANIER 4
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1 CHAIRMAN FEESE: I would like to reconvene
2 this hearing of the House Appropriations Committee.
3 This is the time to hear testimony regarding Penn
4 State University as it relates to the '06-'07 budget.
5 Dr. Spanier, welcome. Thank you for
6 attending today.
7 Will the stenographer please swear in
8 Dr. Spanier.
9 (Witness sworn in.)
10 CHAIRMAN FEESE: Please proceed.
11 PRESIDENT SPANIER: Good morning. This marks
12 my 11th appearance before you as president of Penn
13 State. The budget that Penn State presents to you
14 this year is unique among those that have come before
15 it in its effort to partner with the Commonwealth for
16 the benefit of future generations of students. It
17 reflects a much-needed commitment to access,
18 opportunity, and economic growth for Pennsylvania.
19 As you probably know, state budget
20 difficulties earlier in this decade have left Penn
21 State with an appropriation that is less than what we
22 received in 2000. Over the five-year period that our
23 appropriation was declining, many of our costs were
24 skyrocketing. We saw annual double-digit increases
25 for health coverage for our employees, insurance,
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1 library journals, insurance and security.
2 To offset the loss of state support and cover
3 the increasing costs, our only option has been to
4 raise tuition. Sadly, this has dramatically shifted
5 the burden for the cost of education from state
6 support to students and their families. Increasing
7 the financial pressure on Pennsylvania's families
8 should be a genuine concern for all of us.
9 To help ease the burden, Penn State proposed
10 a tuition freeze at 20 of our campuses if the state
11 would provide a 9.5 percent increase in funding to the
12 university. This level of increase is certainly not
13 without precedent, as the community colleges received
14 a 10 percent boost just last year.
15 The Governor's proposed 3.3 percent increase
16 for Penn State is more than we have seen in recent
17 years; and for that recognition and support, we are
18 grateful. But it will barely return us to our funding
19 level of five years ago. And in the face of steeply
20 rising costs, such an appropriation falls far short of
21 what is needed to hold our tuition at the current
22 rate.
23 The funding a state provides to its public
24 institutions not only sends a definitive message about
25 its priorities, it also provides a hint of what the
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1 state's future may hold. For Pennsylvania, its
2 investment in public higher education has failed to
3 keep pace at exactly the wrong time, a time when the
4 key to economic prosperity is a well-educated
5 workforce and research discoveries that will produce
6 technological innovation.
7 Penn State educates more students than any
8 other university in Pennsylvania and touches half of
9 all households in the Commonwealth with its outreach
10 activities. Its $638 million research program helps
11 create new products, businesses, and jobs.
12 Yet the proposed state budget inexplicably
13 provides no increase for the outreach provided by our
14 extension and agricultural research programs and
15 allocates a smaller percentage increase for Penn State
16 than any state-owned or state-related university.
17 Since its beginning, American public higher
18 education has been based on an important social
19 compact. Our public institutions contribute to
20 society through education, research, and public
21 service. In exchange, the public invests in our
22 colleges and universities.
23 Penn State has worked diligently to be good
24 stewards of the funds that you provide us. Our cost
25 of educating students is among the lowest of any peer
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1 institution in the nation. And at every level of the
2 university, we have looked for ways to reduce spending
3 even further, without damaging the integrity of our
4 academic programs. Over the past decade, Penn State
5 has aggressively trimmed budgets and closed programs,
6 producing nearly $139 million in budget reallocations.
7 But we can't cut our way to success.
8 In higher education, we recognize that our
9 needs are only one component of the state's budget,
10 and there are certainly compelling, competing needs.
11 However, an additional investment in our public
12 universities will yield tremendous benefits for
13 Pennsylvania residents. I ask for your support in
14 that effort.
15 CHAIRMAN FEESE: Thank you, Dr. Spanier, for
16 your testimony.
17 The Chair recognizes the gentleman from
18 Franklin County, Representative Fleagle.
19 REPRESENTATIVE FLEAGLE: Thank you,
20 Mr. Chairman.
21 Good morning, President Spanier.
22 PRESIDENT SPANIER: Good morning.
23 REPRESENTATIVE FLEAGLE: For many of us in --
24 I don't want to say remote areas of the state because
25 State College is about as remote as you can get --
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1 certain areas of the state like Franklin County, we
2 don't have access to a community college. And many
3 times access to a community college is access to an
4 affordable education, at least at the
5 freshman/sophomore level.
6 Particularly in my district, there are other
7 options. And one of them is to go to Hagerstown,
8 Maryland, to a community college where rates are
9 rather low. And the other is what we consider our
10 community college, which is Penn State Mont Alto.
11 One of the ways that I've tried to work with
12 them is to certainly allow them to work with maximum
13 efficiency with maximum class size. To do that,
14 though -- and there's student capacity there that's
15 not being raised. What we like to do -- and I talked
16 to you about this last year and that's why I'm
17 bringing it up this year. I'm still on that issue --
18 is to have a policy, which I believe the SSHEA system
19 has in some of its institutions, of allowing these
20 state tuitions within, say, a 30-mile radius of the
21 Commonwealth campus.
22 And I know some people say, well, you don't
23 want to give out-of-state students in-state tuition.
24 Well, in effect, that would supplement the capacity
25 that we have now or fill the capacity we have now and
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1 actually lower costs for our in-state students,
2 because now those out-of-state students are just
3 priced out of the market by Penn State.
4 I don't know if you remember last year I
5 asked you folks to investigate that. That's very
6 important to our Commonwealth campus at Penn State
7 Mont Alto. Has that policy been looked at and are you
8 willing to bring that to fruition?
9 PRESIDENT SPANIER: Yes, we are talking about
10 that. Let me tell you where we stand. Just a moment
11 of history. Long before there was such a thing as
12 community colleges, as the need for higher education
13 grew around Pennsylvania, Penn State University, which
14 has also been known as the Pennsylvania State
15 University and, before that, Pennsylvania State
16 College, assumed a role that in other states at an
17 earlier point in time met the needs of community
18 colleges.
19 So our system of Commonwealth campuses at
20 Penn State developed because Pennsylvania did not have
21 a community college system and our extension centers
22 and then campuses came to serve that need throughout
23 Pennsylvania. We are still very committed to serving
24 those needs in all regions of the state. And with our
25 system of 24 campuses, it's our intent to have an
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1 educational opportunity within reach for all
2 Pennsylvania residents.
3 Following the discussion in this room last
4 year, we put this topic on our agenda at the
5 university. And we have, in fact, launched a study,
6 which we are well into, of the benefits, the risks,
7 the costs associated with looking at the surrounding
8 geographical area.
9 Of course, it gets a little complicated
10 because the area surrounding some of our campuses puts
11 us in a county or so that reaches beyond the state
12 border.
13 REPRESENTATIVE FLEAGLE: That would be my
14 case.
15 PRESIDENT SPANIER: And that is the case at
16 your campus that you asked about. That's one of
17 those. We are very open to the possibility that you
18 are suggesting. But before we take any further steps
19 in that direction, we want to do a little more
20 consultation and we want to look at what would be an
21 appropriate pricing structure, given that a certain
22 percentage of our educational costs do come from
23 legislative appropriations.
24 REPRESENTATIVE FLEAGLE: And I'm not asking
25 for in-state tuition because -- I believe it's in
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1 Representative Baker's district in Mansfield. They do
2 have a good-neighbor policy. I don't want to take a
3 seat from a Pennsylvania student. That would be
4 terrible. That would be a misuse of the government
5 funds. But I think that we can use those out-of-state
6 students to help subsidize and keep costs lower, get
7 more classes and better classes at what we consider
8 our community college.
9 PRESIDENT SPANIER: I understand exactly what
10 you mean. I think you will see some movement in that
11 direction. We're just going to be very careful about
12 it. And, of course, another variable in this equation
13 is that some other states that surround us that are in
14 similar situations and have institutions of higher
15 education near our borders have pricing structures
16 that attract some Pennsylvania students across the
17 borders with, in some cases, even more favorable
18 tuition than we can offer.
19 So all of these variables are going into the
20 discussion. And I'm quite sure by the time we are
21 back here next year, we will have a clear policy on
22 this. And we will get back to you shortly to let you
23 know where we stand on that.
24 REPRESENTATIVE FLEAGLE: Okay. And I would
25 be happy if there's any coordination that needs to be
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1 done with other states. We're right on the border and
2 have a good reputation with both the Maryland
3 legislators and West Virginia and even Virginia, right
4 on that corridor. That's a real fertile area for
5 getting some good students and some extra students to
6 help subsidize our classes.
7 So I hope it's not next year when this comes
8 to fruition. I hope it's within the next few months.
9 I will work with your staff. I would like to get that
10 program going. If it's not going to happen, I want to
11 move on to other things.
12 Thank you, President Spanier.
13 PRESIDENT SPANIER: Thank you.
14 REPRESENTATIVE FLEAGLE: Thank you,
15 Mr. Chairman.
16 CHAIRMAN FEESE: The Chair thanks the
17 gentleman.
18 The Chair recognizes Chairman Evans.
19 REPRESENTATIVE EVANS: Thank you,
20 Mr. Chairman.
21 Good morning, Mr. President.
22 PRESIDENT SPANIER: Good morning.
23 REPRESENTATIVE EVANS: You said you have been
24 coming for 11 years. So that means we're like family.
25 PRESIDENT SPANIER: Indeed.
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1 REPRESENTATIVE EVANS: We know each other as
2 a family. And as a family member, your sixth
3 paragraph really impressed me. You kind of went to
4 the edge, which really didn't take me as far as I
5 wanted you to. You said -- these are your words --
6 "The funding a state provides to its public
7 institutions not only sends a definitive message about
8 its priority, it also provides a hint of what the
9 state's future may hold."
10 When you said that, you took me to the edge.
11 I sat up. I'm not putting words in your mouth. I'm
12 just curious, when you made that statement, a hint of
13 what the state's future may hold, what exactly do you
14 mean when you talk about the state's future as a
15 result of all the other things that you painted in
16 this picture?
17 You've been doing this for 11 years.
18 Obviously, you -- not putting words in your mouth and
19 you can correct me. You have a problem that I sense
20 -- and, again, these are my words, not your words, but
21 I'm reading your testimony. You have a problem with
22 the priorities that are happening. You've been here
23 11 years. You've been here through Governor Rendell,
24 Governor Schweiker, Governor Ridge. You've been
25 around for a little while. I'm just curious about
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1 that line about a hint of the state's future.
2 PRESIDENT SPANIER: Right now in
3 Pennsylvania, if my arithmetic is right, about 8
4 percent of the Commonwealth's appropriation is in
5 support of higher education at one level or another,
6 financial assistance, direct appropriation to
7 state-owned, state-operated, state-related,
8 state-assisted universities, community colleges.
9 Pennsylvania, frankly, ranks near the bottom
10 among our 50 states in its per capita appropriation
11 for higher education. Other states have placed a
12 higher priority on higher education in terms of
13 investment of taxpayer dollars. We in higher
14 education have all coped with that situation in one
15 way or another.
16 We operate very efficiently. Our
17 benchmarking data shows that we are good stewards of
18 taxpayer dollars. We also have among the highest
19 tuition levels of any university in the country
20 because our two principal areas of support are tuition
21 and legislative appropriations.
22 Part of my budget message every year has been
23 to try to get the state to think about investing more
24 heavily in higher education, because I believe, as an
25 educator and as a citizen, that it is one of the most
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1 important investments. For me, it's the most
2 important investment we can make in the future of the
3 Commonwealth.
4 Whether you're looking at what's important in
5 terms of the health and welfare of the population, if
6 you're looking at an educated workforce, if you're
7 looking at economic development of the state, if
8 you're looking at the human and cultural development
9 of the state, an educated citizenry, certainly K
10 through 12 but, very importantly, beyond, says a lot
11 about what our workforce is going to be like and what
12 areas the state can be competitive. And we have not
13 been investing in higher education at the level other
14 states have.
15 There are critical opportunities ahead. I
16 know many of you recognize it. I know the Governor
17 recognizes it. He and I have talked about it, about
18 how we can position higher education to help this
19 state be better positioned in the future. But you
20 can't cut your way to quality, as I've said before.
21 And we have had a series of cuts. And while this
22 year's recommended increase is more generous than we
23 have seen in recent years, it doesn't help get us to
24 where we need to be.
25 One of the fundamental issues here is whether
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1 an investment in higher education is considered a
2 private good or a public good. And frankly, the
3 history in Pennsylvania has been that higher education
4 has tended, in the minds of many, to be seen more as a
5 private good. It's something that benefits the
6 individual.
7 But I think if you look more deeply into the
8 history and the outcomes, you can see that an
9 investment in higher education at any level, and
10 certainly in the state's largest preeminent flagship
11 university, is a very important investment for all of
12 the people of the state in terms of our outreach, in
13 terms of our cooperative extension, in terms of what
14 we do in public broadcasting, in terms of what we do
15 with the Pennsylvania Technology Assistance Program,
16 all the entities where we reach out to the state,
17 everything from 4-H to helping engineering companies
18 get on their feet, producing the plurality of educated
19 people for our workforce, producing citizens.
20 These are all important things for the future
21 of Pennsylvania. And there's so many ways in which we
22 can demonstrate higher education's contribution. We
23 would like to see that investment be greater, even, of
24 course, while we recognize that there are competing
25 priorities.
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1 REPRESENTATIVE EVANS: I'm not trying to put
2 words in your mouth. But you're still being very, I
3 think, genteel, from what I think you're saying,
4 because I'm trying to get to the question about the
5 hint of our state's future. I think I found that to
6 be an interesting phrase.
7 And then in one breath, you said you had
8 conversations with the Governor and then the Governor
9 comes out with a recommendation of 3.3. One thing is
10 being said verbally but it's not shown in the proposed
11 budget. You said you've been around here 11 years,
12 which means three years of the Rendell Administration
13 and eight years of the Ridge/Schweiker Administration.
14 Let me be clear. I agree with what you've
15 said. But what I don't hear you saying is that you
16 don't think that it would be an optimistic, rosy
17 future in this state as we try to be competitive in
18 terms of what the Governor has said in his proposed
19 budget, that Pennsylvania would be listed 17th in the
20 country, if it wasn't over 17. And then the Governor
21 talked about Pennsylvania went from 46 in job creation
22 to 15. Now, some people debate those numbers.
23 I guess what I'm trying to really get a sense
24 of is, is there something that you really feel very
25 strongly and passionate about in what you said about
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1 the future of this state if we don't change our
2 priorities? That's kind of the way I'm reading it. I
3 want to be clear. What I hear you say is you have
4 been here for 11 years. You have a sense of history
5 under a Democrat Governor and under a Republican
6 Governor. So it doesn't seem like it makes a
7 difference in terms of what Party is in charge. It
8 seems that the pattern is still the same, because
9 there's a specific reason why you started off by
10 saying 11 years. So that means if you're starting off
11 with 11 years, you have a sense of the trend. You
12 know the trend. And then you look in here towards the
13 future. I'm just curious.
14 PRESIDENT SPANIER: The data I cited on
15 appropriations transcends all of the Governors whom I
16 have served with.
17 REPRESENTATIVE EVANS: Correct.
18 PRESIDENT SPANIER: I would never point the
19 finger at any one Administration. And I must say that
20 Governor Rendell has been very generous in looking for
21 opportunities to help promote economic development
22 through investments at the university. A very good
23 example of that is his commitment to a new materials
24 science building at Penn State for which the state is
25 providing half the funds and the university is
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1 providing half the funds. This might end up being the
2 single most important construction project in modern
3 Penn State history that can make a huge difference in
4 Pennsylvania's economy over time.
5 But I believe, to answer your larger
6 question, that we do have some control in this state
7 over our own destiny.
8 REPRESENTATIVE EVANS: Correct.
9 PRESIDENT SPANIER: And it's how we set our
10 priorities that is going to make the difference.
11 Pennsylvania right now is 49th in its projected
12 population demographics and our growth potential in
13 the coming years. We are last in the country, with
14 the exception of West Virginia, in anticipated growth
15 in our population. We are second after Florida in
16 terms of the aging population of this state.
17 We are a brain-drain state as opposed to a
18 brain-gain state. About 50 percent of Penn State's
19 graduates in fields like engineering; information
20 sciences and technology; biological, physical, natural
21 sciences, about 50 percent of our graduates are
22 leaving Pennsylvania for good jobs after they obtain
23 their baccalaureate degrees. A much higher proportion
24 of these students would actually like to stay in
25 Pennsylvania. They are from Pennsylvania. And they
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1 wouldn't mind being closer to home if there were jobs
2 here for them, jobs that were competitive with the
3 other jobs that they are being offered in New York,
4 New Jersey, Ohio, Maryland, North Carolina, or even
5 Florida, Texas, California, Illinois, and greater
6 distances.
7 To make those things happen, we have to
8 increasingly use the university as a vehicle for
9 helping the state in the area of economic development
10 and an investment in higher education. Particularly,
11 a university like Penn State is not just for the
12 business of the private gain of an individual taken
13 from high school to a graduate or postgraduate level.
14 There are so many other things that we are doing
15 through our $638 million in research expenditures,
16 through our outreach, through our workforce
17 development activities that will help Pennsylvania.
18 But we can't do it on the fumes of the funds
19 that we have. We need real dollars to make that
20 investment. We have done an exceptional job of
21 leveraging funds that we receive from the state. Our
22 economic development analysis shows that we generate
23 $6.1 billion a year in enhanced economic development
24 for Pennsylvania. That's what an independent study
25 showed that we shared with all of you. And $1 of
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1 investment in Penn State returns $19.42 to the
2 Commonwealth.
3 The combined economic development of Penn
4 State as the largest employer in the state and as the
5 single largest contributor to the economic development
6 of the state is very profound. So what we're asking
7 for is to have you and your colleagues acknowledge
8 what we are able to do and to see your way clear to
9 investing in us in a greater way than you have.
10 REPRESENTATIVE EVANS: When you say 8 percent
11 that you're referring to, is that 8 percent across the
12 board through all of higher ed?
13 PRESIDENT SPANIER: Yes. That would include
14 PHEAA, community colleges, State System of Higher
15 Education, the private universities who receive funds,
16 the Institutional Assistance Grants that go
17 specifically to private universities.
18 REPRESENTATIVE EVANS: When you say 8 percent
19 and comparing it, for example, when you talk about New
20 Jersey and New York, what percentage in terms of their
21 investment? Do you know that?
22 PRESIDENT SPANIER: Across the country, it's
23 typical for that percentage to be several percentage
24 points higher.
25 REPRESENTATIVE EVANS: Do you have a general
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1 idea?
2 PRESIDENT SPANIER: I have that data and can
3 share that with you, but it's not at my fingertips.
4 REPRESENTATIVE EVANS: Thank you very much
5 for your time.
6 PRESIDENT SPANIER: Thank you.
7 REPRESENTATIVE EVANS: Thank you,
8 Mr. Chairman.
9 CHAIRMAN FEESE: The Chair thanks the
10 gentleman.
11 The Chair recognizes the gentleman from
12 Lancaster County, Representative Armstrong.
13 REPRESENTATIVE ARMSTRONG: Thank you,
14 Mr. Chairman.
15 And thank you, Dr. Spanier, for being with us
16 today.
17 PRESIDENT SPANIER: Thank you.
18 REPRESENTATIVE ARMSTRONG: You mentioned
19 construction that's anticipated at Penn State. I
20 understand you currently have a number of construction
21 projects underway. How many construction projects do
22 you currently have underway right now in the Penn
23 State system?
24 PRESIDENT SPANIER: I don't know the exact
25 number. But it's probably a dozen altogether, either
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1 in design or construction.
2 REPRESENTATIVE ARMSTRONG: Any idea in terms
3 of the cost of those numbers?
4 PRESIDENT SPANIER: I don't have a very
5 specific number, but it would be easy for us to
6 provide that to you.
7 REPRESENTATIVE ARMSTRONG: I would be
8 interested to know. I'm also interested to know how
9 much of that money you already have committed. How
10 much is in the bank and how much still needs to be
11 raised?
12 PRESIDENT SPANIER: Well, virtually all of it
13 would be committed. We never start a construction
14 project unless we know exactly where the funds are
15 coming from. There are very few new construction
16 projects anymore that come exclusively from one
17 source.
18 So, for example, I mentioned the materials
19 science building. That's 50 percent coming from the
20 Commonwealth and 50 percent from the university's
21 borrowing capacity. Some of our construction projects
22 have a portion of it from development funds from
23 private donors through fund-raising. And then we
24 also, as a fourth category, have certain construction
25 projects that are funded as auxiliary enterprises.
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1 An example of that would be residence halls
2 where that is completely built in to the bonding
3 capacity of the university and where the payback is
4 done on the basis of the revenue flow from those
5 enterprises. So there are really about four different
6 mechanisms in which funding packages come together for
7 the university. But we never start a construction
8 project unless we know how those numbers are going to
9 sort out.
10 REPRESENTATIVE ARMSTRONG: So you have 100
11 percent of that money committed before you begin?
12 PRESIDENT SPANIER: We don't break ground on
13 a project until we know exactly where all of the funds
14 are coming from.
15 REPRESENTATIVE ARMSTRONG: I understand that
16 some universities, Harvard, for example, will set
17 aside 10 percent of the money for new building
18 projects to cover on-going maintenance costs. Does
19 Penn State do anything like that?
20 PRESIDENT SPANIER: No. I wish we were in a
21 position where we could. There are just a few
22 universities in the country -- Harvard is one -- where
23 they are able, in most cases, to raise enough money
24 ahead of time to not only build the building but to
25 endow its maintenance. But then again, they have an
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1 endowment that's 20 times the size of Penn State.
2 They're in the neighborhood of $25 billion. And much
3 of that is unrestricted. Ours is $1.2 billion, but
4 it's completely restricted.
5 So typically what we do is we identify all of
6 the sources ahead of time to pay for a building at the
7 time its built and then we build into the operating
8 budget of the university the fuel, utilities,
9 custodial costs, and so on for the maintenance and
10 operation.
11 REPRESENTATIVE ARMSTRONG: I understand that
12 the budget for a building project is planned for.
13 What is your benchmark number that you need to have in
14 the bank before you break ground?
15 PRESIDENT SPANIER: We need to have all of
16 the funds identified. We do not necessarily have it
17 all in the bank, per se. For example, when we do a
18 project that is funded in part or exclusively by the
19 state, the state sends us the money at certain points
20 in the project, not up front. But we have the
21 commitment ahead of time, knowing that it will all
22 arrive at the appropriate time.
23 REPRESENTATIVE ARMSTRONG: Before you break
24 ground, what's the state commitment and is there a
25 percentage that you have to have, 30 percent, 50
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1 percent, before you will authorize the breaking of
2 ground?
3 PRESIDENT SPANIER: We have to have 100
4 percent of the funding identified and knowing that it
5 will arrive on schedule. The amount that we need to
6 actually have in the bank when we break ground has to
7 be enough to pay for the early phases of construction,
8 the architectural and design fees.
9 REPRESENTATIVE ARMSTRONG: What is that
10 percentage typically?
11 PRESIDENT SPANIER: I'm not sure I understand
12 the question. As I said, all of the funds would be
13 identified and then we have to have a schedule for
14 paying all of the bills as they arrive. We don't do
15 any speculation or building of buildings without
16 knowing that the funds are all going to be able to
17 arrive and be paid, the bills paid at the appropriate
18 time.
19 REPRESENTATIVE ARMSTRONG: Is tuition funding
20 ever used to fund building projects?
21 PRESIDENT SPANIER: Yes. When I referred to
22 one of the four possible sources of the funds for
23 construction being the university's debt capacity,
24 part of the financing that allows us to pay off the
25 debt -- this would be equivalent to any other
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1 enterprise, including the state -- is using some of
2 the tuition funds to pay off that debt capacity. So
3 in some recent years, that's been 1 percent of our
4 funding from tuition increases that's gone to debt
5 capacity.
6 REPRESENTATIVE ARMSTRONG: You mentioned in
7 your testimony that Penn State is the most inexpensive
8 education among peer institutions. Can you define
9 peer institution?
10 PRESIDENT SPANIER: Let me just correct
11 something you said. We operate among the most
12 efficient. In other words, our expenditures per
13 student are very low. And all of the benchmarking we
14 do with peer institutions shows that we are always at
15 or near the top in efficiency. Our tuition, as I
16 said, is on the high end. Our peer institutions are
17 several different levels.
18 We do some analysis which looks at your Big
19 Ten colleges. The other nine public universities in
20 the Big Ten, the ten of us together share data. And
21 so much of our benchmarking is done that way. We also
22 do some benchmarking with other public and sometimes
23 private universities in the northeast because there
24 are some regional differences.
25 And then we participate in something called
28
1 the Association of American Universities Data
2 Exchange. This is more of a national benchmarking
3 among the 60 leading research universities. Many of
4 those universities, public and private, share data on
5 a broad range of variables. And we look to those
6 institutions for benchmarking.
7 REPRESENTATIVE ARMSTRONG: According to some
8 data I have, Penn State tuition has increased about 70
9 percent since 1997/1998. It is one of the more
10 expensive public colleges. In fact, there's a website
11 which lists Penn State as the most expensive public
12 institution in the country. Given that, it would seem
13 that you're almost in a position where you have to
14 freeze tuition or do something because you're pricing
15 yourself out of a competitive market.
16 PRESIDENT SPANIER: Yes.
17 REPRESENTATIVE ARMSTRONG: So then my
18 question becomes, if we increase your appropriation at
19 Penn State and you freeze tuition, what if you don't
20 get that appropriation that you're asking for? It
21 would seem to me that you would have to freeze tuition
22 or pretty close to it anyway.
23 PRESIDENT SPANIER: Well, yes, I agree with a
24 good part of what you're saying. We have had to raise
25 our tuition extensively during those years when our
29
1 appropriation was being cut. And two of these years
2 were compounded by mid-year recisions. For the
3 educational programs at the university, we only have
4 those two sources of income, legislative appropriation
5 and tuition. So those are the two things that go into
6 the formula that have to be balanced.
7 Now, during those same years, this was a
8 national phenomenon, so all universities have seen
9 increases. And unfortunately, we reached a point
10 where we're the most expensive in in-state tuition,
11 although in out-of-state tuition, a number of other
12 universities are ahead of us.
13 This is why we've become very concerned about
14 the cost of education to our students. By the time
15 you take tuition and fees, room and board, and other
16 expenses, it's a very big bill for the average family.
17 The average Penn State student now is graduating with
18 twenty-three, twenty-four thousand dollars in debt.
19 So we decided to make a very strong pitch
20 this year to the Governor and to you for allowing us
21 to freeze tuition at 20 of our campuses. We couldn't
22 do it at the 21st campus, University Park, because the
23 amount of dollars that would be required to allow that
24 to happen we thought would be a number that would be
25 outside the realm of what would be reasonable to ask
30
1 you for.
2 The end of your question, which is really the
3 heart of it, is, if we don't receive an increase at
4 that level, if we receive an increase at the level the
5 Governor has proposed, can we still freeze tuition?
6 The answer is, no, we can't. Because the increase
7 proposed this year is higher than it has typically
8 been, we will be able to moderate the tuition increase
9 and keep it as low as possible. We are looking right
10 now at the possibility of having that tuition increase
11 be very modest, perhaps the lowest it's been in a
12 decade at our Commonwealth campuses.
13 We are also seeing if we can make further
14 cuts and reallocations within the university to have
15 the increase at University Park be the lowest it's
16 been in a decade or so. Overall, we want to keep the
17 cost of education down as much as we can. We can't
18 really do it with an increase that is essentially at
19 the inflationary level because right now the
20 appropriation that you give us represents only 9.7
21 percent of Penn State's overall budget.
22 Tuition has become the single largest source
23 of income for the university. So it actually takes a
24 huge appropriation to keep the tuition part down. The
25 arithmetic of that, I think, is evident to all of you.
31
1 So that's where we stand.
2 Under any scenario, we will do the best we
3 can to keep tuition this year as low as we possibly
4 can and perhaps at a level that's lower than it's been
5 in a decade. But, of course, there will still have to
6 be a tuition increase unless we can get those
7 appropriation numbers up. Any increase that you give
8 us above the Governor's recommendation, I can tell
9 you, will be fully applied to reducing the level of
10 tuition below the level that is now projected based on
11 the current analysis.
12 REPRESENTATIVE ARMSTRONG: I understand that
13 each department at Penn State was asked to cut
14 expenditures by 10 percent; is that correct?
15 PRESIDENT SPANIER: No, it's not correct.
16 Every year since I have been president, we have gone
17 through a process of internal budget reductions and
18 reallocations. The highest -- these are
19 across-the-board cuts in addition to specific
20 problematic cuts. There may be, in a given year, a
21 unit here or there that would lose 10 percent.
22 But the projected across-the-board cut in
23 next year's budget for all units that we have told our
24 deans, vice presidents, and chancellors to prepare for
25 is 2 percent, not 10 percent.
32
1 REPRESENTATIVE ARMSTRONG: I just have two
2 final questions. How many trustees are there on Penn
3 State's board?
4 PRESIDENT SPANIER: Thirty-two.
5 REPRESENTATIVE ARMSTRONG: Do any of them
6 have financial dealings with the university?
7 PRESIDENT SPANIER: Of the current 32 sitting
8 trustees -- when you say financial dealings --
9 REPRESENTATIVE ARMSTRONG: Like a business
10 that profits from interaction with the university.
11 PRESIDENT SPANIER: I believe one. I believe
12 there was one in this year's most recent financial
13 disclosures in relation to the university's conflict
14 of interest policies.
15 REPRESENTATIVE ARMSTRONG: And you obviously,
16 I'm sure, have pretty clear policies for trustees that
17 have some kind of financial interaction?
18 PRESIDENT SPANIER: We have very, very strong
19 conflict of interest policies.
20 REPRESENTATIVE ARMSTRONG: For the sake of
21 time, if you could provide that text to the committee,
22 I would appreciate it. I also have some follow-up
23 questions that I will submit to you in writing.
24 PRESIDENT SPANIER: I will just say very
25 quickly, any trustee that is doing business with the
33
1 university at the level of $10,000 or more has to come
2 to a board of trustees meeting and be publicly
3 disclosed in the meeting and in the board minutes.
4 And the specific amount and nature of the transaction
5 would have to be disclosed.
6 REPRESENTATIVE ARMSTRONG: Thank you for your
7 time.
8 PRESIDENT SPANIER: Thank you.
9 CHAIRMAN FEESE: The Chair thanks the
10 gentleman.
11 The Chair recognizes the gentleman from
12 Allegheny County, Representative Wheatley.
13 REPRESENTATIVE WHEATLEY: Thank you,
14 Mr. Chairman.
15 Good morning, Mr. President.
16 PRESIDENT SPANIER: Good morning.
17 REPRESENTATIVE WHEATLEY: I guess I want to
18 follow up behind Representative Armstrong in his line
19 of questioning. I have a lot of students in my
20 district who attend your college and the University of
21 Pittsburgh rather than other universities. And the
22 question of late has always been around, how come we
23 don't give more money to prevent tuition from going
24 up? Can you help me understand, how do you make
25 facility decisions of what you will invest in and how
34
1 it would work? What determines that?
2 PRESIDENT SPANIER: How do we decide which
3 facilities to invest in?
4 REPRESENTATIVE WHEATLEY: Or new or expand.
5 How do you make those determinations? Do you say, oh,
6 I'm going to separate that from my academic situation
7 and say we're just going to be competitive? Do you
8 say, we can use some of our energy and time because we
9 know that's happening and we may not get as much state
10 support as we need so you go on to campaign to also
11 raise money to help supplement more students as ways
12 to help offset some of the cost?
13 PRESIDENT SPANIER: It's a multi-faceted
14 process. And it begins with the university's
15 long-range plans, their strategic plans. These are
16 plans developed both from the top down and the bottom
17 up where we look at priorities across all our
18 departments, our colleges, our campuses. We look at
19 the university's overall priorities. And at different
20 points in the process and at different levels, those
21 decisions are made by faculty, Faculty Advisory
22 Committees, university administrators, board of
23 trustees of the university.
24 We come up with priority lists, both for the
25 internal budget allocations and reallocations within
35
1 the university and also on the capital construction
2 side. They all have to be put in to one complex
3 picture because the university, if you put every part
4 of it together, from what happens at the Hershey
5 Medical Center to what happens at University Park, to
6 138 locations around the state where we have programs
7 of one kind or another, you have to weigh the
8 priorities. It's a huge, complicated enterprise.
9 I think over the years we have become pretty
10 good about trying to listen to all the needs that are
11 out there. But at some point, you have to make a
12 decision about where you want the university to be.
13 Some of the things that people don't think
14 about so much that have to go into that picture are,
15 what is the availability of funds? In other words, we
16 put lots of ideas before different members of the
17 Legislature to get their advice and, in particular,
18 the Governor. And he might say, that is a project
19 that I would be willing to invest in, but I'm not as
20 excited about that project there. So the availability
21 of funds makes a difference. Some areas, we might
22 have a donor who is willing to invest in one of our
23 priorities but not in another. And that will make a
24 difference as well.
25 Also, needs pop up over time in one area that
36
1 may not have existed in another area. So, for
2 example, we are in the process of planning for a new
3 major at the university in security and risk analysis.
4 And that would not have been on our radar screen five
5 years ago. But it's a new priority that's come on to
6 the radar screen because of national needs, state
7 needs, and, frankly, the interest of many of the
8 students who are coming to the university right now.
9 So while we have long-range plans, we do
10 tinker with them each year as priorities shift.
11 REPRESENTATIVE WHEATLEY: I guess I do take a
12 little bit of offense sometimes when it is being
13 portrayed that because we don't -- when I say we, the
14 Governor and the General Assembly -- give more money,
15 that it is the cause for raising tuition. And you
16 made a little presentation. You said the only option
17 you have is to raise tuition when, you know, that
18 doesn't happen, when we don't invest.
19 And I would basically say that I don't
20 necessarily think that's the full story. I mean,
21 there are other options that you can do, but that
22 requires a decision, based on your board of trustees
23 and you, to determine that you want to change your
24 priorities and that tuition covering costs for
25 students is more of a priority than securing a new
37
1 major. But that's an internal decision being made.
2 I think it is an unfair weight to put on the
3 General Assembly. If you don't do this, then
4 automatically we're going to raise tuition because
5 that's what's causing it. I don't think that's fair.
6 I think Governor Rendell has done a great job of
7 trying to be creative in using all of our departments
8 and all of the resources that the state has, not only
9 direct support to higher education but through other
10 means, to try to make them economic generators for the
11 Commonwealth.
12 I just feel like I needed to make that point
13 because I have a lot of students in my district. I
14 know you brought students here that are at this
15 hearing. I think that the families and students who
16 attend the institution need to know that it's not just
17 the General Assembly and our unwillingness to invest
18 in higher education that is causing the strain. It's
19 a very complex situation. It's a very complex issue.
20 And sometimes it gets to the point where you
21 have to look at your individual institutions that
22 you've chosen to attend and their decisions that
23 they're making as a board and as an administration
24 around what their priorities are. And sometimes
25 that's on top of the fact that the state can't
38
1 continue to give at the rate that it probably should.
2 PRESIDENT SPANIER: I understand very well
3 what you are saying. I appreciate that point of view.
4 But if I can just make an additional comment about it.
5 Penn State is in a unique situation. We are, and have
6 been for over 150 years, a Pennsylvania land grant
7 university. We have always had certain obligations to
8 the state. If the state and the people of the state
9 have expected any one university to try to be all
10 things to all people, it's been Penn State.
11 And while we could look at our programs --
12 and we have closed down or merged or greatly altered
13 more than 100 of our academic programs in the time
14 I've been president. And while we will continue to
15 make those adjustments every year, there aren't that
16 many lines we can cross. If we try to cut back on or
17 cut out our college of agricultural sciences, then the
18 Commonwealth of Pennsylvania wouldn't have
19 agricultural because we are it.
20 REPRESENTATIVE WHEATLEY: Right.
21 PRESIDENT SPANIER: If we cut back in our
22 college of engineering, it would dramatically reduce
23 the possibilities for the engineering workforce in
24 Pennsylvania because we are the largest producer of
25 engineers. We're the largest producer of business
39
1 graduates. When we developed, under the Ridge
2 Administration, the College of Information Sciences
3 and Technology, it was to help prepare the state in
4 the area of information technology for the age of
5 technology.
6 We have 100 percent employment of the
7 graduates coming out of all of those colleges. We are
8 the single largest producer of public school teachers.
9 And we have 100 percent employment of the graduates of
10 our College of Education.
11 You start to look deeply into the profile of
12 academic programs at the university and you run out of
13 places to say, well, we can have the university
14 without those programs. So the dilemma for me --
15 while I really appreciate what you're saying, we have
16 looked for all the places to cut. And when you get
17 right down to it, there isn't a lot of fat left in the
18 system. Again, it comes down to priorities.
19 Tuition provides 70 percent of what we call
20 our education, in general, or instructional budget.
21 And so there really is no other place to turn other
22 than tuition when we don't have the help we need on
23 the appropriations side.
24 Having said that, I assure you that we are
25 and will continue to be as frugal as we can. And, of
40
1 course, it goes without saying, we in higher education
2 operate in a competitive environment just like any
3 other kind of enterprise does as well.
4 REPRESENTATIVE WHEATLEY: Thank you.
5 Thank you, Mr. Chairman.
6 CHAIRMAN FEESE: The Chair thanks the
7 gentleman.
8 The Chair recognizes the gentleman from Berks
9 County, Representative Rohrer.
10 REPRESENTATIVE ROHRER: Thank you,
11 Mr. Chairman.
12 President Spanier, I want to somewhat follow
13 up with some of the questions that have been asked.
14 One thing I would like you to do is sort of clarify
15 for me the interaction between Representative
16 Armstrong and yourself. You made the statement that
17 you are one of the universities with the lowest cost
18 of education.
19 PRESIDENT SPANIER: Yes.
20 REPRESENTATIVE ROHRER: And then on the other
21 side, you're the highest in tuition of the public
22 schools. How is that reconciled and what would you be
23 comparable to when you compare yourself to a peer
24 institution that would be of a similar low cost? What
25 are you talking about there?
41
1 PRESIDENT SPANIER: I'm not sure if we have
2 the data in the briefing book that we provided you.
3 But we can show you some numbers that demonstrate this
4 pretty well. The difference is that if you take
5 legislative appropriation and tuition and at some of
6 the wealthier universities, let's say, they may be
7 able to use their endowment to support the cost of
8 education, every university has an average cost per
9 student. Because our legislative appropriation is
10 about $3,400 per student is what it comes out to be,
11 you add the cost of our tuition, which is a little
12 over $10,000, and the cost of the legislative
13 appropriation and then whatever other funds we can
14 bring to bear. I'm just going to use a very round
15 number right now. We'll give you more specific
16 numbers.
17 REPRESENTATIVE ROHRER: That's fine.
18 PRESIDENT SPANIER: We spend on the education
19 of an average student, let's say, $15,000. Now, if
20 you look at other, let's say, Big Ten universities,
21 you will find that the cost might range from fifteen
22 to thirty thousand dollars per person/student. Their
23 tuition might be a few hundred dollars or even a few
24 thousand dollars behind us. But their appropriation
25 per student might be five, ten, twelve thousand
42
1 dollars per student.
2 So on the appropriations side, if you look,
3 for example, at the University of Michigan, their
4 tuition is very high, almost the same as ours, just a
5 little behind us. But the amount of money that they
6 spend per student from their appropriation and a
7 little bit from their endowment and investment income
8 and other areas puts the amount of money they are
9 spending to educate each student maybe double what
10 ours is, to use a very round number.
11 That's what I meant there. We are actually
12 very efficient in terms of what we spend to educate
13 each of our students. We have to be that way because
14 we can't have our tuition be much higher than it is.
15 And the legislative appropriation has not kept pace
16 even with inflation.
17 Does that help clarify it?
18 REPRESENTATIVE ROHRER: I hear what you're
19 saying. I don't fully understand it, because, to me,
20 it doesn't really make any difference where the
21 revenue comes from. The cost of education is the cost
22 of education.
23 PRESIDENT SPANIER: Here is some data that my
24 colleague just gave me. Here's the appropriation per
25 FTE student. It ranges from Penn State's number at
43
1 the bottom -- you can see the dark shaded area -- to,
2 at the top, the University of Iowa, which is receiving
3 about $11,000 per student. So they are spending that
4 entire $11,000 per student each year.
5 And in addition, in Iowa, there is -- here's
6 another graph. This is the appropriation and the
7 tuition and fees together. So Iowa is spending
8 $18,000 a year to educate a student; Michigan,
9 according to this, $23,000. So that's the difference,
10 the appropriation and the tuition together. You take
11 those two amounts and you spend it.
12 When you add those two together at Penn
13 State, you have a low appropriation and a high
14 tuition. But together, it's still on the low end.
15 We'll give you this data so you can take a closer look
16 at them.
17 REPRESENTATIVE ROHRER: I would like to see
18 what else you would have on that. I'm still having
19 difficulty balancing that out.
20 PRESIDENT SPANIER: Sure.
21 REPRESENTATIVE ROHRER: Another thing that
22 you mentioned -- and I know every time we have these
23 hearings, it's always, we need more money. Penn State
24 does receive the largest appropriation. I don't think
25 that's inappropriate.
44
1 PRESIDENT SPANIER: Well, we have over 80,000
2 students.
3 REPRESENTATIVE ROHRER: Correct. I
4 understand that. That has to be taken into
5 consideration. That's why it's not inappropriate.
6 Just in looking at a couple of areas where
7 other funding has been expended. I'm going to go back
8 just a little bit here. The university has also been
9 pretty aggressive, it seems, in building new buildings
10 and sometimes acquisitions and mergers. That gets
11 into the stewardship, I think, of the funding
12 appropriated. Taking us back just a couple of years,
13 the whole Geisinger experiment when the university
14 chose to merge and then demerge, do you know what that
15 whole endeavor cost the university?
16 PRESIDENT SPANIER: Well, the cost was
17 actually very modest. I think what you're referring
18 to is, did we lose a lot of money on the deal?
19 REPRESENTATIVE ROHRER: Well, that's correct,
20 picking up that acquisition, the cost expended to do
21 all of that.
22 PRESIDENT SPANIER: In terms of the costs, I
23 would say they weren't very great. Some signs had to
24 be changed. And what happened is assets changed hands
25 going into the merger and then changed hands back
45
1 after the merger. I think what we lost during that
2 time was really a certain amount of momentum that we
3 might have been able to sustain differently had we not
4 gotten into that.
5 It was a time, as you recall, that most every
6 academic health center in the United States was going
7 through changes in their mergers, affiliations, in
8 some cases selling their hospitals to private
9 entities. Now we're one of only about 10 percent of
10 academic health centers in the United States that has
11 integrated academic health systems, with the
12 hospitals, clinics, College of Medicine all tied
13 together.
14 We've actually come out of it pretty well.
15 Great things are going on at the Milton S. Hershey
16 Medical Center. I think we were very wise to back
17 away from that very early on. We might have lost a
18 little momentum during that time.
19 REPRESENTATIVE ROHRER: But you're saying
20 really not any attributable cost to that?
21 PRESIDENT SPANIER: No. There were assets
22 that changed hands when they were brought together and
23 came back out.
24 REPRESENTATIVE ROHRER: All right. I have a
25 question about Dickinson here and the acquisition. I
46
1 believe since 1999 to 2005, tuition there has gone up
2 $15,526, which is a dramatic increase. Class size has
3 been increased by 50 students, which is a lot. What
4 has that whole endeavor cost the university?
5 I know that you're looking at building new
6 facilities for the law school at Penn State College
7 campus when at the same time the renovation of the
8 Carlisle campus is underway. How can all of those
9 things be done being underfunded? And I'm just
10 wondering how all of that is being done and how that
11 cannot perhaps be used to offset a tuition increase or
12 what this increase is because there's an awful lot
13 being expended there.
14 PRESIDENT SPANIER: From the time of the
15 merger, Dickinson School of Law has been operated as a
16 separate cost center of the university. So we have
17 not to this point re-allocated funds to the law
18 school. They have had to stand on their own largely,
19 which is one of the reasons that tuition has gone up
20 there. We have not put any appropriated money into
21 the law school. So any increases in their cost of
22 operating have to come from tuition.
23 When we build the new building at the
24 University Park campus, that will, however, be
25 integrated into the larger capital construction
47
1 program of the university so the cost of that facility
2 will not be charged against the law school, nor will
3 we raise tuition at the law school to make that
4 happen.
5 At the Carlisle campus, it's a little
6 different. That really is a partnership between the
7 university and the Commonwealth and through private
8 philanthropy putting the financial package together to
9 make that building happen there.
10 REPRESENTATIVE ROHRER: Again, you're saying
11 there's no cost transfer for that? That's
12 freestanding?
13 PRESIDENT SPANIER: There would be a
14 $10 million investment of the university into the
15 construction of the building in Carlisle.
16 REPRESENTATIVE ROHRER: Thank you. I
17 appreciate those answers.
18 PRESIDENT SPANIER: You're welcome.
19 REPRESENTATIVE ROHRER: Thank you,
20 Mr. Chairman.
21 CHAIRMAN FEESE: The Chair thanks the
22 gentleman.
23 The Chair recognizes the gentleman from
24 Allegheny County, Representative Frankel.
25 REPRESENTATIVE FRANKEL: Thank you,
48
1 Mr. Chairman.
2 Good morning, President Spanier.
3 PRESIDENT SPANIER: Good morning.
4 REPRESENTATIVE FRANKEL: It's a pleasure to
5 have you here. I would like to shift gears a little
6 bit. Let's talk about what Penn State brings to the
7 Commonwealth a little bit. I'm obviously very
8 familiar with the University of Pittsburgh as a
9 trustee and being in my district. I understand what a
10 great asset and economic generator it is for our
11 community. Can you maybe tell us what Penn State
12 brings into the state of Pennsylvania with respect to
13 research dollars?
14 PRESIDENT SPANIER: This past year
15 $638 million of research expenditures. The majority
16 of that, the largest share, comes from out of state,
17 really from the federal government. We are eleventh
18 in the United States as a research and development
19 enterprise. We rank second in the United States in
20 defense-related spending. We are third in the United
21 States in research supported by private industry. And
22 there are a number of other categories where we really
23 stand out in a very exceptional way.
24 The leveraging from the Commonwealth of those
25 research expenditures is quite phenomenal. We are
49
1 responsible for the creation of a tremendous number of
2 new companies, of patents, of technology transfer, job
3 creation. There are so many ways which I am very
4 proud of what we do contribute just through research.
5 REPRESENTATIVE FRANKEL: Can you talk about
6 some of the employment numbers in terms of
7 commercialization opportunities that have taken place
8 out of the research job creation? Do you have some
9 statistics?
10 PRESIDENT SPANIER: We can send you some of
11 the numbers. A number of them come out of our
12 economic development report and what we produce in the
13 outreach area. Every year we are responsible for the
14 creation of several new businesses within the
15 Commonwealth.
16 We also save thousands of jobs a year by
17 going to companies that are struggling with a
18 particular issue or a particular problem in areas like
19 small business development, in technical assistance.
20 We're able to help them do things that they have to
21 do. We operate one of the Ben Franklin technology
22 partnership units.
23 Our faculty members have been increasingly
24 successful in patents, licenses, technology transfer.
25 Many of these then become commercialized and marketed.
50
1 And we have a number of spin-off companies each year
2 now that have come about that have helped produce more
3 jobs for the Commonwealth.
4 And also keep in mind that through
5 cooperative extension and our other outreach
6 enterprises, we reach into approximately half of all
7 the homes in Pennsylvania every year with some aspect
8 of our outreach activities.
9 So Penn State is more than just a university
10 in the typical sense where we're producing
11 undergraduates, even though we do produce more
12 undergraduates. Last year we graduated about 16,000
13 students at Penn State.
14 You also need to keep in mind that we
15 contribute significantly to the postgraduate level and
16 at the professional level. We produce a huge number
17 of physicians. We host a number of residents at the
18 Hershey Medical Center, a good portion of which remain
19 in Pennsylvania for their practice of medicine.
20 Through the Dickinson School of Law, we produce a
21 number of law school graduates, a very large portion
22 of which remain in Pennsylvania to practice, many of
23 whom go into public service of one kind or another.
24 Penn State is very important in all of these
25 other ways, not just through undergraduate education.
51
1 REPRESENTATIVE FRANKEL: In your capacity to
2 be that kind of an attraction for research funding,
3 for entrepreneurs, and so forth, you have to invest in
4 your physical plan. You have to be a state-of-the-art
5 facility in order to be a generator of those sorts of
6 investments by the federal government and others.
7 PRESIDENT SPANIER: As I have said in this
8 room before, you can't do 21st Century science in a
9 1930s or even a 1950s building. And with regard to
10 attracting research funds from the federal government
11 and from business and industry, we are in a very
12 competitive environment. Penn State didn't get to be
13 one of the leading research universities in the
14 country by not paying attention to certain facilities.
15 Even still, let me say that the benchmarking
16 that we do in the Big Ten shows that we have the
17 smallest number of square feet per student in our
18 buildings and facilities than any of our peer
19 institutions. So we are still way behind in
20 facilities.
21 Here's what happened. Penn State went
22 through its big growth spurt in that post-war era back
23 in the 1950s and 1960s. Those buildings are now 40,
24 50, approaching 60 years of age. Many of them need to
25 be replaced or need serious rehabilitation. So we
52
1 have to keep up on the facility side or you're going
2 to fall behind.
3 It's no different than our head football
4 coach saying, if you're just standing in place, you
5 are falling behind. You have got to keep moving ahead
6 if you want to be competitive. And that's what we are
7 trying to do.
8 REPRESENTATIVE FRANKEL: I happen to believe
9 that the Commonwealth's investment is a big payoff.
10 Some of the best and brightest of our communities come
11 here. And the economic vitality that's generated by
12 our state-related state system is enormous. It's one
13 of the few bright spots, actually.
14 Let me ask you to comment. We passed here in
15 the House and a competing version in the Senate a
16 piece of legislation known as the Taxpayers Bill of
17 Rights. That legislation seeks to cap state spending
18 no higher than the rate of inflation. You clearly
19 demonstrate, I think, some issues with respect to a
20 cap being anything with the rate of inflation. And at
21 the same time, almost the same week, that we passed
22 the Taxpayers Bill of Rights in the Pennsylvania
23 House, Colorado, which had a Taxpayers Bill of Rights
24 in place for a decade, had to have a referendum that
25 supported a bipartisan basis to overturn it because
53
1 they were in danger of completely defunding their
2 state university system.
3 Maybe you can talk a little bit about that.
4 PRESIDENT SPANIER: Well, the Taxpayers Bill
5 of Rights in the few states that have it or other
6 similar measures that exist in some states have never
7 helped higher education. There's no example of a
8 major university or university system that has been
9 advantaged by such legislation.
10 This Legislature, if I can just offer an
11 opinion, has exercised tremendous discipline over my
12 11 years in keeping an eye on the budget of higher
13 education. I mean, you do it through your
14 appropriation to the university. And as I testified
15 earlier, you have been very modest in what you have
16 appropriated. So I'm not sure from my standpoint why
17 any legislation would be needed that went beyond the
18 normal discipline that you and the Governors have
19 applied in that respect.
20 In higher education, there's great
21 opportunity. And there are times when the Legislature
22 in partnership with the university would want to take
23 advantage of that opportunity to invest in the
24 university. And I would hate to see any restrictions,
25 artificial or through legislation, that would prevent
54
1 you from recognizing those opportunities and
2 investing, along with us, in what's possible.
3 I mentioned a couple already that I think
4 have great payoff for the Commonwealth. And if there
5 were restrictions on the Governor's or the
6 Legislature's ability to do that, I don't see how
7 anybody comes out ahead.
8 REPRESENTATIVE FRANKEL: I'm glad you and
9 others have stepped up to be advocates.
10 PRESIDENT SPANIER: Let me say what's obvious
11 to everybody in this room. Penn State is a
12 non-preferred appropriation. The law says you cannot
13 even -- you can't actually pass our appropriation
14 until the rest of the state budget is in place. And
15 for us to receive any money from the state, we need a
16 two-thirds vote in the House, a two-thirds vote in the
17 Senate, and the Governor's approval.
18 We are at the bottom of the food chain in
19 some respects in terms of receiving funding from the
20 state. I would hate to envision a scenario where
21 there are limits placed on your ability to support us,
22 where other non-discretionary parts of the state
23 budget are having to be dealt with because of the
24 limitations of a Taxpayer Bill of Rights, leaving
25 essentially nothing left in the non-preferred category
55
1 for those of us who depend on some level of support
2 from the state.
3 Talk about putting an increased burden on
4 students and their families. As modest, as I
5 sometimes come in here and would like to say, as this
6 state appropriation is, please remember what I said at
7 the very beginning of my comments. We are grateful
8 for what we are getting from the state. That
9 $300 million-plus is very important to us. And if we
10 did not get that because of limitations, we would
11 essentially be turning all of our in-state students
12 into out-of-state students and tuition would grow
13 dramatically.
14 I don't want to see that happen. We need the
15 kind of support that you can give us, whatever it
16 might be.
17 REPRESENTATIVE FRANKEL: I thank you for your
18 comment. I hope we are not faced with Colorado's very
19 painful experience. Thank you for your testimony
20 today.
21 PRESIDENT SPANIER: You're welcome,
22 Representative.
23 REPRESENTATIVE FRANKEL: Thank you,
24 Mr. Chairman.
25 CHAIRMAN FEESE: The Chair thanks the
56
1 gentleman.
2 For the information of the members, there are
3 eight members who wish to ask questions. We will
4 conclude at 12:30, so please be mindful of your
5 colleagues.
6 The Chair recognizes Representative Maher.
7 REPRESENTATIVE MAHER: Thank you,
8 Mr. Chairman.
9 You observed today that the state
10 appropriation amounts to 9.7 percent of your overall
11 budget. Can you provide us a copy of that budget?
12 And I'm not talking about the little pie charts that
13 are in this document. I understand in the past
14 there's been some reluctance to share that budget with
15 the General Assembly. Would you provide that to us?
16 PRESIDENT SPANIER: I assure you we have no
17 reluctance. Indeed, our budget, about 3,000 pages'
18 worth, is available on the web to every citizen. And
19 it is accessed often.
20 REPRESENTATIVE MAHER: Very good. And that's
21 the budget you're referring to with this benchmark of
22 the 9.7 percent?
23 PRESIDENT SPANIER: Well, we will
24 specifically provide you with a greater level,
25 whatever level you would --
57
1 REPRESENTATIVE MAHER: The challenge I have
2 is you -- over the years, I've heard a variety of
3 statistics offered. And when I go back to measure
4 them against the data which you actually publish,
5 there seems to be an apples-and-oranges problem.
6 That's why I'm asking you, is this budget that you're
7 referring to that's on the web the same budget you're
8 referring to when you observe that your appropriation
9 is a meager 9.7 percent of the total budget?
10 PRESIDENT SPANIER: It all comes out of the
11 same database. And if there's any confusion --
12 REPRESENTATIVE MAHER: That's not the
13 question. Is it the same?
14 PRESIDENT SPANIER: Yes. If there's any
15 confusion about it whatsoever, we will provide you
16 with whatever level of information you would prefer.
17 REPRESENTATIVE MAHER: Now, your predecessor
18 used to make audited financial statements for the
19 university, its affiliated non-profits, the related
20 990s public. In fact, in the beginning of your
21 tenure, those documents tended to be made public.
22 They don't seem to be as publicly available now. Are
23 you able to provide those documents?
24 PRESIDENT SPANIER: Our audited financial
25 statements are provided in public session to our board
58
1 of trustees at our November meetings.
2 REPRESENTATIVE MAHER: Can you provide a copy
3 to us?
4 PRESIDENT SPANIER: Absolutely.
5 REPRESENTATIVE MAHER: Thank you. And
6 similarly for those affiliated with Penn State or your
7 non-profit?
8 PRESIDENT SPANIER: The current financial --
9 standard financial accounting rules require us to
10 include all affiliated enterprises as a part of --
11 REPRESENTATIVE MAHER: So it's all part of
12 the same reporting?
13 PRESIDENT SPANIER: -- those audited plans.
14 Yes.
15 REPRESENTATIVE MAHER: And the 990s, where
16 are these?
17 PRESIDENT SPANIER: We don't have 990s. But
18 if there's something that would be on the 990 that you
19 would have an interest in, please let us know and
20 we'll try to be responsive.
21 REPRESENTATIVE MAHER: That's very
22 encouraging.
23 Eleven years you have been before us. In 11
24 years, the tuition for the main campus has gone up 225
25 percent -- rather, it is 225 percent today as compared
59
1 to what it was when you first became president of the
2 university. That's a dramatic increase by measure.
3 Year in, year out, I have heard your explanation for
4 this. It's all because of the appropriation.
5 Now, if it's correct that the appropriation
6 amounts to just one dollar in ten of your overall
7 budget and if the variance between what you request
8 and what you receive amounts to six-tenths of 1
9 percent of the overall budget, can't you imagine that
10 those of us sitting here are thinking, well, there's
11 99.4 percent of the budget otherwise, that somehow or
12 another you have done everything you can with that
13 99.4 percent and this measly six-tenths of 1 percent
14 is why all the tuition increase has happened. Does
15 that sound credible to you?
16 PRESIDENT SPANIER: I want to understand your
17 question better, because I'm not sure if the numbers
18 that you're suggesting are --
19 REPRESENTATIVE MAHER: I'm just working with
20 the numbers that you offered up, which is the 9.7
21 percent of your overall budget is the appropriation,
22 rounding to one dollar in 10, correct?
23 PRESIDENT SPANIER: That's correct.
24 REPRESENTATIVE MAHER: The difference between
25 what the Governor's proposal is for the university and
60
1 what your request was is the difference between a 10
2 percent increase and a 4 percent increase, correct?
3 PRESIDENT SPANIER: Between 3.3 percent and
4 9.5 percent.
5 REPRESENTATIVE MAHER: So that's 6.2 percent
6 overall?
7 PRESIDENT SPANIER: No, the difference would
8 be -- that would be 6.2 percent on a base of a little
9 more than the $300 million part of your budget.
10 REPRESENTATIVE MAHER: Pick a number,
11 whatever number you like. Pick 6 percent, 6.2, 6.5.
12 Pick a number. Okay. Let's round it up to 6.5. So
13 6.5 percent of 10 percent is two-thirds of 1 percent.
14 So the whole discussion is really about just
15 two-thirds of 1 percent as it affects tuition. My
16 question is, when you say you have done everything
17 else you can with that other 99.4 percent, how can
18 that be? How can all your troubles relate to
19 six-tenths of 1 percent of your budget?
20 PRESIDENT SPANIER: Well, here's my
21 explanation. We principally operate on a
22 tuition-driven model. Right. As we said, if you take
23 the instructional -- I'll try to state it this way.
24 Tuition is the single largest source of income at Penn
25 State. So if we just try to increase everything a
61
1 little bit, we raise tuition a little bit, have a
2 modest increase in the state appropriation. If we
3 wanted to freeze tuition, however, because the state
4 appropriation is carrying the burden of such a small
5 percentage of our budget, we need a much higher
6 increase percentagewise in the state appropriation to
7 leave tuition where it is.
8 An increase in the state appropriation of 1
9 percent is a lot less money than an increase of 1
10 percent in the tuition. So to not have any tuition
11 increase, you'd have to see the appropriation number
12 go much, much higher on a percentage basis.
13 REPRESENTATIVE MAHER: Let's look at how Penn
14 State does where we can extract that variable
15 appropriation. As you observed earlier in answer to
16 Representative Rohrer, there is no specified
17 appropriation at the Dickinson School of Law. In
18 fact, you went further and said that that entity is
19 operating within its own cost center.
20 Now, between the increase in tuition and the
21 increase in the number of students, you are collecting
22 223 percent gross tuition compared to what it was six
23 years ago at the time of the merger, so a 223 percent
24 increase in tuition charges for the Dickinson School
25 of Law over a six-year period unaffected by
62
1 appropriations. Is it perhaps you're just not very
2 good at managing tuition?
3 PRESIDENT SPANIER: You're referring now to
4 law school tuition?
5 REPRESENTATIVE MAHER: That's correct.
6 PRESIDENT SPANIER: I'm not sure those
7 numbers are quite right. I will --
8 REPRESENTATIVE MAHER: Let's talk through
9 them. Is $26,250 the tuition this year?
10 PRESIDENT SPANIER: That sounds about right.
11 REPRESENTATIVE MAHER: And at the time of the
12 merger, it was $15,500. You're now admitting 210
13 students in a year. Before it was 160. So there's a
14 30 percent increase in students, a 70 percent gross
15 increase in gross tuition. Combine those two together
16 and you wind up with the tuition that's being billed
17 this year for the law school. It's 223 percent of
18 what it was in 1999.
19 PRESIDENT SPANIER: Actually, I don't think
20 we were -- I think we've been admitting closer to
21 about 175 students per year. And actually, those
22 numbers will probably come down a little bit.
23 REPRESENTATIVE MAHER: According to the data
24 here, it certainly looks like you're admitting as many
25 as 210, but so be it.
63
1 PRESIDENT SPANIER: Tell me the number you're
2 looking at.
3 REPRESENTATIVE MAHER: At 638.
4 PRESIDENT SPANIER: Well, that includes
5 students working on masters and other advanced degrees
6 outside of the JD degree, so you can't --
7 REPRESENTATIVE MAHER: Maybe it's not 223
8 percent. Maybe it's just 200 percent. It's quite a
9 pattern.
10 PRESIDENT SPANIER: Well, if you go from 15
11 to 26,000, that's not 225 percent.
12 REPRESENTATIVE MAHER: No, that's 70 percent.
13 PRESIDENT SPANIER: Well, there's several
14 things that are operative there. For one thing, a
15 certain percentage of that increase goes back into
16 financial aid for the student. In fact, a fair amount
17 of it does because we still operate with the principle
18 that nobody should be prevented from coming to any
19 part of Penn State, including the law school, because
20 of financial circumstances. So we do offer quite a
21 bit of financial aid. And that's part of where you
22 see that.
23 REPRESENTATIVE MAHER: I see. So you raise
24 tuition so that you can give it back?
25 PRESIDENT SPANIER: In some cases.
64
1 REPRESENTATIVE MAHER: Wouldn't it be more
2 efficient to simply not raise the tuition?
3 PRESIDENT SPANIER: Well, you don't always
4 have the financial aid resources available externally
5 to be able to do that.
6 REPRESENTATIVE MAHER: So is that the
7 technique that you use at University Park and the
8 branch campuses as well?
9 PRESIDENT SPANIER: Unfortunately, we do a
10 little bit of that at the university in every
11 location. We try, as much as we can, each year to set
12 aside some of our funding for internal financial
13 support. But that's another category where we're kind
14 of at the bottom. We have much less of those kinds of
15 funds available than other universities do, which is
16 one reason why the loan debt is so high. And that's
17 true of the law school and with other units as well.
18 REPRESENTATIVE MAHER: And the branch
19 campuses enrollment has declined 2,500 students in the
20 last five years according to the data that you
21 provided. Why is that?
22 PRESIDENT SPANIER: There are a number of
23 reasons. There's some profound changes taking place
24 in Pennsylvania demographics. In certain regions of
25 the state, there are some increases. But in most
65
1 regions of the state, particularly many of them where
2 our campuses are located, there is a declining
3 population and a declining number of college-bound
4 high school graduates.
5 In fact, right now, this coming year,
6 Pennsylvania will be at about its peak of the number
7 of college-bound high school graduates. It will stay
8 level for a couple of years and then it will head
9 down. But that demographic shift has already taken
10 place in many of the regions where our campuses are.
11 It goes back to something Representative Fleagle was
12 mentioning earlier.
13 At our campuses, at many of our campuses, the
14 students are recruited and enroll principally from a
15 more regional locale as opposed to even statewide or
16 national. And, therefore, we anticipated and will
17 expect to see some level of enrollment decrease.
18 Now, that being said, we have stepped up our
19 efforts to make sure that people understand the
20 quality of an education they can get at our campuses.
21 And right now our flow of applications is up at all of
22 our campuses. So I think next year you will see some
23 of that gap disappear. And overall at Penn State, we
24 do expect a modest enrollment increase. Right now, in
25 fact, our applications are up more than 10 percent of
66
1 where they were last year.
2 REPRESENTATIVE MAHER: Are you talking about
3 branch campuses or University Park?
4 PRESIDENT SPANIER: All of our campuses.
5 Just to give you a little more information, we expect
6 to go over 90,000 applications for admission at Penn
7 State. It will be a record. We're already about
8 8,000 ahead of where we were last year. Our
9 enrollments will go up only modestly because we only
10 have so many students that we can take. We are now
11 the most popular university in America. And we expect
12 to see some enrollment increases.
13 At the law school -- by the way, nationally,
14 law school applications are down -- one of the things
15 we're very pleased about, you know, despite a certain
16 amount of turmoil that we had getting through the
17 whole process, in terms of the application flow for
18 this year, nationally, we have become now one of the
19 most popular destinations in the country. Our law
20 school applications are up more than 30 percent. The
21 quality of the applications is very high. So to be up
22 that dramatically at a time when nationally the flow
23 of applications at law schools is down is something
24 very noteworthy.
25 REPRESENTATIVE MAHER: Two questions about
67
1 priorities. Is it correct that you use private
2 aircraft?
3 PRESIDENT SPANIER: For just in general?
4 REPRESENTATIVE MAHER: For university
5 business or whatever.
6 PRESIDENT SPANIER: The university has two of
7 its own aircraft.
8 REPRESENTATIVE MAHER: The university owns
9 two aircraft?
10 PRESIDENT SPANIER: That's right.
11 REPRESENTATIVE MAHER: How much does it cost
12 to own two aircraft?
13 PRESIDENT SPANIER: We will be happy to
14 provide numbers for you. I don't have those on the
15 tip of my tongue. There are two planes that are kept
16 in service most of the time.
17 REPRESENTATIVE MAHER: So it's correct that
18 you would use those to fly to Harrisburg or to fly to
19 Carlisle?
20 PRESIDENT SPANIER: We fly all over the
21 state, frequently to Washington, D.C., on business,
22 occasionally to other universities where we have
23 partnerships, maybe to Big Ten meetings in Chicago,
24 wherever we have business.
25 REPRESENTATIVE MAHER: Do you also have
68
1 pilots on the payroll?
2 PRESIDENT SPANIER: Yes.
3 REPRESENTATIVE MAHER: And, of course,
4 there's fuel for these planes?
5 PRESIDENT SPANIER: Yes.
6 REPRESENTATIVE MAHER: Have you compared the
7 cost of what it costs to fly into Harrisburg versus
8 you and a couple of others get in a van and come down
9 to Harrisburg?
10 PRESIDENT SPANIER: Yes. Again, we have a
11 system with a fair amount of discipline, a policy on
12 the use of the aircraft. We have a charge-back system
13 within the university. Any budget officer has to make
14 a decision about the use of the aircraft and whether
15 to use that or some other means.
16 REPRESENTATIVE MAHER: I would be interested
17 in seeing the details of how much these aircraft costs
18 are during the course of the year and to gauge it as
19 to how many students' tuition that translates to.
20 One final question about priorities. I
21 understand you're spending $31 million to build a
22 ballpark?
23 PRESIDENT SPANIER: The university, in
24 partnership with the state and minor league baseball
25 team, is building a new baseball field.
69
1 REPRESENTATIVE MAHER: So you perceive minor
2 league baseball as part of the university's mission?
3 PRESIDENT SPANIER: No, that's not it. It's
4 really a partnership, as I said, involving the state,
5 involving the minor league team, and the university.
6 The university will own the facility. It becomes a
7 building under the university's purview. But the
8 facility will be shared by the university's baseball
9 team, by the Altoona Curve franchise with a separate
10 team that will be based in State College. And the
11 facility will be used for other purposes as well, some
12 academic and for other activities. We'll use it
13 during football weekends in various ways, for example.
14 REPRESENTATIVE MAHER: Thank you.
15 Mr. Chairman, just in closing, I just want to
16 observe the point that six-tenths of 1 percent of the
17 overall budget is what President Spanier's testimony
18 is really about in terms of the tuition increases.
19 Yet, just things like this ballpark, 3,000 students'
20 worth of tuition goes into the minor league ballpark
21 on the campus. A private air force. That costs
22 something. There are choices. There are priorities.
23 And I suggest that we hear more next year about the
24 99.4 percent of the budget which is otherwise worthy
25 of interest.
70
1 Thank you, Mr. Chairman.
2 CHAIRMAN FEESE: For the information of the
3 members, we have seven members who want to ask
4 questions. And we will conclude at 12:30 to give the
5 stenographer a break before our hearing at 1 o'clock.
6 Representative Shapiro.
7 REPRESENTATIVE SHAPIRO: Thank you,
8 Mr. Chairman.
9 And in the interest of time, I will limit my
10 questions just to one topic. I'm very proud to
11 represent Penn State Abington in my district,
12 President Spanier, and proud that it appears on the
13 first page of your brochure today, that I think we
14 have a shared goal in higher education, I believe, in
15 allowing students to get the best education they can
16 get, to complete their education as quickly as
17 possible, typically in four years, to keep tuition
18 down, and then to get our students hopefully out into
19 the Pennsylvania workforce.
20 One hindrance, I believe, to that is that
21 students often, when they try and transfer from school
22 to school, lose credit hours, which causes them to
23 stay in school for an additional several months or
24 years and causes them to pay more in tuition. Some
25 community colleges, state system colleges, and
71
1 state-relateds have designed articulation agreements
2 with various institutions primarily in their region to
3 help facilitate students' education. And I know that
4 Penn State has such articulation agreements, not only
5 at the main campus but at the branch campuses, like
6 Abington. And I do credit you for that.
7 As you may know, I have met with a number of
8 officials at Penn State on two separate occasions to
9 talk about this articulation agreement issue. And I
10 have introduced legislation that would require state
11 system and community colleges and state-relateds to
12 come together to design a statewide articulation
13 agreement. Unfortunately, I have experienced, to be
14 candid with you, a bit of resistance from Penn State
15 officials to such a statewide system.
16 And my question to you quite directly,
17 President Spanier, is, do you think that articulation
18 agreements, that is, a statewide articulation
19 agreement, will help improve educational opportunities
20 in workforce development in Pennsylvania?
21 PRESIDENT SPANIER: I don't think one uniform
22 statewide articulation agreement is the answer. So in
23 that respect, we would probably not be supportive of
24 legislation that leaned that way.
25 But let me hasten to say that we are very
72
1 supportive of a closer degree of collaboration with
2 community colleges and with our Penn State campuses.
3 We do have, as you point out, a number of articulation
4 agreements already. We would like to see
5 institutions, particularly those in geographical
6 proximity, to work more closely together to make sure
7 that a course taken at one institution is roughly
8 equivalent to a course that might be a requirement at
9 another institution.
10 We will pledge to work collaboratively to
11 make that happen. But I think it has to be done in a
12 voluntary way with whatever strong encouragement we
13 can give from the top because it's very difficult to
14 tell faculty members, who then have to be accountable
15 to external accrediting agencies, that the particular
16 content of a course here must count as equivalent to
17 the content of a course there if, indeed, they are not
18 equivalent.
19 So the goal is to try to match them up and to
20 share syllabi and get people talking to each other so
21 that we make that match as well as we can. We will be
22 pleased to be a part of such a discussion.
23 REPRESENTATIVE SHAPIRO: It sounds to me that
24 you're sort of saying two different things. In a
25 sense, your university is committed to creating these
73
1 articulation agreements; that you're committed, in the
2 instances that you created, to working on making sure
3 English 101 here works for English 101 there. Yet
4 there seems to be some resistance to creating a
5 statewide system, a statewide system, I would point
6 out, that both my legislation and the Rendell
7 Administration's efforts would have Penn State in the
8 driver's seat of actually creating it. It would not
9 be the state creating it. It would be the university
10 creating it.
11 I guess I'm a bit perplexed as to why, if
12 you're already walking down this path, you don't want
13 to walk down this path with the Commonwealth together
14 for the benefit of the students.
15 PRESIDENT SPANIER: Well, because I think in
16 the end, it might be a frustrating, even impossible,
17 task to get faculty members at a huge number of
18 different universities to actually agree that the
19 content of a particular accounting course is going to
20 be the same everywhere or roughly equivalent. You are
21 going to have different opinions at different
22 universities about what the appropriate content can
23 and should be. You're going to be responsive to
24 different external accrediting agencies. Some
25 programs will be accredited and others will not.
74
1 I don't think it's realistic to be able to
2 pull that off. And, of course, how many institutions
3 -- if you just restricted it to one university or
4 maybe to the state system, you might be able to pull
5 something like that off. But as you get broader and
6 you go to state related -- you might bring in private
7 universities -- it becomes very, very complicated.
8 And every university has its own faculty
9 ideas, its own educational goals, its own identity.
10 So nothing is ever going to match up 100 percent. And
11 I'm not sure if that's what you're proposing to have.
12 We would encourage it. And to the extent
13 that we can be a part of helping to make that happen,
14 we would. But I think it has to come with
15 encouragement and have the universities sit down and
16 do it from an educational standpoint rather than a
17 mandate.
18 REPRESENTATIVE SHAPIRO: And that is exactly
19 what I'm proposing in addition to trying to seek money
20 in this state budget for those purposes. I will take
21 your comments as encouragement to that process. And
22 we'll make sure that you're invited to the table to
23 help put that together. I appreciate it.
24 Thank you, Mr. Chairman.
25 CHAIRMAN FEESE: Representative Baker.
75
1 REPRESENTATIVE BAKER: Thank you,
2 Mr. Chairman.
3 President Spanier, congratulations on the
4 brevity of your opening remarks as well as your
5 longevity and very successful athletic programs this
6 past year.
7 PRESIDENT SPANIER: Thank you.
8 REPRESENTATIVE BAKER: I have two concerns
9 primarily, reduced down from four, with the
10 encouragement of the chairman. One is cooperative
11 extension agricultural research and how that could
12 negatively impact rural areas. It's my understanding
13 there's no increase in the Governor's proposed budget
14 for those line item appropriations.
15 And then the other issue is something that
16 Sheila Bourne has been working on with me through the
17 Hershey Medical Center. And that is psychiatric
18 providers are in need in Pennsylvania for additional
19 psychologists or, in particular, the profession of
20 psychiatry. We are down to one. We had three in
21 Tioga County. We are down to one now. This is very,
22 very difficult on our hospital and the judiciary
23 system with court orders and getting individuals
24 treated. I understand there recently was a statewide
25 forum that is trying to address the critical needs of
76
1 having more in this profession. We're going to be
2 meeting with Uhde here in the next month or so to try
3 to address some of those issues. So I appreciate
4 that.
5 I guess it comes back to the requesting of
6 your line item of $1.9 million to the Central
7 Pennsylvania Psychiatric Institute. Could you just
8 express the importance of those two issues in terms of
9 funding?
10 PRESIDENT SPANIER: Let me start with
11 cooperative extension and agricultural research. The
12 greatest disappointment for me in the Governor's
13 budget recommendation is that there is no increase in
14 these two line items. People look at Penn State's
15 budget and they look at a $300 million-plus number.
16 Actually, $50 million -- $50 million-plus of that
17 number is associated with extension and agricultural
18 research.
19 This is the third year in a row the Governor
20 has proposed no increase in those budgets. This is
21 greatly confounding to me. These are enterprises
22 which have been at the heart of Penn State University.
23 These are critical to the people of the state. We are
24 talking about millions of Pennsylvania citizens that
25 are affected by these activities.
77
1 When you talk about agricultural research and
2 issues of bioterrorism, water quality, food safety,
3 the preservation of our environment, our forest
4 resources -- I could go down a very long list. When
5 there is a problem in this state, West Nile Virus --
6 some of you are thinking about Avian flu and other
7 things that might come our way -- you are going to
8 turn to Penn State and our researchers in the College
9 of Agricultural Sciences to be on top of this to
10 advise you and to do something about it.
11 Three years in a row of no proposed increase
12 in these line items. We have already laid off 164
13 employees. The proposed budget will require us to cut
14 another 54 employees. Now we're starting to get a
15 message here. But I would say it's something you
16 ought to be talking about.
17 And if there's a message that we should
18 understand, tell us now. If you expect to dismantle
19 agricultural research and cooperative extension in
20 Pennsylvania, if you expect to destroy the partnership
21 between the state, our 67 counties, and the federal
22 government that has historically underlaid these
23 enterprises, from the Smith-Lever Act and the Hatch
24 Act and everything else that's happened, tell us. But
25 to put us in for no increase, it makes no sense to me.
78
1 That is why Penn State's appropriation number
2 is the lowest of any higher education enterprise in
3 the state, because putting in nothing for cooperative
4 extension and agricultural research brings us down to
5 3.3 percent. That money is all loaded into the
6 educational side of the budget.
7 So all I can say is -- I mean, thank you for
8 raising the question, because it may be the most
9 important message I leave you with today. That has to
10 be brought up at least to the same 4 percent level
11 that all of the other educational entities are as a
12 minimum in the state budget. There are important
13 things happening here.
14 The cutbacks have already been so profound.
15 Don't make us cut back another 50-plus employees.
16 It's devastating. And you know what happens? Every
17 time we go through a cut, we get calls from you and
18 your colleagues here in Harrisburg saying, well, when
19 we cut your budget, we didn't think it was going to be
20 the dairy specialists in my county or the livestock
21 specialists in the county next door or we didn't think
22 you were going to have to cut back on 4-H, which, as
23 you all know, is an important part of cooperative
24 extension or it was going to cut back on the economic
25 development activities in my county.
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1 That's precisely what is happening when we do
2 those things. Okay, enough on that.
3 REPRESENTATIVE BAKER: Thank you, President
4 Spanier. I appreciate your passion. I couldn't agree
5 with you more about that. I think that just goes to
6 the need for additional funding. And I certainly hope
7 the Budget Secretary and the Governor will more fully
8 appreciate the outreach and the value that is being
9 provided, especially to the rural areas, in a very
10 real way. And it's actually part of the land grant
11 mission in which your institution was created in the
12 first place.
13 In the interest of time, I will wait for the
14 answer on the psychiatric funding perhaps from Sheila
15 or yourself later. Thank you.
16 PRESIDENT SPANIER: We'll follow up with you
17 on that.
18 REPRESENTATIVE BAKER: Thank you,
19 Mr. Chairman.
20 CHAIRMAN FEESE: The lady, Ms. Manderino.
21 REPRESENTATIVE MANDERINO: Thank you,
22 Mr. Chairman.
23 Thank you, President Spanier, for being here.
24 In the interest of time, I'll just put on the record
25 the information that I am interested in making sure is
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1 on the record. I'm a proud Penn State Alum. And I'm
2 very proud of my support for Penn State. And I think
3 all the legislators feel the same.
4 I was a little disappointed in your testimony
5 that seemed to say directly or sometimes implied that
6 Pennsylvania is a low investor in higher education. I
7 internally have raised questions about whether or not
8 we should be spread as thin as we are to cover publics
9 and privates when lots of other states only invest in
10 their public education, their public and
11 public-related institutions.
12 But having said that, that's a policy
13 decision that the Legislature has made. I just want
14 the record to show that according to the Chronicle of
15 Higher Education, the most recent numbers I was able
16 to get for '03-'04 appropriations, Pennsylvania ranks
17 ninth among the states in their total investment in
18 higher education as compared to states and particular
19 institutions to which we were compared. For example,
20 the state of Michigan, Penn State was compared to the
21 University of Michigan. We ranked ninth among the
22 states. Michigan is a little bit better than us.
23 We were also compared with the University of
24 Iowa. I suspect that's the only public university
25 they invest in. They ranked 26th among the states.
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1 In the years that states cut budget
2 appropriations or didn't appropriate as much,
3 Pennsylvania was not the only phenomena. Michigan's
4 two-year average cut was 7.9. Iowa's two-year average
5 cut was 4.2 percent. Pennsylvania's two-year average
6 cut was 3.8 percent.
7 Now, I'm not happy about any of those cuts.
8 I'm not happy that we can't give you everything you
9 want every time you need it. But I at least want the
10 record to reflect that Pennsylvania does have a proud
11 history of investing in higher education. And I think
12 that all of us in the Legislature can be proud of
13 that.
14 Thank you.
15 PRESIDENT SPANIER: If I can just make one
16 clarification. I'm familiar with the data that you're
17 providing. There might be a misunderstanding there.
18 That's not data comparing Penn State to any other
19 university. What that means is the total dollars that
20 Pennsylvania is investing relative to the other states
21 ranks ninth. We have been fifth or sixth in
22 population. So we trail given the population size of
23 Pennsylvania. If you normalize those by the
24 population of the state, you'll find that's what
25 brings us down near the bottom.
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1 If everything were equal nationally, we would
2 not be ninth in that number. We would be fifth or we
3 would be sixth. And, of course, Pennsylvania ranks
4 second or third in its support of private higher
5 education. So a lot of this is skewed by our
6 institutional assistance grants, by the funding going
7 to PHEAA, by the support of state-assisted private
8 universities.
9 Again, if you normalize it relative to
10 support for public higher education or support for
11 Penn State, you would find that we are at the bottom.
12 So while I fully understand what you're saying -- and
13 the numbers you're citing are quite accurate in that
14 context -- it depends which way you might look at it.
15 REPRESENTATIVE MANDERINO: I just wanted all
16 contexts to be on the record. Thank you.
17 Thank you, Mr. Chairman.
18 CHAIRMAN FEESE: The Chair thanks the lady.
19 The Chair recognizes Representative McGill.
20 REPRESENTATIVE McGILL: Thank you,
21 Mr. Chairman.
22 Thank you, President Spanier. The 9.7
23 percent of the state appropriation that makes up the
24 total tuition state appropriation budget, do you know
25 what the historical high from the Commonwealth has
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1 been to the university percentagewise?
2 PRESIDENT SPANIER: Let me just clarify. The
3 9.7 percent is a part of Penn State's total budget.
4 And that would include things, for example, like
5 research grants and contracts and other funds. If you
6 take the appropriation as a percent of the educational
7 budget, it's, of course, a little higher than that.
8 REPRESENTATIVE McGILL: My number is 12 and a
9 half percent or 13 percent.
10 PRESIDENT SPANIER: The 9.7 percent number
11 you asked about over time. Eleven years ago when I
12 became president, it was about 20 percent. So it's
13 been going down about 1 percent a year in relation to
14 the total budget. I want to be clear. In some years,
15 in five of the years, it was because of a cut in
16 appropriation. But the appropriation isn't all
17 responsible for that. Our research funding, to give
18 you one example, has gone up. That's going to affect
19 the overall percentage as well.
20 REPRESENTATIVE McGILL: I recall when the
21 research dollars were coming in, I think we had a
22 special hearing here ten years ago to find out why you
23 had to go outside the Commonwealth. To me, it's quite
24 clear that the Commonwealth has underfunded higher
25 education and education in general and we continue to
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1 do it. We allow you to take the hit year in and year
2 out. We can look you right in the eye and say, well,
3 you'll just have to raise tuition. And we're good at
4 it because we've done it to our school districts at
5 the elementary levels for years.
6 I have a school district right now that gets
7 average dollars of 1992 dollars, if you were to equate
8 it out. So having Penn State be only at the 2000
9 appropriation, if you were to go back and look at the
10 numbers, you are ahead of my school districts because
11 they are clearly getting underfunded.
12 We can pat ourselves on the back and tell
13 ourselves that we've done a marvelous job for
14 education, but we have not kept pace. And the reason
15 that we have not kept pace is because we have not had
16 to keep pace because it's easier for you to go out and
17 find dollars elsewhere. It's easier for you to raise
18 tuition. And that's exactly what you've done. And
19 that's exactly what the school districts have done
20 when they increased the real estate property tax.
21 There's a big dilemma in this building right
22 now on how we're going to solve that problem that we
23 created. Year in and year out, we gave you a little
24 bit less, a little bit less, a little bit less. And
25 now you increased, increased, increased on this side.
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1 And people are actually screaming about it and we're
2 concerned. Geez, how did that happen?
3 I thank you today for your frankness. I
4 thank you for coming in and telling us what's going
5 on. I don't think that we should be micromanaging
6 your budget because clearly, with the significance
7 that the Commonwealth puts into Penn State's budget,
8 we've got a lot of guts. So I thank you again for
9 your testimony.
10 This is a topic that's going to come up with
11 all of the other schools because clearly we are
12 underfunding education. It's not just Penn State.
13 You happen to be the first one to come into the room,
14 and we like to vent a little bit. But the reality of
15 it is your number. And we see your number. And your
16 number goes down. And then we pat you on the shoulder
17 and we say, oh, it's okay. It's not okay. We're
18 clearly not funding the way we did 11 years ago.
19 We're clearly not funding education the way we should
20 be. We're moving dollars elsewhere and we're allowing
21 the people of Pennsylvania to pick up those costs.
22 For that, we should be ashamed.
23 Thank you, Mr. Chairman.
24 CHAIRMAN FEESE: The Chair thanks the
25 gentleman.
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1 The Chair recognizes the gentleman from
2 Chester County, Representative Schroder.
3 REPRESENTATIVE SCHRODER: Thank you,
4 Mr. Chairman. I'll do my best to be very brief. I
5 see we're past the 12:30 mark. I appreciate your
6 indulgence.
7 CHAIRMAN FEESE: Not according to my watch.
8 REPRESENTATIVE SCHRODER: I wondered if there
9 was some way to manipulate that.
10 President Spanier, a couple questions. The
11 program that I've been made aware of from Widener
12 University is known as CARE, children of active and
13 reserve military personnel education scholarship.
14 And, of course, in this day and age, we are looking to
15 do what we can for the families of soldiers who are
16 serving in Iraq and Afghanistan. Kids, you know, lose
17 parents as part of the tragedy of this whole thing.
18 And Widener provides a scholarship of $100,000 over a
19 four-year period.
20 Have you contemplated any type of programs at
21 Penn State to assist the sons and daughters of our
22 military personnel in this way at all?
23 PRESIDENT SPANIER: We have an office of
24 veteran affairs, veteran students organization. We
25 have been extremely accommodating to veterans and the
87
1 children of people who served in the armed forces.
2 I'd have to go back and check to get an inventory of
3 what dedicated scholarship programs we might have.
4 When any student, veteran or otherwise, would come
5 forward, we would try to put together as good a
6 financial aid package as we could.
7 I'm not sure as a state-related institution
8 that we are in a position to make any blanket
9 commitments of financial support because it would have
10 to come out of some budget, some financial pool. And
11 I'm not sure we can say that. But I can say that
12 between our financial aid office and our other support
13 services at the university, we, of course, would be as
14 accommodating as we could.
15 We have a very large number of our students
16 right now who are serving in Iraq and at other posts,
17 quite a phenomenal number. And we have done
18 everything we can to accommodate them. We also have
19 some faculty and staff, by the way, who are on special
20 leave. And we accommodate their leaves, also.
21 REPRESENTATIVE SCHRODER: I appreciate that
22 answer. I would just urge not only Penn State but all
23 our institutions of higher education, whether it's
24 other state-related schools or the state system, to
25 consider this issue as we move forward.
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1 You talked about priorities. That's been a
2 recurring theme this morning during your testimony and
3 questions from various members. And certainly the
4 question of prioritization is what these hearings are
5 all about, and the process between now and when we
6 pass the final budget will be all about
7 prioritization.
8 I guess if I can just ask you, for a moment
9 at least, to put yourself in one of these chairs as
10 opposed to the chair you're in, we're going to have to
11 make some very tough decisions obviously in this
12 budget. I would very much like to work with you to
13 see that Penn State achieves the priority in the
14 budget that you advocate so effectively that it
15 deserves. We're all very proud of Penn State
16 University. I believe that it should be treated well
17 in the budget.
18 PRESIDENT SPANIER: Thank you.
19 REPRESENTATIVE SCHRODER: But sitting in this
20 chair, it seems to me that in order to achieve that
21 level of priority that you and others are calling for,
22 you know, we're faced with some tough decisions. It
23 seems that we either have to reprioritize different
24 things within our budget, which means we take funds
25 from some other location or various locations within
89
1 our budget to put to Penn State, or we don't and we
2 raise taxes and just bring in more money and therefore
3 fund Penn State.
4 Do you have a preference as to which way we
5 should go there?
6 PRESIDENT SPANIER: Yes, I do. I mean, you
7 would expect me to as the president of Penn State.
8 You invite me here to make a case for my appropriation
9 and I try to do it. And if I were in your position, I
10 would be responsive to that request, fully
11 understanding the other priorities that you have.
12 I happen to believe and my value system says
13 that's one of the best investments you can make. And
14 one of the things I regret from this hearing today is
15 that a few of the questions suggested that we weren't
16 being good stewards of the funds that we have.
17 Nothing could be further from the truth.
18 We are very proud of how efficiently we run
19 Penn State, of the benchmarking that we do with other
20 institutions. We are not frivolously spending money.
21 We are very disciplined in what we do. And I will
22 welcome the opportunity for myself and members of my
23 staff to get back to any member of the Legislature
24 that truly wonders if we are being good stewards of
25 the funds that we have. We are a not-for-profit
90
1 enterprise. We are not squandering our money or
2 taking it off and doing something else with it. It is
3 all staying within the confines of Penn State to do as
4 good a job as we can.
5 And what I'm here to tell you all today is
6 that if you entrust us with additional dollars, we
7 will continue to strive for quality in our programs.
8 That's the third unmentioned variable between tuition
9 and appropriation. If you're going to skimp on one,
10 the only thing that can happen if you're managing
11 well -- and I believe we can demonstrate that we
12 are -- the only thing that can happen is you begin to
13 erode the quality.
14 And I don't think anybody in this Legislature
15 wants Penn State to be a lesser institution than it is
16 right now, for us to cut programs that we're so good
17 at doing now, to cut our research programs, to cut
18 extension, to cut the production of graduates to
19 support economic development and the cultural and
20 human development of our state.
21 So, yes, I would put more money into higher
22 education. And we are prepared to be fully
23 accountable to anybody that wonders about the quality
24 and level of our stewardship.
25 REPRESENTATIVE SCHRODER: The purpose of my
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1 question was not to question your stewardship of the
2 dollars.
3 PRESIDENT SPANIER: I understand.
4 REPRESENTATIVE SCHRODER: You mentioned in
5 your opening statement about various cutbacks and
6 things that you had to do as a result of the situation
7 you found yourself in. Indeed, we struggle with that
8 from budget to budget right here at the state level as
9 well. There's never enough funding to go around for
10 every good and worthy program out there. Some get
11 cut. Some get level funded. Some get increased. But
12 it's a priority that we have to make.
13 And I didn't hear an answer to the question
14 of whether -- you know, what we should take from other
15 parts of the budget that would then benefit Penn State
16 or whether we should not do that and just dedicate
17 some tax or raise some tax in order to fund at the
18 level that you believe it should be funded. And I
19 don't say this to be critical. But I do say it just
20 to explain, if you will, that we are faced right here
21 with the same type of issues on a different scale that
22 you had to grapple with at the university as well.
23 I don't believe that anyone was targeting or
24 cutting Penn State in the past because of perceived
25 inefficiencies, but it is a budget priority, as you
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1 correctly point out, that we are all grappling with
2 here. These are tough questions.
3 I just think it's important to understand,
4 from where we sit, it's not a matter that any of us
5 would not like to do better by Penn State.
6 PRESIDENT SPANIER: I understand.
7 REPRESENTATIVE SCHRODER: But we have to
8 evaluate Penn State in light of our overall budget
9 obligations and responsibilities as well.
10 PRESIDENT SPANIER: I understand that
11 completely. I'm in that same situation every day with
12 a lot of different people from a lot of different
13 directions needing support that I can't always give
14 them. I also see all of the different sides of this
15 from your perspective, even though I wouldn't presume
16 to tell you what to do about, it because we are so
17 involved as well in so many of those competing
18 enterprises.
19 The Governor has recommended a cut in the
20 budget, the research budget, of the Department of
21 Agriculture in Pennsylvania. We are beneficiaries of
22 some of those activities. That will affect us.
23 We operate one of the principal medical
24 facilities in this state. We see the public
25 assistance and the malpractice insurance and other
93
1 ends of the issue, as you do. We see it from the
2 other side. We are very involved in helping schools
3 throughout Pennsylvania through our College of
4 Education, through our outreach programs there. We
5 see the impact of whatever decisions you made in the
6 funding of public schools. I could go down the list.
7 And at Penn State, because we are so
8 connected all around the state and because of the
9 activities we are involved in, we do see the issues
10 that you see in a very real way. I wish you well with
11 them. I just want you to keep us in mind while you
12 work through it.
13 REPRESENTATIVE SCHRODER: Well, I appreciate
14 that. And I understand your advocacy certainly. And
15 that's your responsibility to do that. But I just
16 believe we should all keep in mind the overall total
17 context in which we work in this budget season.
18 Thank you.
19 CHAIRMAN FEESE: The Chair thanks the
20 gentleman.
21 Representative McGill.
22 REPRESENTATIVE McILHATTAN: Thank you,
23 Mr. Chairman.
24 President Spanier, when you say Penn State,
25 the majority of the people today, they think of main
94
1 campus Happy Valley. I have been more intrigued about
2 the work that you are doing in technical education,
3 your invested commitment to Penn State College of
4 Technology at Williamsport. How is that mission
5 faring? Is that a drain on you financially or is that
6 a plus? Can you share that with me? I've always been
7 intrigued and excited about what's going on there.
8 PRESIDENT SPANIER: Pennsylvania College of
9 Technology, Penn College, as it's known, is one of our
10 24 campuses. It's a wholly owned subsidiary of Penn
11 State. And it may be the single greatest success
12 story at Penn State in modern history.
13 You know that was a merger -- one of those
14 mergers that was kind of strongly urged on us by the
15 Legislature, I believe. And it has been a tremendous
16 success. What the president there has done has been
17 remarkable. It's been the most rapidly growing part
18 of Penn State.
19 And, no, it has not been a drain on us
20 financially because pretty much, like what we
21 described with the law school earlier, up to this
22 point, Penn College has operated as a separate cost
23 center independently. And they are also very
24 tuition-driven, even more so than the rest of the
25 university. They have made great things there happen
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1 on their own with just a modest bit of encouragement
2 from us.
3 And I am very, very proud of what they have
4 done. And I hope you will continue to give them every
5 consideration as a part of the appropriation process
6 as well. They are included in our overall
7 appropriation.
8 REPRESENTATIVE McILHATTAN: Thank you very
9 much.
10 PRESIDENT SPANIER: You're welcome.
11 REPRESENTATIVE McILHATTAN: Thank you,
12 Mr. Chairman.
13 CHAIRMAN FEESE: I believe that concludes the
14 questions, Dr. Spanier. Thank you very much for your
15 attendance and your testimony.
16 PRESIDENT SPANIER: Thanks. Glad to be here.
17 CHAIRMAN FEESE: This committee will stand in
18 recess until 1:30.
19 (The hearing concluded at 12:45 p.m.)
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1 I hereby certify that the proceedings
2 and evidence are contained fully and accurately in the
3 notes taken by me on the within proceedings and that
4 this is a correct transcript of the same.
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8 ______Jean M. Davis, Reporter 9 Notary Public
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