COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES COMMITTEE ON APPROPRIATIONS
In re: 2000-2001 Appropriations Hearings Penn State
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Stenographic report of hearing held in Majority Caucus Room, Main Capitol Harrisburg, Pennsylvania
Monday February "29, 2000 12:30 p.m.
HON. JOHN E. BARLEY, CHAIRMAN Hon. Gene DiGirolamo, Secretary Hon. Patrick E. Fleagle, Subcommittee on Education Hon. Jim Lynch, Subcommittee on Capitol Budget Son. Ron Raymond, Subcommitee on Health and Human Services Hon. Dwight Evans, Minority Chairman
MEMBERS OF APPROPRIATIONS COMMITTEE ion. William F. Adolph Hon. Steven R. Nickol tori. Matthew E. Baker Hon. Jane C. Orie ton. Lita I. Cohen Hon. Joseph Preston, Jr. ton. Craig Dally Hon. William Russell Robinson ton. Teresa E. Forcier Hon. Samuel E. Rohrer ton. Dan Frankel Hon. Stanley E. Saylor ton. Babette Josephs Hon. Curt Schroder ton. George Kenney Hon. Edward Staback ton. Frank LaGrotta Hon. Jerry A. Stern ton. John A. Lawless Hon. Stephen H. Stetler ton. Kathy Manderino Hon. Jere L. Strittmatter ton. Phyllis Mundy Hon. Leo J. Trich, Jr. Ion. John Myers Hon. Pater J. Zug ilso Present: Ion. Lynn B. Herman Reported by: Dorothy M. Malono, Run
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—l -v rsll- \/\ ilso Present: (Cont'd) lichael Rosenstein, Executive Director lary Soderberg, Minority Executive Director Irik Randolph, Budget Analyst
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We also wish to pursue continuing oppor tunities to partner with the Commonwealth in workforce and economic development. The University's historic involvement in agricultural research and cooperative extension is an important force for the ongoing development of Pennsylvania's agricultural industries and also provides substantial support for Pennsylvania's communities and families, both rural and urban. The new funding we requested in these areas is absent from the Governor's proposed budget. Our educational programs at every level are in tremendous demand. This past year, Penn State received more than 75,000 applications for admission, including more than 53,000 undergraduate applications. Penn State Outreach serves one in two households in the state with a wide variety of programs in support of continuing professional education, workforce training, and community and economic development. Penn College, a phenomenal success, is producing critical workers for the Commonwealth and its economy. Nearly 100 percent of our graduates have jobs or are continuing their education. Penn State's research and technology transfer activities help Pennsylvania businesses to be competitive in the global marketplace. Last year, we were involved with 367 Pennsylvania companies in 648 sponsored research projects that helped to improve business and develop new products. Hundreds more companies received technical assistance and other services through PENNTAP and other programs. One of the most pressing challenges of our state and our nation is affordable and high quality health care, support for the most advanced medical innovations and procedures, the viability of teaching hospitals, and the support of the colleges of medicine that provide the foundation for academic health centers. Providing appropriate support is a responsibility that can no longer be ignored. Fenn State is one of the most efficient universities in America and has reallocated more than $79 million and eliminated or merged 58 programs since 1992. We have one of the model long range planning processes in higher education, assuring both efficiency and quality as we strive to serve the public better. The states with which Pennsylvania competes are investing heavily in higher education. Further investment in our University by the people of the Common wealth through their elected officials will return far more value than the dollars involved. I pledge that every part of Penn State will work to promote Pennsylvania's progress and leadership and that the members of our academic community will be good stewards of the funding the University receives. If you support us at the level we need and deserve, I promise we will not disappoint you.
CHAIRMAN BARLEY: Thank you very much, President Spanier. I want to commend you for being willing to sit there by yourself and being confident enough to answer the questions that will be asked on behalf of the University. I think that makes a real statement. I want to commend you. I would also like to acknowledge the presence of your resident legislator, Representative Herman. We appreciate having you here and we know that you are always advocating on behalf of the University. So, I wanted that to be on the record. And for the President and those involved to know that you are an advocate and sometimes we have to pull the reins in a little bit on what Representative Herman is asking for but he is doing his job. PRESIDENT SPANIER: I want to thank you also. CHAIRMAN BARLEY: With that I recognize Representative Lawless. REPRESENTATIVE LAWLESS: Thank you, Mr. Chairman. President Spanier, first of all, I would like to open up with a statement and then a question and then I will be finished. Over the years you and I have had some heated debate, friendly debate, whatever, over funding at Penn State. And if the members allow me go off course here a little bit, I would like to talk about something you and I have been involved in over the last few weeks. It really says a lot about you, the person, Graham Spanier and Penn State. And that is because of our debate up here, a student who attends Penn State University, who is a Delaware resident, contacted my office because they knew of my interest in higher education. This student, as Dr. Spanier knows, has brain cancer and is a freshman -- no, sophomore at Penn State. I contacted President Spanier1s office because this student's wish, although this student was over 18 years of age and Make A Wish Foundation couldn't do it, his wish was to be a Penn State graduate. And thanks to Dr. Spanier and his staff that person will graduate as a Penn State alumni and will be a deceased as a Penn State alumni. Thank you for that. PRESIDENT SPANIER: Thank you. BY REPRESENTATIVE LAWLESS: Q Now, on to the other issue. Community colleges, wouldn't it be better if Penn State partnershiped with some of our local institutions, local community colleges, especially for freshmen who need remedial courses? Because it is my understanding that a community college is about half the cost of tuition at Penn State. So therefore, before we try to educate some of these into remedial courses or even just freshmen wouldn't it better to steer these folks into our community college system as Fenn State's partnership and then come into Penn State? A In some cases, yes. Penn State has not done a lot of that historically for the principal reason that we only had lower division programs at our Common wealth campuses. Mostly had lower division programs at our Commonwealth campuses and all those students needed to transfer to University Park campus to finish their baccalaureate degree and we were full just accommodating the transfers of the students from within Penn State. With the reoganization of our Commonwealth campus system several years ago and with the addition of some new baccalaureate programs at the Commonwealth campuses, this has opened up the doors of opportunity for greater cooperation with the community colleges and we indeed are doing that. We have a number of agreements between campuses and the local community colleges and it has been very successful in its early stages.
Now some of those have been fairly well developed. For example, the single largest provider of students to the Penn State Harrisburg campus has always been from the Harrisburg Area Community College. But in campuses in other parts of the state we have done much less of that and now are in a position to do more. So discussions are taking place between our campus executive officers and local community college presidents and we will see more of those. REPRESENTATIVE LAWLESS: Thank you, Dr. Spanier. And once again, thank you for making that young man's dream come true. PRESIDENT SPANIER: Well let me thank you for your role in bringing it to our attention and for being there as a part of that. I know it has been very meaningful for the family. CHAIRMAN BARLEY: I now recognize Representative Manderino. REPRESENTATIVE MANDERINO: Thank you, Mr. Chairman and President Spanier, thank you for being here. I have to be on my best behavior because I have two college professors, former college professors in the room. I want to acknowledge that Rod Erickson, who is your Executive Vice President and Provost was a professor of mine at Penn State as well as our now Loral Director, Mike King, who was my college advisor. So everyone here knows who to blame. PRESIDENT SPANIER: I'll ask them how you did. BY REPRESENTATIVE MANDERINO: Q You didn't say anything in your testimony though I saw it referred to in your attachment about what you anticipate with regard to tuition rate increases for the upcoming year. I would like to hear what you anticipate and the justification for whatever it is or isn't. A Presently at Penn State our tuition, our basic undergraduate lower division tuition is $6,436. Because about two-thirds Penn State's education and general budget is tuition driven, about 17 percent of our total University budget comes from state appropriation. Under almost any scenario we would have to raise our tuition in any given year. The tuition will not be set until July by the Board of Trustees and it will depend in part on what happens here in the Legislature. But we expect under almost any scenario we will have a tuition increase of over four percent as we have in several recent years. Q 1 expect that Penn State has some fairly healthy endowment income but I don't really know how that breaks down. Specifically, what proportion of that or what amount of that annually goes to tuition grant and aid? A Penn State's endowment in very round number, of course, because it fluctuates day to day is about $800 million right now. We are in the midst of a very active, aggressive, capital campaign to raise more private funds for the University. The single largest category within our endowment is for scholarships for students. Most of that is directed at undergraduate students. There is almost no part of the endowment that Penn State, its President has discretion over because the funds are given to the University by the donors with restrictions in the first place and they specify what those funds are to be used for usually in perpetuity. But the largest share of donors attached to the largest share of funds have given those monies for scholarships. So the payout from the endowment is directed to the various scholarship funds and that becomes a part of what the University contributes to financial aid overall.
If you take all sources of financial aid to Penn State from all federal government grants and loans, PHEAA grants and loans, from scholarships, from all other sources, our students collectively at Penn State, our 81,000 students, receive about $412 million a year of financial assistance. About 75 percent of our students receive some form of financial assistance. Q If you take out student loans where there is an obligation to pay back and grants from non- university sources what is Penn State's -- A About -- we said 75 percent receive some sort of financial assistance. About 58 percent receive loans. The rest are receiving grants, scholarships and other kinds of financial assistance. And of course, many students are receiving more than one category of assistance. They might get some grant, but also have a loan and also have a scholarship. Our financial aid office tries to put as good a package together as they can based on financial need. Q I think one of the things that we are all struggling with, and this is kind of an open-ended question, but I would appreciate hearing your comments, and quite frankly, except for looking at the health care field and maybe it is because they are both so labor intensive, higher education seems to be the other area that just outpaces the economy year after year after year if I could call it an inflationary factor. We have managed care coming in and trying to control things in the health care arena, but 1 don't know, I am trying to get a grasp on how we can better control student costs in higher education. A Well, that is a subject of a great deal of discussion nationally, and of course, within the University as well. Some of our biggest challenges are in the area of containing costs. 1 mentioned earlier that we have gone through an internal reallocation process since 1992. That has amounted to $79 million. We have another three million dollars plus that is already built into the budget next year that is an internal budget reduction. Let me just mention a few things that are driving up our costs so significantly. Probably at the top of the list is something you mentioned as another area nationally and that is health care. Because universities are very people intensive, about 70 percent of our education in general budget being in paying salaries and benefits. While our salaries have not been going up very much, just around inflation or so, health care benefits have gone up significantly. Now we have done an excellent job of containing those costs. We, in fact, are one of the few enterprises in Pennsylvania that has been able to stay below that double digit percentage increase, but we have been going up about eight percent a year in health care costs. The costs of information technology have gone up significantly for us and that is an area where it is very important for us to be on the leading edge. In library materials we have a four million plus volume library, one of the largest in the United States and the cost of library materials is going up on a double digit basis. So, those are just three examples.
Several areas that are very important to our budget where it is critical that we keep up are going up at rates that are not just a little above inflation.
They are two, four, six times above the normal inflationary rate. And so there are a lot of trade-offs that we have to take into account to try to hold the cost of education down to try to keep Penn State on the leading edge as a competitive university.
CHAIRMAN BARLEY: I now recognize Repre sentative Zug.
REPRESENTATIVE ZUG: Thank you, Mr. Chairman. Welcome, President Spanier. PRESIDENT SPANIER: Thank you. BY REPRESENTATIVE ZUG.
Q You were here I believe for the end of the last hearing when we talked about electric deregulation. They have some similarities and differences between Penn State and the state system. You have a large campus at University Park'. You also have a series of branch campuses throughout Pennsylvania similar to the way the state system is set up. Have you done electric deregulation, have you looked at it, have you seen savings in your electric bills over the last couple of years since we diu electric deregulation in Pennsylvania? A- Yes. tfe worked very hara to take advantage of the deregulation. We have an excellent staff in our finance and business area and in our physical plant area. The total utilities cost, all inclusive for Fenn State for our 24 campuses, and that covers the operation of about 1,300 buildings and structures, is about $25 million a year. Now that is total utilities not just electric. Some component of that is electric. I don't have that number. But our savings from the utility deregula tion at Penn Scate chis year was $1.2 million. And we have put that money into meeting the costs of opening up new buildings and paying for incremental utility costs that go along with that as well as maintenance and deferred maintenance. REPRESENTATIVE ZUG: Thank you, Mr. Chairman. CHAIRMAN BARLEY: I think we'll suggest that the state system maybe consult with you folks because they have only saved 40,000. Representative Staback. REPRESENTATIVE STABACK: Thank you, Mr. Chairman. BY REPRESENTATIVE STABACK: Q Mr. President, my understanding is, I think I quote you correctly, that Penn State is projecting at least a five percent increase in tuition rates for the upcoming year; is that correct? A I hope it is quite not that high but it could be very close. Yes, somewhere in that ball park. Q Now supposing you receive the overall eight percent increase that you are looking for in your education general fund line item, would that increase still be in order? A Probably, yes. And here is why. The eight percent increase that we have asked for really falls into two components. Four percent increase is really what we have asked for as an inflationary increase to keep the operation at the University at the same level to meet all of our existing commitments. The second four percent, if it were applied to tuition reduction would allow us to significantly reduce tuition from what we had proposed. But actually that second four percent is a category of initiatives designed to meet priorities of the Commonwealth of Pennsylvania. They are not related to our instructional programs or to our tuition driven programs except in some cases in a very indirect way. They include things like agricultural research and cooperative extension which goes into the College of Agricultural Sciences and a selected number of academic units of the University to provide a set of outreach services for the Commonwealth. In the area of workforce development we have several initiatives that are designed to assist the Commonwealth in producing more qualified workers in certain areas and to develop Penn State's infrastructure to better meet the needs for training, technology transfer and research in certain areas. They are not therefore, except indirectly in a sense some students can be involved in those initiatives, related to the tuition side of the equation. Q If I understand what you are telling me then, the eight percent we are talking about equates to around 18 and a half million dollars. If that was doubled, 16 percent or 36 million, is that what it would take to avoid a tuition increase at Penn State? A We wouldn't have to go that far to avoid a tuition increase. But you are the first person I have ever heard suggest -- (Laughter.) Even for discussion an increase of that level. Q I am simply trying to clarify is that what it would take? A We would have to go beyond that eight percent to begin to reduce a tuition increase. At some point it would zero out if the increase was generous enough. Q To clarify something you mentioned to Representative Manderino before, Penn State, not unlike all universities, does get involved in private funding? A Yes. Q So the endowment fund that you have sounds like a very healthy one, $800 million. No part of that is ever used to offset tuition costs, is it, or potential tuition costs? A Not in the university budget. What it will do is offset tuition costs for specific students who are the beneficiaries of certain scholarships designated department by department or college by college. REPRESENTATIVE STABACK: Thank you very much. CHAIRMAN BARLEY: I now recognize Representative Adolph. REPRESENTATIVE ADOLPH: Thank you, Mr. Chairman. Good afternoon, Dr. Spanier. PRESIDENT SPANIER: Thank you. BY REPRESENTATIVE ADOLPH: Q The Governor has proposed in his budget a graduation incentive program. I would like to have your thoughts on how this would affect Penn State in this coming budget. Your overall thoughts regarding a program like this. A Well let me say first of all that I have not seen any specific details from the Governor's Office or the Pennsylvania Department of Education about how that might be implemented. If the program were implemented on a campus-by-campus basis, what would you find is that the University Park campus of Penn State would be the single largest beneficiary of any college or university in Pennsylvania in that we have the largest number of Pennsylvania residents who graduate in four years at any given campus. It is about 45 percent of the students who started at the University Park campus have completely finished their baccalaureate degree within four years. The number goes up to 78 percent have graduated within five years and then another two percent graduate in longer than five years. Those numbers, by the way, are using the common metric that is now used by the U.S. Department of Education and the NCAA, originated with the NCAA. So it is a conservative estimate because if any student transfers out, even if they graduate at another school, they are shown as an attrition statistic.
But if the program is implemented in a way that includes all of Penn State campuses as one statistic, we would not qualify. We would be below a 40 percent threshold because we have greater rates of either attrition or length of time to graduation from students who begin at one of our Commonwealth campuses. About 15 percent of those students actually transfer to another college or university to Temple or Pitt, occasionally a state system school* so that would show as an attrition statistic for us I suspect. Fenn State is near the top nationally in terms of the number of its students who graduate in four years and our total graduation rate of over 80 percent is just about at the top of public universities nationally. It would actually be much higher again if it were implemented in a way to control for certain very important variables. I will just mention a couple of them to be brief. You know, we have huge numbers of students at Fenn State in business and in engineering. We have one of the largest colleges of business administration and one of the largest colleges of engineering in the United States. About a third of our engineering students take co-op experiences which require them to go into a fifth year. All of our engineering majors require over 130 semester hours for graduation which generally require them to go into a fifth year. The most popular option now in our college of business administration-is called,the international business major and is the second major. You get two degrees. That second major is taken in addition to another major. So you would, for example, complete your degree majoring in finance and in international business, accounting and international business, marketing and international business and that requires at least another entire semester of course work. It requires a foreign language and it requires a study abroad experience. At Penn State we have, and I am not exaggerating, literally thousands of our students who are in programs that really require them in a sense to move into a fifth year. So we are actually very proud so many finish in four and that our fifth year completion rate is as great as it is. Q Thank you. I asked the Chancellor of the State Systems the same question regarding the average SATs. When you get an opportunity would you send to the Chairman the average SAT scores for your main campus as well as your satellite campuses? A I can tell you in ten seconds. The average SAT score right now for students beginning at the University Park campus is about 1,200. And it varies from our other campuses anywhere from 50 to 100 points lower, to some of our campuses it would be lower still, as many as 150 points lower at some of the campuses. But in all cases at Penn State well above the national averages of college bound students. REPRESENTATIVE ADOLPH: Thank you. CHAIRMAN BARLEY: I now recognize Representative Trich. REPRESENTATIVE TRICH: Thank you, Mr. Chairman. Thank you, President Spanier, for joining us today. Mr. Chairman, I promise to make this very brief. BY REPRESENTATIVE TRICH: Q One of the items we are reviewing, the request that Penn State is making dealing with a very important industry certainly in this Commonwealth in agriculture. I notice that most of the line item requests they are in that three to four percent range as far as increased requests. On the agricultural side of it, however, dealing with ag research and ag extension, you are looking for a 9.2 increase? A Yes. Q Could you elaborate a little bit as to why that major jump? A Yes. There are two components to the requests for agricultural and cooperative extension, which I think most of you know are separate line items associated with the Penn State budget. The first part of the request parallels the rest of the Penn State request. It is for the inflationary increase for modest salary increases, for employee benefits, supplies, services and so on. The other part of the increase is a special initiative that is a part of that workforce initiative that Penn State has been promoting. The Legislature began a program a few years ago, after I became President, began a program in 1996 to try to reestablish the foundation of the cooperative extension service and the agricultural research programs that had eroded between 1990 and 1996 when there were no funding increases whatsoever and where inflation really forced us into a 20 percent budget cut and laying off about 500 employees who were associated with those programs. We had agreed to have a three- year initiative to bring those numbers back not just arbitrarily bring them back to a particular number, but at the same time to do an assessment of where the state agricultural needs were greatest now. We have done the first two parts of this. And the two and a half million dollars that are being requested for cooperative extension and agricultural research will be the final component to bring us back and complete the plan. Last year you were very generous in providing those funds and it was a very important advancement for us and for the state's agricultural industry. Let me just mention the seven areas, the seven areas that have been identified in consultation with the state's agricultural industry for investment for the final phase of this initiative of funding. It is integrated animal management; integrated crop management; forest resources management and utilization; food safety and nutrition; water quality; children, youth and families; and rural economic and community development. Those seven areas comprise the $2.5 million initiative. REPRESENTATIVE TRICH: Thank you, President Spanier. Thank you, Mr. Chairman. CHAIRMAN BARLEY: I now recognize Representative Fleagle. REPRESENTATIVE FLEAGLE: Thank you, Mr. Chairman. BY REPRESENTATIVE FLEAGLE: Q President Spanier, I know that you probably think sometimes speaking to elected officials is like a wolf pack, but I understand from several of my colleagues and constituents at Penn State Mount Alto that you did speak to the National Press Club in vital speeches. I have never met anybody that has been in vital speeches. So I congratulate you on that. We used to have to look these up in the library for term papers in college. I never knew they were real people. So, not too shabby. A Thank you. Q I did want to ask you a question. I know there has been several controversies that Penn State has been involved in in the last couple of years. One of the more controversial issues has been the expansion of the Commonwealth campuses. I know particularly in the southeast that was a major concern. I was just wondering if you could fill us in has that, well at least what seems to be an expansion at taxpayers' expense been a success for you? A The reorganization of the Commonwealth campus system is going exceptionally well. I am very pleased to be able to report that in all respects we have done precisely what we have laid out for so many of you in our initial briefing. Our enrollment commitments have adhered to the letter and the spirit of all of our agreements and planning and I think it has been received fairly well. Let me just give you a few numbers that are kind of interesting. When one of the concerns early on was that we might expand our enrollment and therefore increase our so-called market share of higher education market in Pennsylvania and thus put other schools in a disadvantageous position, actually we have worked very hard to control our enrollment growth. I mentioned the 75,000 applications for admission. At this point, this week, we are up 4,500 applications over that for this next fall's class. Yet our enrollments at the University Park campus have been capped. In fact, this year they were actually down a little from the year before. The enrollments of new freshmen at our other campuses have also been stable or declining. So all of Fenn State's modest enrollment increase has been precisely where we said it would be, and that is, upper division enrollments at our Commonwealth campuses. It is taking students who are finishing their freshman and sophomore years at one of our campuses and giving them an opportunity to complete a Fenn State education at the campus where they may be placed on because of work, family or other restrictions on their mobility. So the plan has worked quite well. And that has all been done with the addition of a very small number of new academic programs in areas that have been developed in consultation with the community.
In terms of the market share question, when I began as President in 1995, Fenn State had 14.2 percent of all the Pennsylvania high school graduates who were freshmen. Now we have 12.7 percent. It is a ten percent decline proportionately or one and a half percent actual decline in the total Pennsylvania base. Other colleges and universities have experienced enrollment increases over this time in part because they added between them I think we counted about 293 new majors, programs, branch campuses. And also because there is an increasing number of Pennsylvania high school graduates who are going on to college. We are now at 70.9 percent of Pennsylvania high school graduates going on to college. And while a growing proportion of them are applying to Penn State, we are taking a smaller share of those applicants. So, it is a situation where everybody should feel they came out ahead on that. REPRESENTATIVE FLEAGLE: Thank you, President Spanier. Thank you, Mr. Chairman. CHAIRMAN BARLEY: I now recognize Representative Baker. REPRESENTATIVE BAKER: Thank you, Mr. Chairman. BY REPRESENTATIVE BAKER: Q Welcome. I would like to commend your leadership in pushing for additional funding for agricultural research and extension services. In my legislative district we probably are more impacted by Penn State through those two line items than probably many of the other programs and I think that is a good step in the right direction in replacing those lost funds over the last decade or so. My question in the aggregate, there is about an eight million dollar workforce development appropriation request, almost six million dollars more than what you received last year. I would like to know how you propose to advance the workforce development in the Commonwealth, and in particular how that relates to Fenn College's offerings throughout the Commonwealth and perhaps utilization of wonderful things they are doing at Penn College in your collaboration with them at Fenn State campuses? A Well, thank you for that question. So much of what we are doing at Fenn State right now is trying to meet the needs of the Commonwealth for workers in areas where they are needed. Hence, our interest in expanding what we do at Fenn College where we have a 100 percent placement rate of the graduates. Fart of this money would go, as it did last year, to develop Fenn College programs at other locations around Pennsylvania. Right now Penn College has 5,300 students. Eighty-five percent of them are in two-year programs. Only about 15 percent are in baccalaureate programs. These students are in very applied areas and they are being snapped up into the Pennsylvania workforce. If you take all the colleges and universities and campuses in Pennsylvania, the highest incidence of graduates remaining in the Commonwealth comes from Penn College. Virtually all of their graduates are employed in Pennsylvania. They stay in the state afterwards and they are staying in high demand areas. But a student has to come to Williamsport now for Penn College education. And a lot of what Penn College does is needed in other parts of the state. So the money that you appropriated for workforce development last year was in part used to begin the process of deploying Penn College programs at other locations in Pennsylvania. I regret to say that that money that was put in our budget last year as a new line item that we assumed and hoped would be folded into the base budget this year was not included in the Governor's base budget recommendation for Penn State. We would respectfully ask you to put that workforce development money back into our base budget and expand it because it will help us meet those needs.
Now there are some other areas where those funds are being used that are extremely important to the future of this Commonwealth. I will just take one minute to mention what they are. First of all, we talked about information sciences and technology and I hope we will have an opportunity to say more about that later. But we have four other initiatives. First is in the area of life sciences. We talk so much about Pennsylvania being a high technology state and that's what we need to do for the future. Well, information science and technology is going to be where a lot of the action is over this coming decade. But I can assure you that the 21st century is going to be the century of the life sciences in this country. Much of our future economic growth will be if we marshall our forces to do it properly in the area of health care and in the area of life sciences. We are talking about the pharmaceutical industry, we are talking about the health care industry, we are talking about new discoveries in genetics, biotechnology, bioengineering, a whole raft of areas that are going to be extremely important to the future. Penn State wants to invest in this area. Some of the money would go for that.
Another area is material sciences. We are talking about broad ranges of materials including those that go into developing new microchips and new computer related materials technology. But also technologies that have to do with ace trie metals and other kinds of activities that historically have been important in Pennsylvania economy. Finally, I will mention environmental sciences, an area of growing importance. And the area of children, youth and families, which is very important because if the family structure is not functioning well, if we are not investing in the people on the social side, we are not going to have the productivity we need on the other side. Those are among the initiatives that are part of our broad use of workforce development fund. CHAIRMAN BARLEY: Thank you very much, Dr. Spanier. I now recognize Representative Kenney. REPRESENTATIVE KENNEY: Thank you, Mr. Chairman. BY REPRESENTATIVE KENNEY: Q President Spanier, thank you. I guess we all read the newspaper. I think New Jersey is working on mandatory legislation to mandate the college dormitories throughout New Jersey to have sprinkler systems since the Seton Hall incident where three students died. I see in your summary you talk about critical capital construction you are looking into. This whole issue of student housing safety, since the Seton Hall incident has Penn State gone back and looked at this issue of student housing? A Yes, absolutely. We have been looking at it before then. We have I think a model program of safety in our residence halls. We have, for example, smoke detectors in absolutely every residence hall room at Fenn State. We have on our residential campuses collectively about 18,000 students living in residence halls. We have routine fire drills once a month. Not only do we do the fire drills, we have strict practices that require total evacuation of the residence halls and we will discipline students who do not properly follow the safety rules and participate in our safety planning measures. We also have a unique system where our campus police force are trained as fire fighters. So at Penn State we do not wait for a fire department to show up if there is a call. First on the scene are our campus public safety officers and they are trained to go in and fight small fires and put them out before they even get started. We do not allow in our residence halls at all certain things like halogen lamps and hot plates. They are simply outlawed and we are vigilant in looking out for those things in keeping them out of that environment. Now having said that, we have sprinklers, of course, in all of our new residence halls because that is part of the code and there will always be sprinklers in any new buildings that are built. We also have an accelerated program of renovation of our residence halls and any old residence hall that is newly renovated gets sprinklers. And as we go through the process, and it will take many years of renovating all of the residence halls, in time they will all have sprinkler systems as well. We have, however, over $600 million of renovations in the pipeline for our residence hall system. That is going to take a whole lot of years. The cost of the sprinklers that are part of that total renovation cost is just about $50 million. So you get a sense of the scope of what we are dealing with over a period of time. Q So, at Penn State you have realized the importance of sprinkler systems and you are retrofitting dorms as you do renovations? A As we renovate, yes. We are not inclined, because of our belief in the quality of the safety program we have, to simply go ahead and without renovation do the retrofitting of sprinklers because that would be spending money that would be kind of down the drain in the sense that a year later or three years later you would have to renovate that dorm and you would have to tear things out and start again. So the trick is to make the best use of the funds you have available for sprinkling and do them as you renovate each residence hall year by year. Q And I guess as New Jersey is moving even today, they passed mandatory dormitory fire sprinkler legislation, at this time you don't think that is necessary at Fenn State because you believe you are addressing that issue? A For us I don't think it is necessary, but I can't argue against the concept. If the State of New Jersey has available and is willing to put that kind of funding in to doing it, then that is a great safety measure. It goes a step beyond where most people would be. But for us just that one increment is a $50 million increment. That is a lot of money. Q And how many total buildings would that be in Penn State? A It is several dozen. I don't have the exact number. Q Several — A Dozen. Do we have a number, Gary? Q I mean, somehow you came to that $50 million figure. A Yes, we have about five million square feet of residence and dining hall space. We have done a fairly specific estimate of the cost based upon the going rates for sprinkler systems. Q The model student housing safety plan is that a model you developed? A Yes. Q Would you provide that to the Chairman? A We can summarize all the things we do in the area of fire safety and other public health safety measures. Yes, we would be happy to. REPRESENTATIVE KENNEY: Thank you. CHAIRMAN BARLEY: I now recognize Representative Rohrer. REPRESENTATIVE ROHRER: Thank you, Mr. Chairman. BY REPRESENTATIVE ROHRER: Q Not a follow-up question but a question that was asked in the previous session I would like to ask of you, if you can provide us some information. But there was some discussion earlier on relative to the amount of time and effort that the different colleges are spending having to remediate students who come to them not meeting your entrance requirements. Are you able to provide that number, percentage or number of students that come in that fashion? A Well, we do very little in the way of remediation. It is not an issue for Penn State in part because we have evolved to the point where if you have a 1200 in the SAT scores and the average high school grade point average of our incoming freshmen starting at University Park, for example, now is over 3.7, 1200 SAT score is really a full standard deviation above the mean of college bound students. So that would put people in about the 83rd percentile and you just don't have much remediation going on at that level. Now having said that, we do have some students who come back to school after having been out for 10 or 20 or 30 years. They have to brush up. So we have courses at different levels of entry for them to start. But we don't have an extensive program of remediation the way you would find at many colleges and universities. Q That is good. So nothing to provide that. Along with that goes no additional cost to administer a program that doesn't exist. One other piece of information, there has been discussion about workforce development initiatives that you are involved with. As I review what colleges have always done, it is really development for ultimate workers going into the workplace. What is it specifically that is different about what you are now terming workforce development and what Fenn State has always ever done? A I don't think there is anything very different going on. Most of you are familiar with the concept of a land grant university. When Fenn State was founded in 1855, we were founded as the people's university. The idea was to produce workers for the state. Then it was focused principally on what today would be called agriculture and today would be called engineering and technology. The concept is broadened beyond that. It has always been a fundamental part of Fenn State's mission to produce graduates for the economy. I have always said that the single most important thing that a university like ours does is to produce the next generation of workers, citizens, family members. Of all the things we do that is the most important. But what might be a little bit different in this era or what might have evolved to a new level is our efforts to work in partnership with the Commonwealth, to work with the Governor, with Secretary McCullough, and to work with all the cabinet secretaries really on helping assist them to meet their goals and their agenda. Secretary McCullough spends so much time on our campus, I said, you know, he ought to have an apartment at State College. He is there for so many statewide conferences, meetings, research seminars .launching of new programs, taking advantage of what we do. We are trying to really help Pennsylvania get to the next level and identify areas of need. So, what we have done in our budget request for the last couple of years is to try to break out a portion of that which is focused on the state's needs and which is very workforce development related. Now we define that broadly because it is not just producing workers in a particular area. It is about all of the things a university does in this area. It has a lot to do with our outreach mission. It has to do with technology transfers. You know, we are the number one public university in the United States in industry sponsored research. We have partnerships with huge numbers of Fennsyvlania companies to help them create jobs and retain jobs. We have consulting services. And in our new school of information sciences and technology, we have a new E-Business Institute and a Solutions Institute which is very focused in taking our expertise in helping companies in Pennsylvania. REPRESENTATIVE ROHRER: Thank you very much. I appreciate that. CHAIRMAN BARLEY: I now recognize Representative Dally. REPRESENTATIVE DALLY: Thank you, Mr. Chairman. BY REPRESENTATIVE DALLY: Q My inquiry is about the split up between Hershey Medical Center and Geisinger. Can you explain briefly what impact that has on this year's budget request? A It has no impact on our budget request. The Milton S. Hershey Medical Center and our College of Medicine have always operated as an independent cost center. Now there are some costs, which in time we will be able to quantify, that will be associated with the undoing of that merged relationship. But all of those costs are carefully sequestered you might say in being tracked as a part of the budget of our hospital and medical center and the College of Medicine. The only area where there is a direct relationship with the state is that there is a line item in our budget of about four and a half million dollars to support the College of Medicine. We expect, even though academic health centers nationally are undergoing just terrible pressures because of the Balanced Budget Act of 1997, the federal Balanced Budget Act, the changes in managed care, reduced fee for service care, changes in the health care industry, the driving of the reimbursement down by insurance companies. The financial pressures on our hospital are quite phenomenal. We are simply going to have to find a way to operate the Milton S. Hershey Medical Center on a self-supporting basis. That is a challenge for all of academic medicine. But it is no longer possible in this era to operate a College of Medicine on the clinical revenues, on the profits so to speak, of an academic health center, of a teaching hospital. Those days are gone. You are looking around the countries at hospitals that are losing 10, 20, 50, 100, $200 million a year in their clinical operation. We have that going on, I mean, there are examples right here in Pennsylvania as I think you all know. Now that hasn't happened to us yet. We are going to do what we need to do at the Hershey Medical Center. But where we need your help, and I plead with you to please give chis your highest priority to properly support the educational programs, the College of Medicine at Hershey. We are receiving about 6,500 applications last year for 110 spots in our medical school. A lot of these people are Pennsylvania residents and a very large portion of these people, the majority we hope in any given year, become physicians in Pennsyl vania. This state needs the College of Medicine at Penn State. We rank 75th, dead last out of 75 public university colleges of medicine in the United States. The average nationally is $50 million a year and there are some that this year have gone over $100 million a year of appropriations from their legislature to support the College of Medicine. That is the marketplace so to speak that we are competing in in medical education. And we really need your help in that area because we cannot get by anymore on profits that don't exist from hospitals and clinic revenues. Q You said that your line item request is a little over four and a half million for that purpose? A That is the current amount that we receive for medical education. There is virtually nothing additional in the budget for us there and we can't really tinker around the edges. This is not an area where we are talking about an extra percent or two. We need millions of dollars more coming in to support our College of Medicine. I dare say the same may be true in some other colleges of medicine in the state if Pennsylvania is going to be competitive in that area. Q Is that in your request before the Committee today? A The only thing that is in the request at the moment is the four percent inflationary increase and that is not even in there at that level. There are other requests that we are supporting by some of your colleagues in the Legislature that would remedy that situation. Representative Tulli I believe is the lead sponsor of an effort to correct that situation. REPRESENTATIVE DALLY: Thank you. CHAIRMAN BARLEY: I now recognize Representative Robinson. REPRESENTATIVE ROBINSON: Thank you, Mr. Chairman. Mr. President, thank you for being here. Let me just make a comment concerning my ongoing interest that the people's university allows the people of this Commonwealth to be able to track those appropriations that we make available. As you are aware, last year and in previous years I have raised this issue on the House floor by way of an amendment, an attempt to amend the appropriations for Pennsylvania State University. I'll try this again this year. But I am convinced more and more that while the University certainly forwards to us significant amounts of paper work and reports, that for the most part they are not relevant to us making any serious decisions around whether or not we should appropriate money to you and whether or not the fact that that money has been spent in accordance to any mandate we have given you. That material, as you know, comes to us after the fact, after the money has been spent.
I would much prefer to see us establish an account with Penn State's cooperation where we could track Commonwealth dollars. Pennsylvania State University is somewhat unique in that regard. We give you a lump sum of money and then you tell us the following year how you spent it, but during the year we can't track it. I am not sure you can even track it internally. So that is still a concern for me. I just wanted to let you know that in advance I will be continuing to pursue that. Thank you. PRESIDENT SPANIER: Well, let me just say I would ask you to rethink that position. We are extremely responsive to providing data about what we are doing, to answering inquiries of all kinds. We cooperate very willingly in the production of these legislative reports showing what we are doing. And if you notice in the budget request that we made this year to the Legislature, I asked our staff to actually put not only on the cover but on every page of our request the website where you can go and obtain Penn State's budget in virtually any level of detail that you want. Now, the reason I ask you to reconsider the position is, you know, why does it concern me if I said our books are. about as open as you could possibly want. Because at some point the bureaucracy involved, I mean, already we spend about $100,000 a year to meet the legislative mandates of preparing reports. I am not sure it is a good use of taxpayer dollars to have additional mandates, especially inasmuch as they are likely to be unfunded mandates to produce data at a level people aren't necessarily interested in. I understand your point of being accountable and responsive and I promise you that we will be, we are and we want to be in every respect. Let me just cite one example that we have going on this year that has slowed us down, and that is, the appropriation for our new school of information sciences and technology was put in the Pennsylvania Department of Education. We are most of the way through the academic year and still do not have all of those funds in our budget. By giving us those funds in the beginning, we can be good stewards of them, move quickly, deploy ourselves rapidly to meet the needs that are out there. If we have to go through other state agencies, it slows us down. REPRESENTATIVE ROBINSON: Just one comment, Mr. Chairman. I appreciate the President's response. My focus is on the accountability from the standpoint the people being able to track their tax dollars once given to the University. It is not a question of whether or not that money is being spent wisely. It is simply that during the year, even if I go to your website based on what I know about your accounting system, I doubt it very much if a website would tell me how any Commonwealth dollars are actually being spent from the appropriations that is made by way of the nonpreferred. I think internally you cannot produce that. Some schools are required, the state system is required. I just think Fenn State stands alone as an institution that for a variety of reasons has not been willing, and to be very honest with you many of my colleagues probably would agree we don't need that information. But I want you to understand what my purpose is like. I do appreciate your comment. Thank you, Mr. Chairman. CHAIRMAN BARLEY: Well thank you very much and that concludes the members that have asked for an opportunity to ask you questions. We thank you very much, President Spanier, for being here today. We look forward to working with you on behalf of Penn State. Thank you and we will now recess until two o'clock. (Whereupon at 1:35 p.m. the hearing was concluded.) I hereby certify that the proceedings and evidence taken by me in the within matter are fully and accurately indicated in my notes and that this is a true and correct transcript of the same.
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The foregoing certification of this transcript does not apply to any reproduction of the same by any means unless under the direct control and/or suprevision of the certifying reporter.