Monday, January 22, 2007

A Closer Look at the Numbers

My last post concerning the way in which the University tried to hide the amount of its debt service in the 2006-2007 University budget very likely was wrong. I couldn't find a line item for debt service in the budget and deduced that an item labeled capitol improvement was in fact debt service. It is possible that the purpose of this cryptically name line item was to give the impression of a much lower debt load than is in fact the case.

Today I found a report, issued in August of 2006, on Virginia Tech's debt policy which uses the debt policy of several universities, including Penn State, to assess its own policy. This report contains informations from Moody's bond rating service which combined with other information allowed me estimate the debt service.

Penn State's total debt, at the time the report was issued, was $849 million. The ratio of debt service to operation costs is 0.027. The total budget for 2006-2007 (Erickson's report to the Penn State Faculty Senate, p. 21 of the pdf file.) is $3.2 billion. If one assumes that that total budget and operating costs are the same (Since the budget is balanced, this is not unreasonable to assume.) then debt service would be $86.4 million and not the paltry $3.65 million which I guessed at yesterday. Total student enrollment for the 2006-2007 academic year, according to the Collegian, is 83,721. Therefore the amount of debt per student is $10,141. The debt service per student is $1032 based on total operating costs. If you exclude Hershey and Penn College the numbers are more than halved, but still substantially more than yesterday's guess. The debt service per student in this case drops to $442. This later number does not leave out the students from Hershey and Penn College in the total number of students. If those students are dropped, then that number would increase. Either way, $1032 or $442, it is a substantial contribution to tuition.

The state also incurs debt on behalf of the University for capitol improvements, which are payed-off with tax dollars. These numbers are not included in the report.

Let me set aside the size of that numbers for a moment and return to the original point of my post yesterday. The University does not make these numbers readily available. I had to spend the better part of today looking for the information which I needed to estimate the debt service per student and I was lucky to find the Virginia Tech report. Without that report I wouldn't have been able to do the calculations.

I believe that the budget information that the University places online is designed to give the appearance of openness while, in fact, obscuring the situation as much as possible. We need more sunshine. The University should be required to put a detailed budget online in an easily searchable format. Work to get the Mahoney open record law passed.

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