Tuesday, April 07, 2009

The Hundred Million Dollar Plus Question

I've put together a little slide show for you based on Penn State's Audited Financial Statements covering fiscal years ending June 30 of 2000 through 2008. This show tells the story of how Penn State uses its revenues from tuition, fees, and state appropriations.

A story you hear all of the time from Graham is that the Commonwealth doesn't support Penn State the way it once did, but, to the extent that this is true, it is only part of the story. This part of the story, the revenue side, is captured in slide number two.

In 2000, the Commonwealth appropriated 57 cents for every dollar of fees and tuition (Henceforth I'll use the shorthand tuition .) that Penn State collected. The amount of dollars of appropriations per dollar of tuition has decreased every year since. Last year it stood at 29 cents of appropriations for every dollar of tuition. While over those nine years appropriations have gone up, they have have done so at a much slower rate than tuition.

The other side of the story is the spending side. It's difficult to trace from the audited financial statements exactly how Penn State uses all of its money, but the audit does list four categories of direct expenditure on students: instruction, academic support, student aid, and student services.

The story of direct expenditure on students is told in slides three and four. In 2000, Penn State spent $1.03 on instruction for every dollar of tuition it collected. By 2002, this had dropped below a dollar for the first time and steadily declined until 2007, when it stood at $0.78 spent on instruction for each dollar of tuition collected. It bounced up to $0.79 last year. Student aid has never been a penny or more per dollar of tuition and it was dropped as a category in the 2007 audit. Academic support, which started out at $0.37 spent per dollar of tuition collected in 2000, has dropped every year but one until it reached $0.25 spent on academic support per tuition dollar collected last fiscal year. Student services has declined slowly over the nine years form $0.15 spent per dollar of tuition collected to $0.12 spent per dollar of tuition collected.

The revenue and spending sides of the story lead to the final part of the story, surpluses.

The total direct expenditures on students has gone from $1.55 per dollar of tuition collected in 2000 to $1.16 in 2008. The way to look at this is that in 2000 the University spent all of its tuition revenue plus 55 cents of appropriations revenue for every dollar of tuition revenue it spent directly on students. That left $0.02 of appropriations for every tuition dollar to be spent on things other than students. By 2007, the University was spending all of its tuition revenue plus $0.15 of appropriations for every dollar of tuition it spent on direct student expenditure. This left $0.16 of state revenues per dollar of tuition to spend on things other than students. That surplus is a factor of 8 greater than what it was in 2000.

The complete story of the surpluses is told in slides four, five and six.

To fully appreciate the magnitude of these surpluses one must look at the actual dollar amounts. In 2000, Penn State had a bit more than $11 million left over from tuition and appropriations after all direct expenditures on students were made. In 2002, it was more that $26 million. It nearly doubled the following year to a bit more than $52 million. In 2007, it was over $169 million. It dropped to a tad more than $149 million last year.

The bottom line is that Penn State currently takes in much more in tuition, fees and appropriations, than it spends on education, academic support, and student services. Hence, while they may not know it, when students lobby the Commonwealth for more appropriations or to be included in Rendell's Tuition Relief Act, they aren't asking for more money for their education, because the University already has more than enough money for that, they are asking for more money for things not directly connected to their education.

But what are those things? That's the $100 million plus question.

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