Colleges and units across Penn State have now received their final budgets for 2024 and 2025 created using the university’s new budget allocation model, according to a Penn State press release Tuesday.
The new model looks at each college’s student headcount and student credit-hours – weighted by tuition rate – to determine how much money it will get from the university’s tuition and state funding dollars. The university will then deduct overhead costs to cover student support and administrative units.
While university officials say there aren’t plans for large-scale lay-offs or closures, many units will likely see their funding shrink. The university did not provide details about which units might see cuts and how much they would be, except that they would not exceed 4% a year for the first two years. They also won’t increase more than 4.6%.
This is a change from the past incremental model, making small changes from year to year.
A working group that included more than a dozen Penn State vice presidents, deans, professors, budget experts and consultants created the new budget allocation model.
“Throughout the process, the budget executives in each unit will still have ultimate control over how they allocate their budget and will decide what’s best for their respective unit,” said Sara Thorndike, senior vice president for finance and business/. “We’ve also been very conscious that any cut — no matter how small — will impact units. As mentioned previously, the University has no plans for mass layoffs or closing colleges or campuses and is committed to working with units to work through needs and priorities and minimize impacts.”
Research is also factored into the model, and most of it will now be funded through facilities and administrative costs. Research incentive funds will be calculated the same as in past years. The budget also includes $28.5 million for research support.
At Tuesday afternoon’s Penn State faculty senate meeting, President Neeli Bendapudi responded to a faculty member concerned the budget didn’t prioritize research.
“Anytime you’re talking about how you divide a pie, you will have differing opinions,” Bendapudi said. “Even on research, I just want to share that there are units that will argue, ‘We are in areas we’re doing cutting edge work, but we are not the areas that get the big grants. But we have more of our people in our academies.’ What do you do? These are very real challenges.”
Another $50 million is earmarked for strategic investment funds for initiatives surrounding issues like enrollment and diversity efforts.
“It’s still a lot less than a typical university our size would put aside for strategic initiatives. This is the best we can do right now,” Bendapudi told the faculty senate. “Given our financial realities with the structural deficit, we did not think we could go much larger than this. Longer term, these will be real dollars that we can invest meaningfully in priorities that we all say matter to us.”
Completed unit budgets will be compiled into a university-wide budget that will be voted on by the Board of Trustees at its July meeting.
The university will rerun the numbers through the new allocation model this fall for fiscal year 2026.
