Note: As a member of the Penn State Board of Trustees, I will from time to time be made aware of certain confidential information. I will also engage with Trustees and administrators in private, off-the-record conversations, with the expectation of privacy on both parties. I take these expectations seriously, as they are required in order to catalyze important discussions.
As a fiduciary, it is also important that I engage in conversations with all stakeholders of the University. Stakeholders like you. Discussions will involve publicly available information and issues before the Board, as well as my personal thoughts, concerns, and ideas. I also will continue to solicit your thoughts, concerns, and ideas, and plan to engage in meaningful conversations with you on those topics. I hope that you will continue to share your concerns and ideas with me.
Last week I attended my first Penn State Board of Trustees meeting as a trustee elected by the alumni. I was joined by fellow alumni-elected newcomer Dr Christa Hasenkopf, seven other alumni-elected trustees, and the rest of the Board of Trustees. The meeting was held at the Penn State York campus on Thursday and Friday, July 21-22, 2022. Source for the meeting agendas: 2022-23-July-BOT-Schedules.pdf (psu.edu)
The July meeting of the Board routinely features two items: approving the University’s next fiscal year budget (which we were informed before the meeting was moved to the agenda for the September meeting) and setting tuition levels for the coming year.
For historical perspective, over the last ten years tuition increases have averaged approximately 2.5% per year. That includes four years (2015, and 2018-2020) when tuition for many in-state students remained flat . During that time, Penn State increased tuition revenue largely by shifting enrollment to higher percentages of out-of-state students (who pay tuition levels nearly double that of in-state students). Every proposed tuition increase in recent history has passed with broad trustee support. For the record, Penn State has never reduced tuition.
This year, for the first time, tuition cost approval was specifically coupled with a motion to award a 2.5% across-the-board salary increase to Penn State faculty and staff, who hadn’t had a broad-based raise in over two years (including cost of living). The Finance Committee, of which I am not a voting member but whose public meeting I attended Thursday as is my prerogative as a trustee, did not discuss the logic behind linking the two items into one. During the meeting, the committee chairman refused to recognize any of the attending non-voting trustees who had questions and comments, myself included. Every other public committee meeting I attended did welcome questions and comments. Several rationales were posited to justify the proposed tuition increases, the two most common themes being:
- The University is in dire financial straits. (Note: In fact we just finished the last fiscal year nearly $200 million in the red.)
- A lower than desired level of appropriation from the Pennsylvania legislature. (Note: Since the conclusion of the July Board meetings, the Governor of Pennsylvania, Tom Wolf, increased funding to Penn State without the approval of the PA Assembly, which effectively forwards an additional 5% appropriation to Penn State. This is the amount Penn State originally expected to receive.)
Both of the above rationales are true. But there are many options with respect to how to deal with those challenges without resorting to tuition hikes. There are several painless solutions, several of which I have discussed in detail:
- Correct the inefficiencies in the Capital Projects administration. These inefficiencies often lead to Penn State neglecting building maintenance, which then requires new buildings to replace ones decaying before their time. Ironically, this was demonstrated moments before approving the tuition increases, when the Board approved the proposal to tear down the 50 year old Oswald Tower and replace it with the new $128 million Liberal Arts building.
- For building projects that we have committed to, make strenuous efforts to keep the cost per square foot within the range being paid by our peer institutions, instead of regularly overpaying by 20-30% or more.
- Penn State must re-evaluate the endowment administration fees it is currently paying, which are proportionally the largest in our peer group, the Big10.
These are not the only examples of “low hanging fruit” actions that Dr Bendapudi and her administration can address and quickly see real results in Penn State’s financial position.
In the end, I voted No at the Friday general meeting for the combined tuition increase and staff raise, although I wanted to vote yes on the 2.5% salary increase for the faculty and staff. Five other alumni-elected trustees agreed with me and also voted No – Anthony Lubrano, Ted Brown, Alice Pope, Alvin deLevie, and Jay Paterno.
Three alumni-elected trustees voted Yes: Brandon Short, Christa Hasenkopf, and Steve Wagman. The rest of the board voted Yes with two abstentions.
Just as importantly, I voted No to spending $128 million (which is at least $30 million too much) on the Liberal Arts building project.
I voted Yes on the upgrades to the Field Hockey complex because they raised 75% of the needed funds themselves,
There was also an important – and under-the-radar – governance issue that was raised. The item in question was lumped in with a group of “Consent Items”, with the typical procedure being that all “Consent Items” would be voted on by a single voice vote of the Board. I, as is my right and duty as a Trustee, asked that the first of these items be separated from the others for discussion and a separate vote. That item was: The election of Trustee Dan Delligatti to the Executive Committee.
I then asked Board Chairman Mathew Schuyler, “When was the last meeting of the Executive Committee held, to conduct University business?”
Chairman Schuyler replied that the Executive Committee had met most recently within the last few weeks. That question and answer is now on the record. Where are the records of those meetings?
To the best of my recollection, I was the only Trustee to provide any questions or commentary on this item. I voted No (I believe I was the only dissenting vote), after making the following public comments (see below).
My public comments to the Board at the general meeting, Friday, July 15, 2022:
On the tuition versus salary proposal:
“This really should be two separate items – and the parameters of each are significantly different. I asked that the two items be separated but, as you all know, I was rebuffed.
With regard to the salary increases:
While I would like to see increased salary pools be allocated with a significant emphasis on performance-based differential increases – and I believe that, moving forward, that preference is shared by current administration – I also understand the desire to provide some baseline across-the-board salary increases – – so that all PSU employees can receive some salary boost.
And so, I can approve of that portion of the proposal.
With regard to the Tuition Increases:
We know we were surprised by the lack of increased funding from the State… and it kind of threw things into a bit of a tizzy. Unfortunately, the prevailing knee-jerk reaction appears to have been “We have to raise tuition”.
IMO – the reaction should have been “We need to get to work on the things that we should have been doing for the last 10 years”.
Now, Dr Bendapudi and her administration walked into this crisis situation, not of their doing – we would be remiss to not recognize that, and I believe we are all hopeful that moving forward we will be able to work together – Board and Administration – to overcome the mess (and it is a mess) that we all find ourselves in.
That said, there is plenty of “low hanging fruit” with regard to savings and increased efficiencies that we can, and should, be able to harvest – to mitigate tuition increases at this time. The potential silver lining of the surprise from Harrisburg CAN be that it will light a fire under our behinds to do those things we should have been doing all along.
And so, if we cannot separate these two items – and I don’t know why we can’t, and we absolutely should separate them – I will have to vote “No”, even though I support the Salary increase portion of the item.”
On the Liberal Arts Building proposal:
“I have two concerns with regard to the proposed project:
1) The proposed structure serves the missions of the college of Liberal Arts, a mission which may be very justifiable and appropriate – with approximately 75% of the space being allocated to Offices and Classroom space – and something less than 25% to Laboratory space for the Anthropology Department.
Such a space – based on rough estimates of similar higher education construction throughout the country – would be expected to be priced at somewhere in the neighborhood of $650 per composite square foot, as a reasonably healthy estimate.
This estimate, $650 per square foot, times the total listed square footage of the new building, would place a total cost at approximately $93 Million. The proposed price – of $128 million (minus $5 million to raze Oswald, if that is included) – is $35 million over that target.
To put that into some relevant perspective, that single “inefficiency” is enough money to provide 1700 full tuition scholarships to Pennsylvania students. While the “mission” may be righteous, the cost – for what we are getting – needs to be refined.
2) Razing Oswald Building:
Is spending $5 million to tear down a 50 year old office/class building the best option?
I don’t know, but if it is, it is an indictment of our Capital Spending priorities. If Oswald, after 50 years, is in such a state of disrepair that the only viable option is to spend $5 million to tear it down, we have done a very poor job of maintaining the structure over the years.
More often than not, when we put up a new building – and tear down an older building – we hear that the ”costs” will be offset by razing the old building to save on deferred maintenance costs. At the same time, we hear reports on a regular basis that we are putting off required maintenance projects due to lack of funds.
It is far, far less expensive to take care of those assets we have – rather than allowing them to go to seed, tearing them down, and building a new replacement. And we now have well over $3 Billion of long-term debt on the University’s books – a significant portion of which is due to such actions – which will be paid by who? (We know who, it will largely be future generations of Penn State students, and their parents).
That needs to stop.”
On the appointment of Dan Delligatti to the Executive Committee:
“To be clear, my concerns are completely unrelated to the qualifications or abilities of the specific nominee to the Executive Committee – but rather to my belief that the existence of the “Executive Committee” does nothing to further the mission of providing responsible governance to Penn State, and indeed creates the opportunity for governance that is incongruent with “Responsible Governance”. I cannot support the addition of any Trustees to the committee.”
I was pleased that media outlets provided coverage of the meeting’s events, and that to the best of my recollection all seem to have quoted me and everyone else accurately.
- Onward State: Board Of Trustees Officially Raises Tuition For 2022-23 Year | Onward State ,
- PennLive: Penn State trustees ratify tuition hike for upcoming year after state aid is held flat – pennlive.com
- Centre Daily Times: Penn State increases tuition for 2nd straight year — but not for families making under $75K (aol.com)