August 11 – Penn State University is facing a budget crisis, particularly since enrollment has been declining, but some people are wondering, if you’ve got problems, how about you look at cutting costs?
Penn State’s total operating budget for 2021-22 was $7.7 billion.
Pat Ryan of NewsTalk 103.7FM pointed out, “I went to a college up in cold New Hampshire. It was a cinderblock building. It had one room with four showerheads, no stalls. It was a disaster. It certainly wasn’t some of these palaces. I didn’t have a sous chef cooking for us. We were lucky if we had Taco Night once a month.”
Attorney Clint Barkdoll said, “I share your experience by the way, living in a dormitory all four years in North Carolina, sharing a bathroom with four people and pretty basic conditions. But it was great too.”
A story in the Wall Street Journal today talks about the financial problems at places like Penn State and the University of Kentucky.
Barkdoll said, “Just massive spending binges over the last 20 years, now to the point where it’s really causing budget problems at these schools. In Penn State’s case, we know nationally and at Penn State specifically, enrollment keeps declining. Some of that’s just demographics. But the spending just keeps ballooning. There’s never any proportionate cuts in spending related to the drop in enrollment. The article is also reminding us of the painful fact that in Pennsylvania, Penn State is the most expensive state related university in the United States.”
Don’t forget Penn State gets a $250 to $300 million annual subsidy from the Pennsylvania state government.
Barkdoll reminded, “Which by the way has not been approved for this year. That’s one of the carve outs in that budget that takes a special vote. The House and Senate have not ratified that yet for Penn State, Pitt or Temple.”
Penn State has a new president who came from the University of Louisville.
Barkdoll said, “She immediately got all hands on deck and is calling for reforms and cutting of programs, cutting of the budget. The board has demanded that there be a balanced budget in place by 2025. So presumably, this year and next year, you’re going to see major cuts across these Penn State programs and we don’t know what that looks like yet. Do they reduce staff? Do they eliminate programs? Do they close some campuses? All of those things are apparently on the table.”
Michele Jansen of NewsTalk 103.7FM said, “That was a bipartisan decision in the House to not pass that funding for the state because they raised the tuition and they’re spending money like crazy and they don’t have the support of more students coming in, which means you know what? You have to start being a business here now Penn State and other universities. You don’t keep spending more money when you don’t have a product that’s attracting enough customers to come in. I applaud the House for doing that. We’ll see what happens when these code bills come up. It looks like the House won’t come back into session, as we said till September, but it’s going to be very interesting to see the dance on that, especially with reports like this. I think it adds to the fuel, the ammunition for those who are saying, wait a minute, wait a minute, this is ridiculous that we’re putting all that money into these schools.”
Ryan asked, “So Penn State University in State College, that is one part of the system, right? Or are they independent of it all?”
Barkdoll said, “That’s their main campus. They have lots of other campuses including here locally, Mont Alto. Dickinson Law School is now part of Penn State as well.”
“Got it,” Ryan said, “You put 100,000 people in Beaver Stadium, right? And then all the sponsorship dollars, right? And then all the tickets and all the vendors and all the food and all the parking and all the rest of that stuff. Then I’ve got two beautiful golf courses. You mean to tell me that that machine cannot support the rest of whatever’s happening out in Pennsylvania when it comes to education here? And then I’ve got to hear words like well, we demand that we have a balanced budget. How are you running without a balanced budget? You’re trying to teach these young skulls full of mush how to work it in the real world when you’re not in the real world at all?”
Barkdoll said, “I think it illustrates how bloated these college budgets must be, not only with capital improvements, the constant improvements and upgrading of facilities and all of these amenities, but just the escalating cost of wages and benefits. Penn State is a massive operation and in fairness, we should say that that $250 million subsidy from the state government, that is less than half of a percent of the overall Pennsylvania budget. And it’s a very small fraction of the overall Penn State budget. There has been talk over the years that maybe Penn State will just privatize, just get disentangled from the state subsidy. But I think the reality is when you read this exposé in today’s Journal, they need this money. Penn State needs this money. The Journal was pointing out that even as the state of Pennsylvania has reduced this subsidy over the years and Penn State often brings that up at budget time, we keep getting less money from the state, but the journal was pointing out Penn State more than makes up for that cut in the subsidy by their tuition increases. So it’s more than offset which is impossible to reconcile other than the fact that they’ve got a major spending problem at Penn State.”
Ryan added, “Well, let’s look at all the endowments then. If there’s a problem there, let’s take a look at what’s sitting in the bank accounts on that side. But I still can’t get my head around all the TV rights, and the booze and the food and the ticket prices, 100,000 people that swell into that stadium and you can’t figure out how to get a balance? You talk to any private business owner, that would go oh my goodness, I’ve all this at my fingertips and all the sponsorships and all the things that they sell, everything that goes along with it and you need 250 million from the state? Come the heck on.”
Barkdoll said, “One thing Penn State Athletics we’ll say about that, I mean, football is obviously the juggernaut that just funds all sorts of things, major money, but they say that that subsidizes a lot of the other sports at Penn State that are revenue negative, that cost money and subsidize other university operations. The TV portion, big 10 network, each big 10 school last year got a subsidy of roughly $60 million. That’s all through the football programs, the football games in the fall. That’s expanding. Remember now next year, USC and UCLA are joining the big 10. Now Oregon and Washington have also agreed to join the big 10. So that number is going to likely get even larger, even though it’s going to be sliced among more schools now that are members of the big 10.”
Ryan suggested, “Well, maybe it’s time that we stopped subsidizing some of the sports. If underwater, racquetball is not working out, is it time to put that program on hold?”
Barkdoll agreed, “Or badminton or we could go through the list if you can imagine that the programs that certainly are not generating any revenue, that football is essentially underwriting.”