Pennsylvania’s Higher Ed – Transformation or Disruption?

Pennsylvania’s Higher Education system has been struggling for a few years. Triggered primarily by declining enrollments, the Pennsylvania State System of Higher Education (PASSHE) proposed cost cuts and campus consolidations in 2019 in return for increased funding from the state’s legislature.

Pennsylvania State University (Penn State) announced on Monday, January 22, that it plans to cut approximately $100 million from its fiscal year 2026 budget. You would not have known that from the release’s title which was Penn State leaders share road map for University’s future.

Penn State’s Modernization of its Business Model

Penn State’s president Neeli Bendapudi announced a plan to focus changes in six key areas “aimed at modernizing Penn State’s business model.” The university’s road map will:

  • Prioritize students at the forefront of every decision.
  • Create a sustainable future and business model that provides room to innovate and to respond to unexpected challenges.
  • Prioritize continued excellence in teaching, learning, and research preparing students for success.
  • Embed regular opportunities and processes in operations to evaluate and make decisions around strategic priorities, efforts, and investments to drive growth and improvements.

Penn State’s Future Financial Challenges

Penn State will use data and the mission as a guide to confront financial challenges including:

  • The need to maintain a balanced budget beginning fiscal year 2025-2026.
  • Changing demographics in Pennsylvania generating a 30% decline in enrollment at its Commonwealth campuses since 2010 (compared to a 30% decline in enrollments at PASSHE’s 14 campuses since 2010).
  • A projected $30 million increase in health care expenses in the 2025-2026 budget.
  • The reality that 69% of the education and general funds budget is personnel costs.
  • Stagnant funding from the state (flat for the last four years) and tuition rates that have not kept up with inflation (likely higher ed inflation versus consumer inflation).
  • Inflationary cost increases for goods and services necessary to its mission.

Penn State’s 20 Commonwealth Campuses Initiatives

The Commonwealth Campus structure enables close-to-home access to a Penn State education which is a critical component of the university’s land grant mission. The university wants to expand the nonresident, international, adult, online, and transfer student markets for each of its campuses.

Additionally, the University wants to invest in successful and high demand academic programs that align with the state’s workforce needs. Specific initiatives include:

  • Analyzing the unique strengths of each campus to create discipline-based hubs of excellence that leverage faculty expertise, campus resources, and local community needs.
  • Increasing demand for the first-year class through expanded marketing and recruiting efforts.
  • Implementing a dual admissions program and expanded articulation agreements with Pennsylvania community colleges to create seamless pathways to Penn State degree completion.
  • Adopting a test-optional admissions policy.
  • Expanding the Discover Program to grow Commonwealth campus reach in out-of-state markets (note: the Discover program awards $6,000 per academic year, up to $24,000 for out-of-state students enrolled in a four-year program at a Commonwealth Campus.

While the initiative related to create discipline-based hubs of excellence does not refer to establishing a course sharing platform, I believe it should. Many of the Commonwealth campuses are in rural or low population areas. Sharing the faculty and programs from the hubs of excellence to other campuses through a course-sharing platform like Acadeum could increase revenues a multiple locations as well as decrease overall expenses.

Penn State’s University Park (main campus) Initiatives

The university plans to eventually increase first year undergraduate students from 9,200 to 10,000. Housing needs will have to be met as well as potential staffing increases.

The university will also begin an academic program and portfolio review (APPR) of all academic programs including undergraduate and graduate majors and minors offered at all campuses. The university is in the process of engaging a consultant to complete this evaluation by summer 2024. (As I noted in my critique of the SUNY System plans, I hope the university chooses to use a knowledgeable higher ed consulting firm like the rpkGroup.)

University research expenditures reached a record high of $1.24 billion in 2022-2023. The university plans to commit to have resources available to continue to grow its research enterprise. Growing the research enterprise requires reducing the administrative burdens on faculty conducting research.

Higher Ed Dive’s Commentary About the Penn State Plan

Higher Ed Dive’s Lilah Burke reported that the university will decide over the next 18 months which units will be impacted by the plan. She also noted that the plan calls for a 3.8% reduction across administration and student support groups totaling $29 million and a 14.1% cut from the Commonwealth campuses totaling $54 million. University Park will see cuts of $11 million.

The university also plans to spend $17 million to align employee pay with its new salary structure.

Burke reported that the academic program and portfolio review will evaluate which programs to cut from and which programs to support. She added that faculty are concerned about the outcome of the review. Budgets are expected to go to the Board in July.

Pennsylvania’s Governor’s Blueprint for Higher Ed

Last Friday, Pennsylvania governor Josh Shapiro released his blueprint for higher ed in the state focused on increasing workforce preparedness and expanding college access and affordability. The governor, a Democrat, noted that Pennsylvania’s higher ed institutions are suffering from 30 years of disinvestment. Pennsylvania spends less on higher ed than every other state except New Hampshire.

Part 1: will build a new system for higher education that unites the PASSHE universities and the state’s 15 community colleges under a new governance system. This combination will enable the creation of pathways to affordable credentials and degrees for Pennsylvania students.

Part 2: will provide access and affordability by ensuring that Pennsylvanians making up to the state’s median income will pay no more than $1,000 in tuition and fees per semester at state-owned universities and community colleges.

Part 3: will direct appropriations to publicly funded colleges and universities based on a predictable, transparent, outcomes-focused formula that will incentivize them to focus on what is most important to the Commonwealth.

The formula will consider factors including increasing enrollment, the number of first-generation students that receive credentials, and the graduation rate. The formula will incentivize institutions to recruit and support students to complete degrees and earn credentials in fields facing workforce shortages such as education and nursing.

The governor plans to authorize the performance-based funding through the Pennsylvania Department of Education (PDE) for all publicly funded institutions. This will no longer require a two-thirds approval by the legislature that has reduced funding over time.

pennsylvania flag inside government office with stacks of documents on a desk
Image of Pennsylvania flag created by Google Bard

Inside Higher Ed’s Analysis of the Blueprint

Jessica Blake and Kathryn Palmer reported on the governor’s initiative for Inside Higher Ed. They noted that the plan to charge $1,000 per semester is a $6,716 reduction in the costs to attend a PASSHE institution (they did not note what the difference is for community college students).

Blake and Palmer report that Pennsylvania was one of six states that cut per student funding by more than 30 percent between 2008 and 2019. PASSHE institutions experienced a 20 percent enrollment decline between 2017 and 2023. PA community college enrollments declined 25 percent between 2017 and 2021 but saw a slight increase in 2023.

The two reporters note that the governor’s plan has not cleared its first hurdle which is the legislature. Assuming that hurdle is cleared, they note that the plan does not include the states’ four largest public institutions (Penn State, University of Pittsburgh, Temple University, and Lincoln University). As a result, the plan won’t provide full statewide coordination.

The estimated costs were not revealed in the blueprint. Instead, the governor plans to reveal them in his February 6 budget proposal. The reporters interviewed several state politicians who indicated that understanding the cost of the program was vital to its passage.

Final thoughts

Initially, I thought it was coincidental that the Penn State plan and governor’s plan were published within a week of each other. Later, it occurred to me that perhaps the plans’ release timing was not so coincidental.

I tried to find out the percentage of Pennsylvania legislators who attended public institutions other than PASSHE and the 15 community colleges. While I couldn’t find that data, I noted that the bill to fund Penn State, The University of Pittsburgh, Temple University, and Lincoln University passed by a 45-5 vote in the fall. It’s likely that a large number of legislators have links to those institutions.

The 2019 proposal from PASSHE to consolidate several campuses in return for additional state funding took a while to receive approval from the legislature. The Governor’s blueprint will not release its funding requirement until February 6. Depending on the cost, that proposal could be dead on arrival at the legislature.

Penn State is less dependent on funding from the PA legislature than the PASSHE colleges and the state’s community colleges. Its plan indicates that it does not have to decide as to which units to cut or decrease funding to for at least 18 months.

Nonetheless, its APPR process examining the return from all degrees and majors at all campuses will be the report that is praised or pilloried, depending on the recommended changes to your program or major.

I recently wrote about the SUNY System’s initiatives to reduce its projected $1 Billion loss. I wasn’t surprised to read the separate disclosures of the Penn State System and the Pennsylvania governor’s blueprint for higher ed. We will continue to read about other states and their systems over the next few years.

It should not be surprising that almost all these reports fail to hold themselves accountable for aligning program and student support expenses with student enrollments annually instead of when a deficit is looming.

A partial explanation may be the way that state appropriations are granted. Another partial explanation may be the culture of assuming that increases in tuition or enrollments could cover rising expenditures. Heaven forbid that the institutions recognize that the rate of their annual expenditures growth caused the inflationary tuition and fees that many students are beginning to reject.

Over the next several years, few institutions will be able to cover inflationary expenses with enrollment or tuition increases. State and federal governments will have budgetary issues more pressing than higher education, so public institutions should not count on a government bailout. The time has come to realign expenses with market-based tuition. I believe there are ed tech related companies that can assist with the goals of expense reduction and enrollment expansion.

Only the passage of time will reveal how successful Pennsylvania’s colleges and universities will be in aligning expenses with enrollments as well as meeting the needs of a changing workplace. The pathway to achieve these goals is likely to be fraught with obstacles and challenges. Let’s hope leadership is able to successfully accomplish these important goals.

Subjects of Interest


Higher Education

Independent Schools


Student Persistence