UNIVERSITY PARK, Pa. — Penn State’s Faculty Senate held an off-cycle meeting on May 7 to walk through the details of the University’s budget model with Senior Vice President for Finance and Business Sara Thorndike. This meeting built upon the high-level presentation Thorndike gave on the budget model during the April meeting of the Faculty Senate.
Over the past few weeks, Thorndike has been hosting meetings with deans, chancellors and other leaders throughout the University to discuss the budget model and the accompanying spreadsheets, which include all the data inputs and outputs used to run the model. She also has met with the senate committees on Faculty Affairs and University Planning to review the budget model.
Thorndike published a blog post Tuesday morning on Penn State’s Road Map website linking to the two workbooks and in-depth FAQs, providing additional insight into Penn State’s 2025-26 budget.
The spreadsheets were created to help explain central budget allocations (increases, reductions and redistributions) for Penn State’s colleges, campuses, and administrative and student support units using the University’s data-driven budget model, which Penn State adopted beginning with the 2023-24 and 2024-25 fiscal years. The 2025-26 allocations were initially shared publicly in January with the rollout of the Road Map for Penn State’s future.
The purpose for sharing this information, Thorndike said, is to show how budget allocations for fiscal years 2023-24, 2024-25 and 2025-26 have been calculated. It also provides an overview of how strategic funds have been allocated to units funded by Education and General (E&G) revenue, which includes tuition, state appropriations and investment income.
Penn State’s budget model allocates funding for colleges and campuses using the following factors:
-
Three-year weighted student credit hour (SCH) average, based on in-state upper-division undergraduate and in-state graduate program rates.
-
Three-year student headcount average.
-
Research allocation, based on the three-year average of research expenditures that generate facilities and administrative (F&A) costs and are recorded as research, instruction, or outreach/public service.
While the E&G revenue — including $12 million for additional enrollments — is funneled into the allocation model, $101 million in strategic funding is being set aside in 2025-26, with $51 million of that to go to the provost for subvention (operating subsidies) for academic units, including Commonwealth Campuses. An additional $50 million will go to University senior leaders for strategic needs, such as enrollment management; diversity, equity, inclusion and belonging (DEIB) initiatives; new programs; and capital projects.
“The best way I can describe how we are using subvention is like an operating subsidy,” Thorndike said. “The provost determines how much subvention is allocated to each college and to the Commonwealth Campuses in the aggregate. What we’ve seen going through these budget meetings is that those colleges and campuses look at that as another resource that helps support their whole operating budget.”
She reiterated that subvention is separate from the strategic funds, which she anticipates University senior leaders will continue to use for line items to cover costs of strategic needs or priorities not captured in the model, such as marketing for enrollment support and capital projects, particularly at the Commonwealth Campuses.
The spreadsheet also reflects deductions in revenues for contingency ($8 million), benefits increase ($30 million) and compensation modernization ($7.5 million). Thorndike said salary increases for employees will be covered by an anticipated modest tuition increase for 2025-26, but final decisions on any tuition changes will be decided by the Board of Trustees at its July meeting.
Thorndike went through each tab in both spreadsheets. The first workbook (FY26 Budget Allocation Model) was used to determine individual unit allocations for fiscal year 2025-26, and the second (FY24_FY25 Budget Allocations) was created to explain the central budget allocations to individual units using the University’s data-driven budget model.
A reoccurring topic throughout the discussion was the explanation of the average student credit hours (SCHs) and the three-year average student headcount and how those are weighted.
“The student credit hours are weighted by a factor that looks at the tuition rate based on in-state upper-division undergraduate and in-state graduate programs,” Thorndike said. “For the Commonwealth Campuses, we take an average of the upper-division rate because we don’t look at individual programs at the campus level.”
The student credit hours are defined in the model as the amount of classwork credits that are being earned by students in each college or campus each year and weighted at 65% of the total allocation. Student headcount, which is the number of degree-seeking students enrolled in a college or campus each year, determines 35% of the allocation. More information defining the student credit hours and headcount, and explaining how they are reported can be found on the budget allocation model website.
One senator raised a concern with weighting SCHs against tuition for the Commonwealth Campuses, which have lower tuition rates than University Park, resulting in lower allocations. This formula, while not perfect, Thorndike said, was the best way the budget working group could come up with to capture the cost of attendance.
“We acknowledge that while this was our attempt to capture the cost of instruction, this does not apply when we look at Commonwealth Campuses because their lower tuition is not because of lower cost of instruction, it’s because of accessibility,” said Interim Executive Vice President and Provost Tracy Langkilde, who also served on the budget working group. “The subvention funds are an attempt to make up for that.”
While discussing the impact of the budget model on the Commonwealth Campuses, faculty senators made several suggestions, including designating a portion of the subvention to the campuses to be permanent, similar to the permanent subvention designated for the Nese College of Nursing and the College of Arts and Architecture.
Another suggestion was for the budget model to credit campuses for the students they enroll through the 2+2 plan, who start their Penn State careers at a campus then move to University Park. The 2+2 plan is a key piece of Penn State’s accessibility mission.
Thorndike thanked the faculty senators for their ideas and engagement in the discussion and encouraged them to continue to share feedback and ask questions about the budget model using this Google form.
“I hope what you can take away from this is that we really tried to design a model that was as simple as possible. We know that it is not perfect. Every budget model is inherently imperfect,” Thorndike said. “We did our best to calculate an allocation for the revenues that are coming in and provide enough flexibility with subvention and strategic funds to supplement what the model itself calculates. We would like your feedback. We’ve made some tweaks already and know this will continue to evolve as more information becomes available to us."
Additional information about the budget allocation model can be found on the Budget Allocation Approach website. Ongoing updates around budgeting and other University initiatives and priorities are available on Penn State’s Road Map website.
The next regular meeting of the Faculty Senate will be held at 1:30 p.m. July 9 via Zoom.
About Faculty Senate
Faculty Senate is a legislative body comprised of 200 faculty, elected by their peers from each college and campus. The senate also includes representatives from the undergraduate and graduate student body and University administration. The senate holds legislative authority on educational matters including curriculum, student policies, admissions, and retention/graduation requirements. The senate also serves as an advisory and consultative body to the University administration, a process referred to as shared governance.