Harrisburg – On Dec. 6 Pennsylvania State System of Higher Education (PASSHE) Chancellor Frank T. Brogan distributed to the Board of Governors and university presidents the following statement in response to the recent study of System finances conducted for the faculty union:
"Although it was not shared directly with us, we have now had the opportunity to review the report on PASSHE finances prepared for the Association of Pennsylvania State College and University Faculties (APSCUF) by the accounting firm of Boyer and Ritter. Because there are obvious errors, I wanted to correct the record, not only on the report’s content, but also on the unsubstantiated statements and mischaracterizations contained in the news release issued by APSCUF leadership in relation to the report.
"It cannot be overemphasized how seriously PASSHE leadership—which includes the Chancellor, Board of Governors, university presidents and the members of the individual university councils of trustees—takes its responsibility to be good stewards of all of the taxpayer-supported funds we receive from the Commonwealth as well as those derived from student tuition and fees.
"APSCUF President Steve Hicks’ statement that “PASSHE has been allowing the fourteen state-owned universities to mismanage their budgets” could not be further from the truth. In fact, our budget process is thorough, transparent and professional. We believe the findings in the report demonstrate a clear misunderstanding of our procedures by Boyer and Ritter.
"Each October, the PASSHE Board of Governors reviews and approves the State System’s annual appropriations request, which is then submitted to the governor’s budget office. This submission forms the core of PASSHE’s annual budget proposal and includes System priorities that are presented to the House and Senate Appropriations Committees during the annual budget hearings.
"Once the Commonwealth’s budget is adopted, the Board approves a final budget for PASSHE, reflecting both the state appropriation and new tuition rates for the next academic year. By its very nature, this process is fluid, which results in several different budget adjustments being made throughout the year.
"The university presidents have the statutory responsibility to prepare their respective institution’s individual budget, which is then submitted to the Board for approval. Each university budget also must be approved by its individual council of trustees. Mid-year budget updates are submitted in March and necessary revisions are made based on actual student enrollments and revenue (tuition and fee) collection.
"At the end of each fiscal year, all of the individual budgets (the overall System budget and each university’s budget) are audited by an outside, independent auditing firm.
"If the assertions made in the APSCUF report had any validity, they also would apply to every school district, state agency and virtually any other entity that receives financial support from the Commonwealth.It is well documented, including in this report, that for the past two years the amount of state funding PASSHE has received has remained flat, while expenses have continued to rise.
"It is hard to believe that the APSCUF-funded report fails to include the impact of either the salary or benefit increases incurred by the System primarily as the result of new collective bargaining agreements finalized within the last year. Also not considered were the higher costs of pensions. These increases are only partially offset by the 3 percent tuition increase the Board of Governors approved for the current academic year, requiring the universities to manage an overall deficit of more than $50 million.
"Dr. Hicks also stated that PASSHE is “hiding debt in affiliated corporations.” There is no data nor narrative in the report to support this claim.
"The information APSCUF claims is being hidden is, in fact, included in the report, which is based on financial records provided by PASSHE. The information, which is related to the financing of the construction of student housing, is included in each of the university’s annual financial statements and is routinely shared with all of the credit-rating agencies that regularly review PASSHE finances. This information has always been publicly available.
"Only 3 percent of the PASSHE academic operating budget goes toward debt service while 72 percent goes toward salaries and benefits.
"Although APSCUF leadership has participated in briefings in which it has been clearly explained that the construction, operation and maintenance of student residence halls are funded by student housing fees, APSCUF continues to incorrectly state that these facilities are supported by university operating funds and that this affects the academic budgets of the universities. That simply is not true. Tuition dollars and PASSHE’s annual state appropriation are not used to fund student housing, nor any other auxiliary operation.
"On the positive side, the report clearly demonstrates support for what the leadership of PASSHE has been saying for the past several years: that students are seeking new courses and programs and that enrollments in some of the more traditional fields are dropping. In order to remain relevant, and to best serve students and the Commonwealth, the PASSHE universities need to continually update and realign their academic offerings.
"APSCUF does acknowledge that the report was commissioned to address faculty realignment on several PASSHE campuses.
"A little less than 1 percent of our faculty complement did receive letters notifying them of possible furlough, an action made necessary to help ensure the relevancy and long-term viability of our universities.
"Unequivocally, the university presidents, the individual councils of trustees, the Board of Governors and the chancellor are committed to sound financial management practices as they seek to ensure students receive high-quality educational experiences even as the State System and its leaders address a myriad of challenges resulting in part from level state funding, minimal tuition increases and rising personnel costs."