FWIW: This Bill passed the State Senate Committee yesterday:
- Thread starter PSUFTG
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Quick Google search says PSU gets around $300mm in funding from the state. Is that correct? That’s of an operating budget of close to $8bn. What’s to stop PSU from becoming entirely private and going to a ‘flat’ tuition for all students to make up lost state funding? Could anything prevent them from doing that? Is more oversight worth it to PSU?
Isn’t there some tax/financial advantage to being a state affiliated institution?
I believe total state appropriation last year was around $350 Mill (someone can look that up), not sure what was forthcoming via CapX (GSA) budget / PHEAA, and other odds and ends - but those also add up, of course.
Penn State University's educational budget is about $2 Bill... so that appropriation would be somewhere in the order of 15-20% of the total.
The rest of the oft-cited $7-8 Bill budget is typically roughly $4 Bill the Medical Center Operations, about $1 Bill in total research funding, and several hundred millions from here-and-there (including Athletics and what not). Those financial statements are publicly available, of course (this is a link to the most recent public posting - but one should keep in mind it is from the COVID-impacted year.... and is a bit off from a "normal" year Audited Financial Statements (psu.edu) ).
The rest of your questions open up Pandora's Boxes of issues that are not really discussable here. IMO. (Aside from a blanket statement that I would be shocked if anyone at PSU would seriously consider "going private" - but who knows?)
PSU says the money mostly goes to keeping tuition low for Pennsylvanians and other state related efforts (ag research, health care, etc.).
Tax-Exempt Status of Universities and Colleges | Association of American Universities (AAU)
This, I assume, will address the issue you are getting at.
Thanks
These two paragraphs caught my attention:
Private universities, as well as some public universities and foundations that support public universities, qualify as tax-exempt charitable organizations because they meet the requirements of IRC Section 501(c)(3), which includes “corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes…”
Public universities can and often do obtain tax-exempt 501(c)(3) status because they qualify as quasi-governmental entities that: are separately-organized entities; pass the organizational test by being an educational organization; do not possess regulatory power; and are not an integral part of the state government.
So, going back to @Midnighter's comment, I guess there is no significant (?) difference in terms of private vs. public.
So, the next question I have comes down to the charter of the University upon it's foundation. To go from public to private would require an amendment to the charter (?) and have to be approvd by a at least the Board of Trustees, although I would imagine State Legislature would have to approve. Although I doubt that would happen.
Really though....$338MM against an $8BN dollar annual operating expenditure really is a drop in the bucket. Even against the $2B educational amount (17%) can be made up through some strategic actions. PSU could save that much money by closing some underperforming branch campuses - or make some money by.....perhaps leasing out the Nittany Lion Inn property.
But, on a serious note - if they do take up some strategic actions, then it's really only good for the year they do it - assuming the Legislature won't be funding in the future, it would cause significant issues with future budgets.
Ok - I am just thinking out loud now.
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If there were an easy $350 million per year in increased revenue/reduced expenses to be had - one would think, would they not, that the powers-that-be would have long ago made those moves? And, whether that be the case or not, that continuing to receive the $350 Million from the State would be a good thing - regardless.Thanks
These two paragraphs caught my attention:
Private universities, as well as some public universities and foundations that support public universities, qualify as tax-exempt charitable organizations because they meet the requirements of IRC Section 501(c)(3), which includes “corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes…”
Public universities can and often do obtain tax-exempt 501(c)(3) status because they qualify as quasi-governmental entities that: are separately-organized entities; pass the organizational test by being an educational organization; do not possess regulatory power; and are not an integral part of the state government.
So, going back to @Midnighter's comment, I guess there is no significant (?) difference in terms of private vs. public.
So, the next question I have comes down to the charter of the University upon it's foundation. To go from public to private would require an amendment to the charter (?) and have to be approvd by a at least the Board of Trustees, although I would imagine State Legislature would have to approve. Although I doubt that would happen.
Really though....$338MM against an $8BN dollar annual operating expenditure really is a drop in the bucket. Even against the $2B educational amount (17%) can be made up through some strategic actions. PSU could save that much money by closing some underperforming branch campuses - or make some money by.....perhaps leasing out the Nittany Lion Inn property.
But, on a serious note - if they do take up some strategic actions, then it's really only good for the year they do it - assuming the Legislature won't be funding in the future, it would cause significant issues with future budgets.
Ok - I am just thinking out loud now.
What benefit would the University (or the University's stakeholders) realize from "going private" that would be worth burning $350 million per year? Rhetorical question, I think.
I couldn't tell you the last University to go from "public" to truly "private" (I know of several occasions where there have been public universities which went through levels of restructuring to grant them more autonomy - but not full-blown "private" - though somewhere in the history of higher education it must have happened). The list of reasons that would work against such a move would be very, very lengthy - and lengthier for PSU than for most universities.
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About a decade ago, the University of Delaware admin looked a bit into going private. While the Univ. owned all the buildings, the state actually owned the land the campus was on. It would have been much too expensive for the univ. to buy the land from the state at a fair market rate so the idea died very quickly. Not sure how it is set up for PSU, but ownership of land/buildings would be an issue that would need to be worked out.
History says the first 200 acres were donated by a farmer from Bellefonte, and he sold an additional 200 to the BOT not long after.
Barry is correct when he points out that including portions of the budget attributable to the medical center and research isn't relevant when discussing the state appropriation. Resources from those activities can't be shifted to cover shortfalls on the instructional side.
Believe the Governor has proposed around $350mm for the state appropriation this year. It's not a small amount. Pays for a lot of hostages.
As an agency of the Commonwealth, PSU borrows largely in the tax-free market. As a private university, that advantage is pretty much erased. Hard to get a good fix on what that translates to, but borrowing costs could conceivably double. That's on $3bn of long term debt and Brandon Short is just getting started.
They own close to 30,000 acres in Centre County. Main Campus is about 400 acres but you need to consider the farmland being used in the College of Agriculture. Heck, think about Stone Valley, the deer pens, airport, golf courses, etc, etc.
