Dec. 12, 2014
Higher Education
A key goal of the commonwealth is to help students, young and old, access higher education and gain
skills for the workplace. Pennsylvania taxpayers invest sizable resources each year through
institutional support and financial aid grants to help make postsecondary education more affordable.
Pennsylvania has a diverse higher education sector, consisting of many different kinds of public and
private colleges and universities. Because an educated workforce is so crucial to the economic vitality
of the commonwealth, the General Assembly appropriates funding for institutions and students to
help make a quality postsecondary education more affordable.
State Budget Support
Pennsylvania State System of Higher Education
The Pennsylvania State System of Higher Education (PASSHE) consists of 14 state-owned universities across the commonwealth. Many of the universities were established to train teachers, and have since evolved into state colleges and formally established as the State System in 1982.
Funding for PASSHE is at the institutional level, with appropriations made to the system each year as part of the General Appropriations Act. The appropriation is distributed to the member universities through a formula set by the system’s Board of Governors that includes factors such as: enrollment, instructional costs, support services, and building and grounds costs at the schools.
The universities offer a wide range of associate, bachelor’s and master’s degrees, as well as limited doctoral programs.
The 14 PASSHE member institutions are:
Bloomsburg University
California University of Pennsylvania
Cheyney University
Clarion University
East Stroudsburg University
Indiana University of Pennsylvania
Kutztown University
Lock Haven University
Mansfield University
Millersville University
Shippensburg University
Slippery Rock University
West Chester University
Community Colleges
The 14 community colleges offer two-year programs and a variety of non-degree programs.
Community colleges were envisioned as a partnership, in which the state and a local sponsor contribute funding, so that costs were spread equally among students, the state and the sponsor. However, an increasing share of the cost of education is borne by the students as funding from the commonwealth and local government sponsors declines.
Community college funding in the budget is distributed through a grant program under the Pennsylvania Department of Education. While there once was a formula to distribute increases in funding each year, recent budget cuts have given way to pro rata distribution of funds, based on 2008/09
The 14 community colleges are:
Community College of Allegheny County
Community College of Beaver College
Bucks County Community College
Butler County Community College
Delaware County Community College
Harrisburg Area Community College
Lehigh Carbon Community College
Luzerne County Community College
Montgomery County Community College
Northampton Community College
Community College of Philadelphia
Pennsylvania Highlands Community College
Reading Area Community College
Westmoreland County Community College The commonwealth does not have full geographic coverage with its community colleges, and many communities in the northern and western parts of the state do not have access to a community college. In recent years, legislative proposals to start a new community college have stalled, often because of the requirement to have local sponsor support. In 2014, a pilot proposal passed the General Assembly to establish a “rural regional college” similar to a community college, but initially without local sponsor support. As of the date of this publication, concerns about the state budget situation led the governor to freeze state funding for the proposed college, so the final disposition of the plan remains unresolved.
Thaddeus Stevens College of Technology
The Thaddeus Stevens College of Technology, located in Lancaster, is a special purpose college owned by the commonwealth. Originally founded to serve needy orphans, Thaddeus Stevens College now provides two-year technical education programs with special emphasis on serving economically disadvantaged students. Thaddeus Stevens College is funded as part of the General Appropriations Act each year.
State-Related Universities
Pennsylvania has four universities that, while not owned by the commonwealth, have a special status conferred by law. State-related universities receive
direct appropriations and, in-turn, offer in-state tuition rates for Pennsylvania students.
Three of the four universities – Penn State University, the University of Pittsburgh and Temple University – are major research universities. The fourth, Lincoln University, is a historically black university located in Chester County, and is the oldest degree-granting historically black institution of higher education in the United States.
Because the state-related universities are not under the direct control of the commonwealth, appropriations to these institutions are subject to special provisions under the state constitution. Appropriations to each institution must be made in separate bills and receive a two-thirds vote from each chamber to become law.
Institutional Assistance Grants
Private colleges and universities make up a comparatively small portion of institutional support distributed each year; however, Pennsylvania has a program in place to help more than 80 private institutions.
Non-profit, non-denominational colleges and universities that do not receive direct state aid through a non-preferred appropriation are eligible to receive an institutional assistance grant from PHEAA. Grants are distributed based on the number of students who receive individual PHEAA state grants at eligible schools. Once a per capita amount is determined, each school receives its apportionment based on the number of PHEAA grant recipients enrolled at the institution. Grants are made to the institution, not the student, although many schools use them to help augment student financial aid packages.
Community Education Councils
In response to the lack of full community colleges in certain parts of the state, non-profit organizations called community education councils (CECs) have emerged to help fill the gap. The CECs act as facilitators and brokers of employer-driven educational programs, working to help get needed educational programs to the area in partnership with other colleges and universities. CECs are funded by the General Appropriations Act each year.
Pennsylvania Higher Education Assistance Agency (PHEAA)
Since 1963, PHEAA has assisted students in college with grants, loans and work-study opportunities. PHEAA is one of the largest student financial aid organizations in the country. Through its subsidiaries, PHEAA provides student loan servicing and financial aid services to students in many states. The business earnings from these activities pay for PHEAA’s administrative costs and help subsidize the state-funded programs that the agency oversees. The largest of PHEAA’s programs is the State Grant Program, which provides money to students who demonstrate financial need and attend a PHEAA- approved postsecondary institution. In order to qualify for aid, students must be residents of Pennsylvania and enrolled at least half-time. Award amounts vary each year with the amount of funds appropriated, the number of eligible students and the type of institution that a student attends. In addition to the state appropriation, PHEAA’s business earnings contribute additional funds to augment state appropriations to its programs. These additional funds mostly go to expand the amount of aid available in the state grant pool, but the PHEAA board also has set aside funds for a distance education pilot program. The pilot program was created in a effort to see how the expanding state grants outside the traditional brick-and-mortar setting might work and impact the existing program. Business earnings also support the Pennsylvania Targeted Industry Program (PA-TIP), which provides grants to students enrolled in approved certificate programs in high-priority industries that are less than two years in length.
In 2014, the General Assembly made an appropriation for a new merit-based grant program for outstanding students from middle- and lower-income families. While this new program is small compared to the existing program, the merit-based approach is a departure from the traditional need-based grant program.
Other University Activities and
Special Circumstances
Universities are some of the largest employers in Pennsylvania. Because of the breadth of activities with which they are involved, they often intersect
with other parts of the state budget. For universities with academic medical centers and other teaching hospitals, funding is provided through the Department of Public Welfare.
As Pennsylvania’s land-grant institution, Penn State University has an important role in supporting agriculture in the state. It receives funding for agricultural research and funding for the county extension offices. These programs help bring cutting edge research into the field and help farmers be more productive and efficient.
From time to time, special circumstances arise that policymakers decide to address with small appropriations in the state budget. A current example comes from Somerset County, where the local community college is based across the state border in Maryland. The state provides funding to subsidize tuition for Pennsylvania students attending branch campuses in Bedford and Somerset Counties. Additionally, in the past, the General Assembly has appropriated money to help pay for the installation of fire sprinklers in dorms, in response to the Seton Hall fire in 2000.
Capital Funding
Capital funding for higher education in Pennsylvania varies by sector. Generally, for the public four-year institutions, Pennsylvania uses general obligation debt to provide capital allocations to the institutions or system, depending on the type of university, that then make project decisions. Community colleges receive debt service support subsidies for approved projects from the state’s operating budget.
The PASSHE universities receive funding from the primary capital budget of the commonwealth. The governor decides annually how much to allocate to the system, and then the system’s Board of Governors distributes funds to the universities based on a system-wide capital plan. For the state contribution, the commonwealth issues general obligation debt to pay for the allocation and covers the debt service costs from the General Fund. PASSHE schools also receive dedicated funding for deferred maintenance through a portion of the realty transfer tax. This funding also flows from the commonwealth to the system, and then is allocated through a formula by the Board of Governors to the universities.
Like PASSHE, state-related universities also receive capital funding from the commonwealth’s capital budget, with the governor deciding on an allocation amount. General obligation debt is used to provide the funds and debt service is paid by the commonwealth. Since the universities are separate entities, the governor decides the allocation to each university. The universities are generally afforded discretion in choosing which projects to fund.
The operating budget contains a separate appropriation for community college capital funding. The commonwealth pays one-half of approved capital debt service costs. Projects are scored by the Department of Education to determine priority of projects among the 14 community colleges.
State capital support is often insufficient to meet the need; therefore, most of the institutions issue debt themselves. Conduit financing is available for public and private universities through one of two authorities (depending on the type of institution), although not all institutions use this option. Notably, when PASSHE schools issue debt, they pool it system -wide and issue it in the name of the system through the Pennsylvania Higher Educational Facilities Authority.
Funding Trends
Appropriated support for higher education in the most recently enacted budget, 2014/15, totaled just over $1.6 billion. See Chart 1 below.
This amount includes all operating appropriations for community colleges, PASSHE, state-related universities, Thaddeus Stevens College, community education councils, regional community college services, all appropriated PHEAA programs and community college capital, but excludes PHEAA business earnings, the University of Pennsylvania veterinary school and agriculture-related transfers to Penn State.
Looking at trends in funding over the medium term can be difficult, because many different things have been grouped under “higher education” in the past. Through the years, the funding mechanisms have changed as well, with appropriations being moved to different departments and into special funds. To try to compare apples to apples, Chart 2 on Page 5 excludes capital funding, agricultural support, business earnings and medical-related appropriations. It includes federal ARRA appropriations from 2008/09 through 2010/11 that supplemented operational funding.
Because higher education is not a mandated expense of state government, like Medicaid, corrections, debt service and pensions, its appropriations are more susceptible to cuts during the state budget process during downturns in the state economy.
Operational support for higher education increased through most of the last decade, reaching a peak in 2008/09 of $1.92 billion, approximately 13.4 percent
House Appropriations Committee (D)
Miriam A. Fox, Executive Director Eric Dice, Budget Analyst Stephanie Weyant, Communications Director
above the 2002/03 baseline. When the recession drastically reduced state tax collections in 2008 and 2009, support was reduced, but federal ARRA funds helped maintain funding in 2008/09 through 2010/11. In 2011/12, the loss of ARRA funds plus additional cuts caused total funding levels to be reduced 15.3 percent, driving operating support
below the 2002/03 level in the aggregate to $1.55 billion. Since then, funding has risen only slightly. Recent increases have been directed to certain appropriations, but enacted budgets have not contained broad increases for all sectors and institutions of higher education.
