Penn State’s general support funding flat in PA’s budget but a new funding model is coming

For the fifth year in a row the Pennsylvania state budget does not include an increase to Penn State’s general support appropriation, but university leadership anticipates that will change next year as the state will move toward a performance-based funding model.

This year’s budget, passed by the general assembly and signed by Governor Josh Shapiro Thursday evening, kept Penn State’s general support appropriation at $242.1 million for the 2024-25 fiscal year that began July 1, according to a release from Penn State.

The budget does include a funding increase of $4 million (13%) for Pennsylvania College of Technology, level funding of $57.7 million for Penn State Agricultural Research and Extension, and restores line-item funding of $2.35 million for Invent Penn State, the release states.

The funding received from the state goes toward the university’s education budget and, according to the release, allows Penn State to offer an in-state tuition discount.

But the appropriation is far less than the $483.4 million Penn State requested as part of Pennsylvania’s annual budget process in September.

In the release, Penn State President Neeli Bendapudi said the commonwealth funding is “critical to our public mission to serve Pennsylvania students at our campuses across Pennsylvania,” and noted she’s looking forward to seeing the performance-based funding model implemented.

“As we enter a fifth consecutive year without a funding increase, I look forward to working with the General Assembly and Gov. Shapiro to implement performance-based funding for 2025-26 as a means to increase the state’s investment in public higher education while also meeting shared goals for Pennsylvania’s long-term success,” Bendapudi said.

While the state appropriations at one time made up the majority of the university’s education budget at 62%, it has shrunk to only 10% of the education budget, according to the release. To fill the gap, tuition and fees have increased over time.

The last time Penn State’s general support appropriation was increased was for the 2019-20 fiscal year when it received a 2% increase.

State appropriations breakdown

• General Support: $242.1 million. This helps fund the discounted in-state tuition rate for Penn State students. It is also invested in academic programs.

• Agricultural Research and Extension: $57.7 million. This supports Penn State Extension and research conducted by the College of Agriculture Sciences.

• Pennsylvania College of Technology: $34 million. Penn College is a Penn State affiliate that offers technology education.

• Penn State Health and the College of Medicine: $15.1 million, the same level as last fiscal year. These dollars are used for medical assistance to give access to high-quality health care for residents with limited finances.

• Invent Penn State: $2.35 million as a co-investment with Penn State. Funding will be used for Invent Penn State’s LaunchBox and Innovation Network, and to further expand access to the Pennsylvania Technical Assistance Program.

What is performance-based funding?

Bendapudi and Penn State have long been advocating for a performance-based funding model; it’s also supported by other state-related schools University of Pittsburgh and Temple University.

“Performance-based funding is designed to reward institutions for achieving outcomes-based metrics in support of student success and workforce development, with specific metrics to be determined by a new Performance-based Funding Council before the start of the next fiscal year,” the release states.

Bendapudi said the “much-needed update” to funding will allow the state to work with universities on shared goals for a number of areas, including workforce and economic development, college access and affordability, and successful student outcomes.

“I am eager to partner with the state and fellow university leaders to develop a performance-based funding model that rewards institutions for achieving outcomes-based metrics that align with the needs and priorities of the state, our students and our universities,” she said.

The funding model, according to the release, is intended to increase degree attainment, encourage higher education affordability and meet workforce needs.

The general assembly passed a bill that will establish the Performance-based Funding Council. It will develop recommendations for a process that utilizes performance-based metrics to allocate money to Penn State, University of Pittsburgh and Temple University.

The council will include five voting members from the state government, including the secretary of education, a member of the Senate appointed by the president pro tempore, a member of the Senate appointed by the minority leader, a member of the House appointed by the speaker, and a member of the House appointed by the minority leader, and three non-voting members from the state-related universities, including Penn State’s president or a designee. The council will consult with state agencies and experts to develop recommendations for the funding model, as well as hold public hearings at each participating university, according to the release.

Mike Stefan, Penn State’s vice president for government and community relations, called it a “transformative opportunity.”

“This is a transformative opportunity for the state and universities to work together to better support Pennsylvania students and employers,” Stefan said. “Penn State is already a valued part of so many Pennsylvania communities, and this much-needed update to the way we fund higher education only works to expand our impact and historic land-grant mission of teaching, research and service to the commonwealth.”

The council will have an April 30, 2025 deadline to submit its recommendations to the governor, a newly created State Board of Higher Education, the Pennsylvania Department of Education and the General Assembly, and will include draft legislation to implement the process to distribute funding.

The council will reconvene every five years to reevaluate the metrics utilized for the distribution of funds, the release states.

“I want to thank the General Assembly, especially those who have continued to advocate for this new future in the way we fund higher education in the state,” Stefan said. “We’re eager to continue working with the state and our peer universities to ensure we are delivering for our students and all Pennsylvanians.”