Dear Penn State faculty and staff,
In conversations with many of you across Penn State over the past year, a common request has been to provide detailed insight into the new budget allocation model and more information on the 2025-26 budget allocations. Earlier this year, we shared final budget allocations for FY26 to give units ample time to plan. We’ve also previously shared general information about the data used to determine each unit’s budget, and explanations of how the budget model works. But, understandably, questions about the specifics — how exactly did Penn State determine allocations for each unit — have remained among the broader University community.
In the interest of clarity and transparency, and in pursuit of our collective success, I am sharing two workbooks and in-depth FAQs that provide deeper insight into the budget for 2025-26 (links to more details are below). Video resources are now available that walk through the budget model.
Before you begin exploring, I want to share a few key thoughts and updates with you:
- I am pleased to share the good news that we are going to fund both tenure-line and non-tenure-line faculty promotions centrally starting in FY 25 and FY26. In the FY25 budget, we will be including more than $4.8 million for tenure and non-tenure line faculty promotions, and in the FY26 budget, we will be including more than $5.4 million.
- As I previously shared during our community conversation at Penn State Altoona on April 24, we discovered a spreadsheet error in the FY26 budget model that resulted in World Campus graduate student credit hours being double counted for 2021-22. We acted quickly to address the error and, as a result, the previously reported $54 million reduction in aggregate Commonwealth Campus budgets has been reduced to approximately $49 million. We’ve used contingency funds built into the model for situations like this to increase the allocation for the Commonwealth Campuses and for the College of Arts and Architecture, the College of Health and Human Development, and the Eberly College of Science, which also were underfunded due to the error. Those colleges that were overfunded are being held harmless, meaning their FY26 allocations will remain unchanged. You can read more about the error and the steps we have taken to correct it in our budget FAQs.
- Student success, and our teaching, research and service mission to the commonwealth, remain at the very core of all decision making. Everything we do, every conversation we have, is in service of these objectives.
- We are not making budget decisions based solely on formulas and figures. Our world-class faculty and staff are our most important asset, and we are focused on supporting them because they are the ones who prepare our students as leaders of tomorrow and carry out our mission, day in and day out.
- The budgeting approach starting with fiscal year 2023-24, and that is reflected in our 2025-26 budget, incorporates input from research on budget models at major research universities, faculty, staff, and administrators who served on the Budget Working Group, the Academic Leadership Council, and feedback from many across Penn State. And yet, it is imperfect. There is no perfect budgeting approach for Penn State, a reflection of the inherent complexities that come with being an incredibly impactful, multi-faceted institution with interdisciplinary research strengths and more than 20 locations across Pennsylvania.
- The model builds in flexibility so we can continue to invest in the things that make Penn State one of the best public universities anywhere in the world. Not every metric makes sense for every unit, and no model can fully capture the value proposition for each unit. That’s why we allocate subvention funds and strategic investments to units to fund priorities that the model can’t capture. A total of $101 million is being set aside in FY26 for strategic allocations, with $51 million going to the provost for subvention (operating subsidies) for academic units and $50 million to University senior leaders for strategic needs, including additional priorities, enrollment management, DEIB initiatives, capital projects and new program investments.
- Our budgeting approach is constantly being refined and adjusted, and key metrics may be adjusted between budget cycles to better reflect our needs and priorities. This is a process that will never end. It is important to note this, especially for leaders and budget executives who may be thinking about budgets for future years.
I encourage you to thoroughly read the supporting materials, including answers to frequently asked questions at the link below. Those who wish to explore the spreadsheets also are encouraged to review the cover note and user guide contained within the spreadsheets themselves, which provide additional context and instructions for how to use the spreadsheets. It is our hope that these supplemental materials will help those who are interested to successfully navigate the spreadsheet.
You may still have questions and suggestions. After you have reviewed the supporting materials and budget workbook, you are welcome to submit questions or offer suggestions. We will read your feedback and respond to your questions — either in the form of future FAQs at the link above or directly. Community members can submit questions and feedback about the budget model here.
I want to thank the many members of our community who have already been actively engaged in the budget conversation — such broad interest reflects how deeply people care about Penn State and our success. In particular, I would like to thank Professor of Higher Education John Cheslock, whose expertise in higher education finance helped to create our model, and the many other members of the budget working group who poured countless hours into modernizing and transforming the University’s budgeting process. Change is never easy, but I am confident that the hybrid model we’ve created, which pairs data and metrics with additional funding for flexibility, captures what is important and special about Penn State and best meets our needs, both now and in the future.
Sincerely,
Sara Thorndike
Senior Vice President for Finance and Business/Treasurer and Chief Financial Officer