UPUA Votes Pave Path for Future Tuition Increases

UPUA voted down Al Lord's resolution to complete the Freeh investigation and supported proposal A+ on board reform.  Those decisions ultimately will result in future tuition increases.

By
Ray Blehar

This morning upon learning that the University Park Undergraduate Association (UPUA) had voted down Al Lord's resolution to complete the Freeh investigation (under the false pretense that the resolution called for a   re-investigation) and supporting BOT reform proposal A+, I made the following comment on a report by OnwardState.

Their vote to support A+ -- which is nothing more than the OGP ensuring that they stay in control of the BOT - shows that the UPUA didn't look beyond the carrot it was offered when it voted on the resolution. In other words, they didn't look at the "stick."

The "stick" I was talking about was the future tuition increases students will face as a result of a stacked BOT membership that will do nothing to change the status quo.  In short, future tuition increases were the cost the UPUA was willing to "pay" for a seat at the table.

Neither the OnwardState or The Collegian reports made any mention of any debates about how these two resolutions will impact tuition.    As it turns out, the resulting tuition increases will fall under the "law of unintended consequences" and perhaps can be used as a learning experience by the UPUA.

The Hows And Whys of the 2013 Tuition Increase

Between 2012 and 2013, tuition and fee payments by students rose by approximately $40 million dollars, from $1.508 billion in 2012 to $1.549 billion in 2013.  After the vote by the BOT to increase tuition, then-President Rodney Erickson stated (my emphasis added):

Erickson: "unavoidable cost increases" ??
mandated higher tuition fees

“Before considering an increase to tuition and fees, we identified expense reductions of $35.9 million and delayed planned budget increases for the capital improvement plan and deferred maintenance. The unavoidable cost increases that could not be funded by internal budget reductions and reallocations are what constitute this increase” 

At this point, I hope that most have already figured out those "unavoidable costs" that couldn't be funded happen to be costs "assumed" by PSU for the fallout of the Sandusky scandal.  These costs were not "unavoidable" as Erickson stated.

Expenses
Obviously, the best example of an avoidable cost in 2013 was the $59.7 million that PSU volunteered to pay the Sandusky victims despite the fact that civil liability for the abuse had never been established.   Also, the $12 million in fines that PSU agreed to pay that year also was an avoidable cost.  As were many of the legal fees had the Administration and Board decided to defend its employees, rather than throw them under the bus.

Revenues
On the other side of the coin, tuition had to be increased due to  losses in revenues as a result of the BOT's decisions.  Ad Age estimated revenue losses over $1 million in advertising.  An athletic department that once funded all of PSU's sports is now in the red due to severe revenue losses since 2012.

And despite what the Old Guard Plus (OGP) tells the public about donations and giving, that took a major hit too.


In short, tuition was increased because funds from the institutional support budget were used  to pay the "unavoidable costs" of the scandal -- instead of being used to make up the shortfall between the projected revenues and  expenses for instruction, academic support, and student services in 2013.  PSU went from a positive total cash flow for the year ending June 30, 2012 to a negative total cash flow for the year ending June 30, 2013.

Future Tuition Increases

In late mid August, the PSU BOT voted to accept the the conditions of a proposed settlement in the Corman v. NCAA lawsuit which would result in the University's payment of $60 million in fines over five years (which commenced in 2012).  In addition, the PSU BOT decision not to reject the Consent Decree resulted in the continued punishment by the Big Ten Conference, which will keep any bowl revenues earned by PSU.

Additionally, at least three victim lawsuits are pending that could result in even greater payouts.  The notes to the PSU financial statements also reveal that the lawsuits "could have a material adverse effect on our current and future financial position, results of operations and cash flows."   In each of the pending cases, attorneys are utilizing the language of the Freeh Report to make their cases against PSU.  In summary, the continued expenses of those items and other litigation related to the Sandusky scandal will eat up future funds that could have been used to defray tuition costs.

Conclusion

The best way for Penn State to regain its financial health is for the Board to publicly reject the Freeh Report on the grounds that it is 1) erroneous, 2) incomplete, and 3) an embarrassment to higher education.  Any student who would have turned in a paper as sloppy and structurally deficient as the Freeh Report most assuredly would have received an "Incomplete" grade or an "F."

Conversely, the decision to accept proposal A+ will lock PSU into the future expenses noted earlier, as the voting power will remain with the OGP, who have no intention of admitting they made poor decisions in the aftermath of the scandal, that the Freeh investigation was a sham, and that Freeh's resulting report was worthless.