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Lunch with Mimi: David Gray, Penn State senior VP for finance and business/treasurer, on state support, demographics

on September 27, 2018 11:49 AM

David Gray took the helm as senior vice president for finance and business/treasurer at Penn State in February 2012. He is tasked to oversee all financial decisions of the university and its operations, including the strategic planning process of the offices of Auxiliary and Business Services, Commonwealth Operations, Corporate Controller, Diversity and Inclusion, Enterprise Project Management, Ethics and Compliance, Human Resources, Information Technology, Internal Audit, Investment Management, Physical Plant, and University Police and Public Safety.

Born and raised in Williamsport, he graduated from Penn State with a bachelor’s degree in political science in 1977 and a master’s degree in public administration in 1979. Prior to returning to his alma mater, he served three years as the senior vice president for administration, finance, and technology, as well as treasurer, at the University of Massachusetts.

Town&Gown founder Mimi Barash Coppersmith sat down with Gray at Gigi’s to discuss the financial challenges the university faces to gain continued state support for public higher education, the changing demographics with the increase enrollment of students in World Campus, and the national conversation for a transformation of Greek life.

Mimi: Well, I can recall when we got together shortly after you came here in 2012. You're an important part of the history of Penn State in this period.

David: When I arrived here in February 2012, it was a very challenging time for the university. We had gone through something tragic and unexpected that just took everybody in the community and the larger Penn State family utterly by surprise. It was a blow to the solar plexus of our Penn State family. And here I came in through a national search and I felt secure in my qualifications to take on this job under ordinary circumstances. But these were not ordinary circumstances, they were extraordinary. And usually at a big place like Penn State, you're getting adjusted to a very new enterprise, environment, and different institutional culture. So, in the midst of climbing that steep learning curve after I arrived at Penn State, we were also dealing with a swirl of events around the Sandusky crisis. Within months after my arrival, the Freeh report was issued, Sandusky was convicted, the NCAA levied its draconian sanctions against the university, and we were just dealing with a very profound crisis situation. It called upon all of our energy and attention really for two-and-a-half years after I got here. We were focused completely on the stability, bringing the family back together, and re-stabilizing this institution. But if there's something that has amazed me in the six-and-a-half years I've been here, it's the resiliency of this institution, the Penn State family, if you will, that they have had an incredible capacity to take a very difficult situation and move forward from it to build an even stronger institution.

Mimi: We can't forget, with the direction of the great leadership, which you're a part of.

David: The leadership of Rod Erickson during those early years, when he served as president in the immediate wake of the crisis – getting Penn State stabilized and responding in a measured way to the challenges that were in front of us – was vitally important, and Rod did that. And then we had Eric Barron join just a couple of years after that and he just has done a terrific job of moving the institution forward and really building a brand new leadership team in so many respects.

Mimi: Then you get hit with another atomic bomb, the horrible incident at Beta Theta Pi.

David: I think the challenge of Greek life, not just at Penn State University but across the nation, is a significant issue for all of higher education. The temptation to engage in socially dangerous behaviors with alcohol and other illegal substances is something that bedevils all of society. We just seemingly find it very difficult to come to grips with this challenge of young adults, as they're transforming from their high school situation while they're still living at home to an independent situation at college. It's just a very difficult time.

Mimi: It makes me proud as a Penn Stater to see Eric Barron taking a national role of leadership in trying to fix this problem.

David: He has, and I think he deserves a great deal of credit for assuming that mantle of leadership and really becoming a voice nationally for the kinds of transformation that must take place if Greek life is to survive in our institutions of higher education. At least to survive in a way where they are institutionally sanctioned and recognized organizations as opposed to living in that gray zone where they don't really operate and they're not accountable to anybody as we see at some institutions.

The best thing that could happen is for there to be a genuine remaking of the Greek life system where there's better self-awareness at all levels. It calls upon institutions to be more vigilant. It calls for alumni of these Greek life organizations to take a greater stake in how their alma mater fraternities are behaving, and to take more ownership and interest in their reform than we've seen to date. And I say this as an alumnus of a Greek organization during my time at Penn State. They are very, very different than they were during my time here as an undergraduate student, and different not so much in a good way. So, it is time for them to kind of confront the situation in an honest way and recognize that some changes need to be made if they're to continue to exist.

Mimi: Well, you are the boss of gazillion things at the university, the ultimate decision maker. What would you see as your biggest challenge out of that plethora of challenges, and how are you handling it?

David: What I'm about to describe poses financial risks to the future health and well-being of the institution, but it transcends just the financial aspects of how the university operates. And that really gets to the heart of our demographic situation here in the northeastern United States. Pennsylvania is facing some dramatic changes over the course of the next 10 or 12 years; the number of 18-year-olds graduating from high school is going to literally fall off a cliff. And it isn't just Pennsylvania; it's the surrounding states as well.

We have a systematic oversupply of institutions of higher education with too little demand coming from the traditional college-age population. That's going to be a challenge for Penn State, as well as for some of the small, private, liberal arts colleges, regional public universities in Pennsylvania and beyond. If they're operating in the red now, the bad news is, it's only going to get more challenging. I think this is something that even institutions like Penn State that have a very strong national brand are going to struggle to move through.

Thank goodness Penn State started the World Campus back in the late 1990s and got a head start on many competitors. And here we sit these many years later with around 15,000 online students that are enrolled in our World Campus degree and certificate programs out of the total of 100,000 students institution-wide. It's now become a major force.

Mimi: Where does it stand in popularity?

David: In terms of peers, it is ranked very highly. It has been recognized by US News and World Report and others as having some of the very best online programs in the nation.

Mimi: Within the Penn State family, where do they stand?

David: The residential enrollment at University Park, both graduate and undergraduate, is close to 50,000; the commonwealth campuses would be a little over 30,000, and then you have the World Campus making up the rest. So, it is the fastest grower of all three of those components.

What we're already starting to see is the interest of students in mixing and matching online and face-to-face experiences. In the future, I think you're going to see more and more of that. It doesn't have to be all of one mode or all of the other; it can actually be a mixture. We extol the fact that Penn State students can take their courses anywhere. They can take them at the commonwealth campuses, at multiple commonwealth campuses, transfer and come to University Park, or take courses online. They can blend all of those experiences in a seamless way. It's all a Penn State education.

Mimi: So, demographics are the first challenge; what's right behind it?

David: Right behind it is a longstanding challenge that the university has dealt with over decades. And that is the erosion of state support for public higher education in general in Pennsylvania and for Penn State in particular. If we just look back to the year 2000, if you adjust for the CPI inflation, we're about $150 million behind this year relative to where we would be had our appropriation simply increased at the rate of inflation.

People are quite critical of our relatively high tuition rates for in-state students when measured against our peers. And yes, they are high, but the math on this is really quite simple. Our tuition rates are high because our state support compared to our peers in the Big 10 and elsewhere, is quite low. It's in the bottom quartile nationally and it has been for decades.

So, what we're really witnessing is the gradual privatization of public higher education, not just in Pennsylvania but elsewhere. It's happening more quickly here. And that is going to be an ongoing, significant challenge for Penn State and the other public institutions in Pennsylvania, who are going to have to learn to progressively get by with fewer and fewer state resources.

Mimi: How do you get that out of the political system?

David: It's hard to extract it from the political system because at the end of the day it's taxpayer resources that are being channeled to us by the legislature with the agreement and direction of the governor.

Our situation is in no way an expression of a lack of effort on the part of the president or the leadership of the board. We're appreciative for the fact that we got a 3 percent increase this year. But that 3 percent increase translates to $6.9 million. A percent of tuition increase yields $12 million. So you can see the dramatic difference. State support has eroded to the extent that it doesn't move the needle a whole lot when we get modest increases.

Mimi: There's nothing I appreciate more than I've invested in in my lifetime than my Penn State degree. How can we do a better job of mobilizing these incredible voices who love the institution to help the legislature see this is not a political issue, this is a practical issue?

David: I think we're getting better and better at that. Each spring in Harrisburg, we hold what we call capital day. Our Penn State students come out in force and they represent the university in a way that would make all Penn State alums extremely proud. They're very professional in how they represent the virtues and values of a Penn State education. They are arm-in-arm with Penn State administrators, trustees, and alums. But we have to continue to build upon that base of support and really mobilize progressively more and more of our alumni.

Mimi: We can get 107,000 people in that stadium. If we charter buses in all the major areas of concentrated alumni, I bet you could make the news on TV not just in Pennsylvania but nationwide. Get our voices together and say we have to educate the sons and daughters of the working class. It is true that the people who most need a Penn State education can’t afford it.

David: It's a significant concern and one that we're paying increasing attention to. If you're from an affluent family, obviously you don't have any concerns. And, ironically, if you're indexed below the poverty threshold, you will get maximum support in terms of federal Pell Grant assistance, PHEAA state grants, and you'll be eligible for need-based institutional aid. If you come from a distressed economic background, you'll get a fair amount of support as well. But what about the sons and daughters of the working class who make $40,000-$60,000 a year? It's an increasing struggle for them to afford.

Mimi: One major subject in the area, both town and gown, is the concept of consolidation of the various governments surrounding Centre County. How can the university, in a collaborative way, help us at least begin planning for the way that might possibly happen?

David: You’re drawing upon my old education as a political science student. I really think it starts with conversation and a willingness of leaders from these different communities, municipalities, as well as the university because we're a major corporate citizen in this region. It starts with an honest conversation about the common challenges in front of us and a willingness to listen to each other better than we have in the past. Without that as a foundation, we will go nowhere. But if we're willing to sit down and share our perspectives about those things that challenge us in common, I think we'll understand quickly that there are common solutions to those challenges, and that we will do much better if we join forces.

There are some examples of this already that I think are quite striking. If you look at what the university in association with the surrounding municipalities do in the area of police mutual aid, the University Police and Public Safety Department working with the borough, Ferguson Township, Patton Township, and the state police. They come together seamlessly around major events: football games, concerts, and so forth. And they work extremely well together. What probably the general public doesn't realize is that right now, the university, in association with those municipalities that I just named is developing a common police records management system that will be operated on a single platform by the Borough of State College on behalf of all of these other entities. It can be done. It just requires the goodwill of people and a willingness to sit down, talk, and realize that we have a whole heck of a lot more in common than we do things that divide or separate us.

Mimi: There's so much to be gained.

David: It's just a simple truism that we’re much stronger working together than we are on our separate islands.

Mimi: Give me a snapshot of how you view Penn State's role in the community.

David: Penn State as the largest employer in Centre County has an enormous role to play and indeed a responsibility to be a good citizen of the community that surrounds it. We have tremendous influence and with that comes a responsibility to behave in ways that are thoughtful and supportive of the long-term well-being of this community. The university has over the years sold land at bargain prices to create community parks. We've both given and sold at way below market prices over the years, all in the interest of community well-being.

Our leaders at the university serve on important boards like the Centre County United Way that helps so much with folks who are in need of supportive social services. We have representatives serving on the board of the Chamber of Business and Industry of Centre County, and a myriad of other local organizations because the people that make up Penn State are also part of this community and they feel very keenly that it's part of their individual and collective responsibility to be good citizens of this region and of this community.

Mimi: Thank you so much.

David: You're welcome. This was fun.



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