Penn State Announces Pay Freeze, to Start in July

UPDATED @ 1:57 p.m. Friday: The new Penn State pay freeze announced Friday will save about $31 million in the university’s general funds, university spokeswoman Lisa Powers reported Friday afternoon.

Taken together, the new pay freeze and the one imposed in the 2009-2010 budget year will have saved the university roughly $61 million by July 2012, Powers noted.

She confirmed the new freeze will last one year. Penn State will revisit the issue when it considers the university budget for 2012-2013, Powers added.

She also confirmed that employees covered under already-negotiated collective-bargaining agreements, as well as those with other contractually mandated pay increases, will not be affected by the freeze.

Earlier coverage is posted below.

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Earlier report, posted @ 12:25 p.m. Friday:

Starting July 1, Penn State will freeze its ‘normal program’ of faculty and staff salary increases, university President Graham Spanier announced in a letter to employees Friday.

‘This is the second time in three years that I’ve had to ask you to assist the university in meeting serious financial challenges,’ he wrote in the letter. ‘In 2009, you stepped up with a firm commitment to Penn State and were gracious in your reaction to this news. While I wish that circumstances were different, I must ensure that we remain a financially sound institution that stewards its resources in a responsible manner.’

Most Penn State employees saw a pay freeze in the 2009-2010 year. Modest pay increases — typically about a couple percentage points — were reinstated for 2010-2011.

For the 2011-2012 budget year, which will begin July 1, the university is expecting to see a substantial decline in its state support. It remains unclear exactly how much the state appropriation will decline, but Gov. Tom Corbett has proposed a cut of about 52 percent.

Spanier is due to testify in Harrisburg on Monday before the state House Appropriations Committee. Corbett and state lawmakers are expected to finalize the 2011-2012 state budget within the next few months.

The full text of Spanier’s Friday letter to employees is posted below:

A Letter to the Penn State Faculty and Staff from President Graham Spanier

The events of the last two weeks, spurred by Governor Corbett’s proposed reduction of Penn State’s appropriation by $182 million, or 52.4 percent, has created a great deal of uncertainty and anxiety. In my press conference on March 9, I indicated that the impact of any funding reduction to the University would not be inordinately borne by any particular stakeholder. Most importantly, I want to re-emphasize that the funding gap that a reduced appropriation would create will not be filled solely with an increase in tuition.

We continue to work with Legislators to determine if a moderation of this cut can be achieved. However, the final outcome is most likely still several weeks away and we must begin to make some budgetary decisions for the fiscal year that will begin on July 1.

I regret to report that our first specific action is to cancel our plans for our normal program of salary increases for faculty and staff on July 1, 2011. This is the second time in three years that I’ve had to ask you to assist the University in meeting serious financial challenges. In 2009, you stepped up with a firm commitment to Penn State and were gracious in your reaction to this news. While I wish that circumstances were different, I must ensure that we remain a financially sound institution that stewards its resources in a responsible manner. Your sacrifices over the past two years helped us to weather the worst downturn in US economic history since the Great Depression. I’m convinced that working together, we will do what is necessary to once again help Penn State deal effectively with another significant fiscal challenge. We will, of course, honor existing commitments made prior to this date and for promotions.

This is one of several key decisions that we will need to make in preparing our operating budget for next fiscal year. Provost Erickson, Senior Vice President Horvath and I will continue to consult with the Deans, Campus Chancellors, Vice Presidents/Provosts and the Faculty Senate leadership to review alternatives and evaluate the implications of potential decisions. The work of the Core Council, led by Provost Erickson, will take on even greater importance in light of these potential State funding cuts. In consultation with the Trustees, we have halted the start of several important capital projects until there is greater certainty in our overall financial picture for the coming year. I will keep you posted as our thought process evolves and as other decisions are finalized.

As I stated on March 9, Penn State has been and continues to be ready to do its part to help the Commonwealth repair its substantial budget deficit. Let me thank you in advance for your help in allowing us to respond to this latest financial challenge, and for your support of Penn State in all that you do.

Sincerely,
Graham B. Spanier

Earlier coverage

• Conklin to Host Public Forum on Corbett Budget Proposal (March 25, 2011)

• ‘Extreme Care and Caution’ Urged at Penn State Board Meeting (March 18, 2011)

• Penn State, Peer Schools Take Their Budget Case to Harrisburg (March 16, 2011)

• Moody’s: Corbett Budget ‘Credit Negative’ for Universities; Merger Idea Floated (March 16, 2011)

• Spanier to Faculty: Penn State Funding Issue ‘Not as Simple as the Bloggers Think’ (March 15, 2011)

• In Marcellus Shale Boom, Budget Plan Threatens Penn State’s Public Service (March 14, 2011)

• Corbett: Penn State Misstepped in Responding to Cuts (March 11, 2011)

• VIDEO: Spanier Delivers Penn State Response to Corbett Proposal (March 10, 2011)

• Spanier: ‘Abraham Lincoln Is Weeping’ as Corbett Pushes Penn State Cuts (March 9, 2011)
  

• Corman: Lawmakers Need to Hear Corbett’s Vision for Higher Education (March 9, 2011)

• Spanier to Answer ‘Proposed Catastrophic Cuts’ in Penn State Funding (March 8, 2011)

• Corbett Budget Proposes Deep Cut in Penn State Funding (March 8, 2011)

• Jay Paterno’s Case for a Private Penn State (March 10, 2011)