The Pennsylvania State System of Higher Education (PASSHE) Board of Governors today approved a two-year budget outline designed to address major challenges resulting from a significant reduction in state funding and rising personnel and health care costs.

PASSHE will receive about $38.2 million in federal funding this year and likely again next year to temporarily offset a $54 million reduction in state funding that has occurred since the beginning of the 2008-09 fiscal year. Those funds will help replace the reduction in state funding resulting from the floundering economy, but will disappear in 2011.

“We are grateful to the governor and the General Assembly for ensuring the level of funding we received for 2009-10,” said Board Chair Kenneth M. Jarin. “The federal stimulus funding will help us this year and next. We hope that over the next two years the economy will recover sufficiently and the state’s revenues will rebound such that PASSHE’s funding can be returned at least to its previous level. In the meantime, we will continue to strive to find efficiencies and better ways of conducting our business in a midst of a very difficult environment for our universities and our students.”

Because the federal money is one-time in nature, PASSHE will try to spend as few of the dollars as possible on recurring programs. That will mean some difficult decisions will have to be made across the System, said PASSHE Chancellor Dr. John C. Cavanaugh.

“The funding received under the federal American Recovery and Reinvestment Act is appreciated, and will benefit the universities and our students this year and next,” Dr. Cavanaugh said. “We need to be very careful, though, how we spend those funds so we don’t become dependent on them. There is no doubt our universities will have to make some very difficult choices in virtually every area of their operations as we move forward in this economic climate.”

The Board approved a 2010-11 appropriation request totaling $483 million to help fund the 14 state-owned universities next year. That amount would represent an increase of $17.8 million, or 3.8 percent, over the current year’s total.

The state appropriation combined with the anticipated federal funds would help support PASSHE’s proposed Fiscal Year 2010-11 operating budget of nearly $1.5 billion. The proposed budget represents an increase of about $61.9 million, or 4.4 percent over the current year’s spending total.

Much of the increase is required under the various collective bargaining agreements PASSHE has with its seven labor unions, all of which will be in their final year. Those increases will cost PASSHE about $37.7 million in 2010-11. In addition, health care costs are projected to increase by $12.9 million next year while State Employees’ Retirement System costs are expected to increase by about $6.8 million, and utility costs by about $3.7 million.

The Governor’s Budget Office will consider PASSHE’s appropriation request along with those prepared by other state agencies and state-supported entities as it develops a proposed 2010-11 general fund budget for the Commonwealth. The governor will submit his budget proposal to the Legislature in February, after which the House and Senate appropriations committees will hold a series of public hearings on the spending plan. The Commonwealth budget must be approved by June 30, 2010, in order to take effect July 1, the start of the next fiscal year. This year’s budget was approved more than three months late.

The Pennsylvania State System of Higher Education is the largest provider of higher education in the Commonwealth, with nearly 117,000 students. The 14 PASSHE universities offer degree and certificate programs in more than 120 areas of study. Approximately 454,000 PASSHE alumni live and work in Pennsylvania.

The state-owned universities are Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester Universities of Pennsylvania. PASSHE also operates branch campuses in Clearfield, Freeport, Oil City and Punxsutawney and several regional centers, including the Dixon University Center in Harrisburg.