Final English 202 Assignment 4

8/2/2019 Final English 202 Assignment 4

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An Analysis of Penn State

University Possibly Becoming aPrivate Institution

Prepared for Dr. Rodney Erikson and the Penn State Board of Trustees

By: Bobby Stitchick and Jordan Taylor

April 10, 2012

This report examines the possibility of Penn State University, a large and powerful public school in rural

Pennsylvania, becoming private. Being faced with public criticism and a proposed cut of 30% of its

funding from the state, the school must make a decision that is best for all involved, from the students

to the faculty and staff to the university as a whole. Information gathered in this report comes from a

variety of reporting sources, Cornell University, and other documents.


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Executive Summary

After Governor Corbett significantly cut funding in 2011 to the Pennsylvania public universities

in order to slash Pennsylvanias debt, the schools that have been affected are now scrambling

to find ways to accommodate this lack of money. One way to possibly start making up for this

loss of money is for Penn State to become a private institution.

We researched this possibility in order to determine the best financial decision for the

Pennsylvania State University and for all of its students. The first area we examined was the

impact of this decision on tuition. If the school would switch to a private university, one of the

already highest public school tuitions would become even higher, likely forcing out students

who cannot afford the increased cost of attendance. Penn State students already graduate with

over $31,000 in debt on average, and switching to a private school would increase this numbereven more.

To further study this issue, we investigated Cornell University to see how they functioned as a

private land-grant university and the proposed model for Penn States switch is very similar to

Cornell. They are a private school; however certain areas of the school still receive funding from

the government so therefore it has public tendencies. Although it works for them, making this

switch right now would simply create an enormous amount of work and take up a large amount

of time that could be used for better and more useful things.

Another component that we looked into was the competitiveness of the university in theacademic field. Currently, the top twenty universities in the nation are all private. However,

Penn State is ranked 45th

and although not a private institute, can still improve and compete

with the nations other top universities, despite being public.

The other benchmarks we explored were the differences in construction of the public and

private sectors. We also looked at Penn States principles. From the building aspect, we

determined that it would be extremely difficult to determine ownership of the land that is

currently public. Regarding the principles, we realized that many alumni came to Penn State

because it was a state school. As a land-grant university, Penn State has a responsibility to

Pennsylvanias students.

Due to our research, we have concluded that it would be best for Penn State to remain a public

university or adopt a partially-private model, such as Cornells. We recommend that the

university find ways to decrease spending and increase tuition as little as possible.


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Table of Contents

Page Number

Executive Summary.... i

List ofIllustrations.iii

Introduction.. 1

Research and Results

1. Student Interest and Tuition Rate........ 22. Right to Know Law....... 43. Cornell Model... 54. Competitive Nature....... 65. Construction in the Public and Private Sectors.....76. Back to the Basics: Penn State Principles...7

Conclusion8

Recommendation8

Works Cited.9


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List of Illustrations

Figure 1: College Costs.4

Figure 2: Top 50 Ranked Universities....................6


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Introduction

Problem

In 2011, Penn State University was placed under a very large financial strain when Governor

Corbett proposed a very large reduction in funding for the public universities of the state,including Penn State. The original proposed cut was a whopping 52% of the previous total, or

$182 million dollars, but this was later reduced to only 30% from over $334 million. However,

this is still a very large amount of money for a large research university like Penn State which

has a budget for the 2011-2012 year of over $4.1 billion.

With this decreased funding comes the need to replace those lost funds. New building costs, an

increase in the cost of operation, and many other factors all contribute to the fact that a loss of

30% of funding would be difficult to deal with. This loss in money needs to be brought in from

other means whether it is increased tuition, a loss of jobs, or another drastic measure to come

up with difference.

Some experts and many Pennsylvanians have suggested that one response to a decrease in

state support is to become a private institution. Private universities do not receive any money

from the state government nor do they have to make any of their financial or other records

available to the public because their money is not coming from the taxpayers. This could be a

relief as the school has been under pressure lately when dealing with the Right to Know Law

which requires this knowledge to be public. By becoming private, the school could likely attract

more academically advanced students which is always a goal. A private institution would also

help to fulfill this monetary gap created by the governors cut of the funding.

Research

In order to help solve this problem and make the best judgment for the school and all involved,

we did research as to what some of the costs and benefits would be for different options. By

investigating past Penn State budgets and seeing how the grants from the state have been

decreasing, we will be better able to predict how this trend will continue and how best to deal

with it. Another type of research that is done involves that with Cornell University. They are aprivate, land-grant college with several parts of the school that are still public. This is the model

that many have said Penn State would follow if it became private so it will be investigated to

determine its effectiveness.

While doing the financial research is very important in this report, the effect this move would

have on the students must also be taken into account. This move to become private would


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increase the tuition which would make it more difficult for many to attend without some

financial aid. The average cost of tuition for a private school in 2009-2010 was over $32,000

while the average for a public institution was just under $13,000. This is over twice the amount

when comparing private to public, and Penn State already has one of the highest in-state

tuitions in the country, which would likely mean an even higher private based tuition. Thesepoints must all be taken into account. Furthermore, throughout this report we will look at the

bearing of the Right to Know Law, the competitiveness of universities in todays society,

construction differences between the public and private sector, and how all of these ideas

compare to the principles upon which Penn State was founded.

Report Structure

This report will examine:

Student Interest and Tuition Rate Pennsylvanias Right to Know Law The Cornell Model The Competitive Nature of Penn State Construction Differences Between Public and Private Sectors The Penn State Principles Conclusion Recommendations

Research and Results:

Student Interest and

When taking into consideration the switch to becoming a private school, a one of the most

important factors that needs to be taken into consideration is the students who will be affected

by this change. By becoming private, the school will need to make up monetary funds that will

be lost. One of the most obvious ways with which to do this and one that will affect thestudents most will be the increased tuition. Its no secret that private universities have much

higher tuition than their public counterparts, and Penn State already has a high tuition to begin

with so one can only imagine the financial burden this higher tuition would place on the

students.


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The average tuition of a private institution is over $26,000, which doesnt include room and

board, or other fees which can easily add $10-$15,000 to the student costs. Compare this to the

meager $7,000 that is the average for public school students tuition and its easy to see the

discrepancy (de Vise). At the end of 2009 the cost of private schools was over three times as

much as public schools on average! This will naturally lead to increased student loans and likelymore student debt after graduation at these schools. If Penn State made this switch, their

students will be looking at a much higher cost of education than compared to before.

According to The Daily Collegian, the average Penn State graduate has over $31,000 in debts

upon graduation (Wintner). This is one of the highest of all public universities in the country.

Making the switch to a private school would likely only increase this number even more as

constantly rising tuition prices will increase even more. Although cost may not be the most

important thing students consider when looking at schools, it is certainly a very important thing

to be taken into account. With a shrinking job market and an economy that still isnt great,

post-graduation debt will become more of a factor than it ever has been before.

These increased prices of tuition will likely lead to a decrease in student applications. An

already high tuition that is raised even higher will likely force students who may not be that

well off financially to deter from applying. Although student aid may increase, there will still be

those students who simply cannot afford to attend this university. This increase could force

very bright, intelligent students to look elsewhere and as a school that prides itself in being a

high-level university, having prospective students who are more than academically ready turn

away because of costs is not something Penn State would want to have happen. Figure 1 below

shows the projected tuition through 2030 for both private and public schools. Keeping in mindthat Penn State is one of the most expensive public schools, it could be accurately predicted for

Penn States tuition to remain well above the public school trend.


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Figure 1: By the year 2025, a private college education will be unaffordable for most

Americans (Kliff).

Right to Know Law

The Pennsylvania Right to Know Law is a law that makes any public universites or any other

state run bodys records available to the public (Schweiker). Since Penn State is a state run and

funded university, all of its records must be accessible to the public. However, Penn State does

have some exemptions from this law as it must only release the financial information of its top

25 earners (Ganim).

In previous years, President Spanier had always levied to keep Penn State exempt from these

transparency laws because he thought that the school would be less competitive for top

academic talent. President Erickson, meanwhile, has been more willing to make these recordsavailable to all those who are interested. By going private, Penn State would be completely

exempt from these laws because it would not receive any money from the state. This could

prevent a lot of pain and fighting about records if the school would simply not have to release

these records.


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A big reason why this has come under fire recently is because of the emergence of the Jerry

Sandusky cloud over the school. Penn State, by law, should have to release some of their

records when dealing with this case that it may not want to be brought to the public eye.

Although it may not have to release all of its records, this could still do a large amount of

damage to the school and all of those involved. Taxpayers dollars will be used to pay the legalfees for many of those involved in this case which many people are not a fan of. Had the school

been private, none of these records would need to be released nor would taxpayers money

have to pay for it.

Although Penn State doesnt have to reveal all of its records due to this law, it still requires that

a majority of them be released. If the school would make the switch to becoming private, then

none of these things would have to be released at all. Since there is no taxpayers money

funding at a private school, the schools records would not need to be common knowledge. This

could save the school a lot of headache and it could keep its spending and other areas of

information that the public often clamor for, hidden.

Cornell Model

If the switch would be made to become a private university, many have envisioned the

transition to follow what people call the Cornell Model. Cornell is a land-grant university like

Penn State that is actually a private college. This means that the school in general does not

receive funds or money from the state; however, certain colleges including the veterinary

medicine and college of agriculture and life sciences do receive state funding. Many people feel

that state funding could be very useful still in certain areas and this model would be a good one

to follow.

One of the problems that would be encountered here would be dealing with the legal

legislation. Board of Trustee member Karen Peetz is one of a few board members who have

looked to Cornell and the process of making this switch by modeling it after the Ivy League

school. The school is able to maintain some state funding to help offset its costs, but only in

certain areas rather than the entire school (Schackner). This could greatly aid in Penn States

financial situation as it receives private school tuition, yet still receives money from the state at

the same time.

However, therein lays the potential problem with this idea. If the school were to make the

switch and follow this model, the students would be the ones feeling a large part of the force

from it. They would still be paying for a private school tuition, to attend what is a partially state

run school. This model may be plausible for a smaller run school like Cornell; however, for Penn

State it may not be as appropriate. Also, the amount of legislation and other work that would


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need to be done in order for a partial switch would be gigantic- a daunting task for a school

currently dealing with enough issues.

Competitive Nature

According to the National University Rankings done by the U.S. News, 33 of the top 50universities in America are private. Only 17 of the top 50 are public institutions, and the

University of California at Berkeley is the highest ranked public institution at #21. Penn State

University comes in at #45. This data is represented in Figure 1 below, in which it is obvious

that the private universities see more success (National).

Figure 2: Private schools are currently more successful than public universities. Not only are

there more privately ranked universities, but all of the top ranked universities are private

also. It appears that a public university cannot compete in the modern world of academics

(National).

It is unreasonable to expect Penn State to be able to compete with the other leading

universities in the nation as long as it retains a public status. Perhaps part of the problem, if it

could be called that, lies with the fact that admission to Penn State doesnt solely lie with the

potential of the candidate, but depends, in part, on their residency. It is a great thing to admit

students to Penn State that live in Pennsylvania, but the truth is that this is limiting the

potential of Penn States success. Today, more than ever, a university is a business. According

to Gary Fethke, a professor of management sciences and economics at the University of Iowa,

we are evolving towards privatization, whether we want it or not. He agreed that this is a good

0

2

4

6

8

10

12

Top 10Universities

#11-20Universities

#21-30Universities

#31-40Universities

#41-50Universities

NumberofSchools

Top 50 Ranked Universities

Private

Public


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thing, and goes on to say that going private allows colleges to position themselves increasingly

toward greater self-reliance, entrepreneurship, and competitive vigor (Matheson). If Penn

State wants to be one of the leading universities in the land, it may need to take the lead in

becoming a private institution to get a jump start on becoming one of Americas best

universities.

Construction in the Public and Private Sectors

As Penn State is currently a public university, all of the projects must be built to meet public

needs. However, in the private sector projects can be built for the sole use of the owner, which

in this case would be the university. As a public university, we must use appropriations from a

legislative body, bonds, grants, and cost sharing to propose a project in which the lowest bidder

wins the project. As a private owner, Penn State could use out-of-pocket cash, loans, and

bonds to construct and they could hire a firm outright, which would be much faster than the

public sector timeline. A private university would have more options too. If it did decide toaccept bids it wouldnt be limited to choosing the lowest bid. For instance, when Penn State

chose the lowest bidder to construct the Bryce Jordan Center, the firm went bankrupt before

the end of the project. Therefore, it was more difficult and took longer to complete the project.

Having the freedom to choose another firm would have been more convenient in that instance.

When switching from the public sector to the private sector, the only difficult question

becomes, Who receives ownership of these previously publicly-owned buildings? Do they

belong to the university, the state, or whom? This, of course, is a case by case difference.

Back to the Basics: The Penn State Principles

From the beginning, Penn State was founded in 1855 as a land-grant university, and land-grant

universities were established to focus on the teaching of agriculture, science, and engineering.

Michael Tanner, vice president for academic affairs at the Association of Public and Land-Grant

Universities said that, Land-grant schools have a commitment to providing educational

opportunities for a broader range of students, including those with the most financial need

(Matheson). Interestingly enough, both Cornell University and the Massachusetts Institute of

Technology have become private despite their prior land-grant status. The question then

becomes who is responsible for the students with financial need? How does one weigh moralsamid business?

Countless Penn State alumni have said that Penn State wouldnt have been an option for them

had it been a private school. Thus, if Penn State would become a private university it is likely

that some alumni donations would decrease or disappear altogether. Also, by becoming a


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private school, the university will appeal to a completely different array of people, thus

changing what makes a Penn Stater a Penn Stater.

Conclusion

The Penn State administration must consider many components when attempting to make sucha major decision that could have impacts for years to come. The cost of tuition is the most

important factor, because the cost associated with a private university would prevent some

current students from graduating and would limit the pool of applicants who can afford a Penn

State education. The Penn State Principles are also very important, as there is such a rich

history and tradition over the last 157 years that the university has been in existence. Also, by

making Penn State a private school, there could likely be less support from alumni, which would

only compound the previous tuition problem. Although it will be harder to be the top

university as a public school, we can still remain among the top, just not at the top. A change

from public to private wouldnt make but only a modest difference in the potential for successfor Penn State. Also, because the Right to Know Law has been so challenging for the university

over the last year, the transparency of the university could help to prevent future scandals.

Considering the above, it is in the best interest of the students to either remain a public school

or adopt a modest change, such as the Cornell Model because they are more feasible and

better match the needs of the university along with the people involved with the university.

Recommendations

Penn State should:

Remain public rather than convert to private Find other ways to decrease spending Increase tuition as little as possible


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Works Cited

1. de Vise, Daniel, and Nick Anderson. "College Costs, Student Aid Continue to Rise." The Washington Post21 Oct. 2009.Web. 16 Apr. 2012. .

2. Ganim, Sara, and Jan Murphy. "Penn State's 'informal' discussion about possibly going private meets with mixedreactions."The Patriot News 14 Mar. 2012 [Harrisburg, PA] . Web. 12 Apr. 2012..

3. Kliff, Sarah. "The $441,728 college diploma." The Washington Post9 Jan. 2012: 1. Web. 12 Apr. 2012..

4. Matheson, Kathy. Penn State says it won't become private. ABC, 15 Mar. 2012. Web. 12 Apr. 2012..

5. "National University Rankings." U.S. News : 1-5. Web. 12 Apr. 2012..

6. Schackner, Bill. "Penn State Open To Going Private." Pittsburgh Post Gazette 14 Mar. 2012. Web. 9 Apr. 20127. Schweiker, Mark. "Pennsylvania's Right To Know Law." Pittsburgh Post Gazette 27 May 2003. Web. 10 Apr. 2012.

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8. Wintner, Micah. "PSU Student Debt Highest in Big Ten." The Daily Collegian 30 Nov. 2010 [State College, PA] . Web. 9Apr. 2012.

Final English 202 Assignment 4

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