Here are answers to some frequently asked questions about the impact of the declining economy on the university.

What are some of the factors that are affecting Temple’s fiscal future?
A: Both the U.S. and global economies are in deep recession. Financial experts differ on projecting the depth and length of the downturn, but what is clear is that the near-term economic picture is not promising. This is not business as usual.

What about the state’s economic health? How does this factor into Temple’s future?

A: As the Pennsylvania economy slows, Temple feels the impact in two important ways. First, a decline in state tax revenues means a decrease in state support for schools like Temple. Second, even though a Temple education remains a great value, it is possible that students and families in Pennsylvania will find it more difficult to pay for tuition.

Let’s break that down, starting with the state picture. What has happened so far?

A: As a state-related institution, Temple’s major sources of revenue are state support and tuition dollars. During the current fiscal year (FY08-09), Temple’s appropriation from the state was cut by $11.4 million.

Is this unusual?

A: State support for higher education has been declining in recent years, as a total of Temple’s overall budget. When you include the current fiscal year, Temple’s appropriation has been cut in five of the last 10 annual commonwealth budgets. In addition, next year’s proposed appropriation of $178.5 million is lower (in non-inflation adjusted dollars) than the $179 million appropriation the university received in the 2001-2002 fiscal year.

Did the governor restore the $11.4 million when he made his budget proposal last week?

A: No. Instead, he plans to extend the cut for another year.

So the $11.4 million reduction is included in the governor’s budget proposal for the next fiscal year too?

A: Yes. This means that Temple must absorb $22.8 million in cuts from its commonwealth appropriation for this year and next.

What would it mean if we raised tuition next year to make up for the cuts in state support?

A: Tuition would have to go up by 3 percent just to compensate for the loss of state revenues. That does not include covering the growing costs of doing business and paying for fixed operating costs, like utilities, fuel and union contracts.

Won’t the governor’s proposal to help students pay for tuition make a difference for Temple students?

A: The governor’s proposal creates a new direct tuition subsidy funded by tax revenue generated by legalizing video poker. Community colleges and State System of Higher Education schools (like West Chester, Kutztown and Millersville universities) are the only institutions whose students would be eligible for the funding. Students at state-related schools, which include Temple, Penn State University, the University of Pittsburgh and Lincoln University, are excluded from this potential new benefit.

If state support is down, won’t the federal government step in? Isn’t there money for higher education in President Obama’s stimulus plan?

A: The federal rescue plan has yet to get final approval. And while elements continue to change, what has not changed is that funds for higher education have largely been directed to new construction. Federal money approved for new construction can’t be used for operating expenses.

Many schools rely on their endowment to pay for fixed costs. Can Temple’s current campaign make up for the loss in state appropriations?

A: As President Ann Weaver Hart said in her Jan. 15 letter to the community, “The university’s current fund-raising campaign, Access to Excellence: The 125th Anniversary Campaign for Temple, has brought more than $325 million in new resources to the university. A large portion of these funds consists of pledges that will be paid over time and are restricted to capital projects, endowment and other uses and do not represent significant budget relief in the short term.”

So, if state support is dropping and neither the federal stimulus plan nor endowment revenues will support short-term operating budgets, what is the plan for Temple for the coming fiscal year?

A: President Hart has outlined a plan for the coming year that features two key elements:

• Holding salaries for all non-collective bargaining employees at current levels. Revenue-based, clinical faculty salaries based on incentive pay programs will not be affected. The university will initiate discussions related to wage and compensation costs with all unions with which it has existing collective bargaining agreements.
• Conducting a comprehensive institutional review to prepare a budget for FY09-10 that reduces recurring operating costs by 5 percent, for a total reduction of approximately $40 million.

Why cut $40 million from next year’s budget when state support was reduced by $11.4 million for next year?

A: Remember that Temple must absorb $22.8 million in cuts from its commonwealth appropriation this year and next. Beyond that, there is no sign the economic downtown will improve in the next several months. It is essential that Temple keep tuition increases as low as possible so that we can stay true to our mission of providing access to excellence. The 5 percent reduction to Temple’s FY09-10 budget will protect against:

• Continued downturns in the economy and the myriad of ways that impacts Temple’s finances.
• Additional commonwealth cuts, such as this year’s mid-year cut, if tax revenues continue to fall.
• The possibility that fall enrollment (and tuition income) could be down given the very high level of debt being carried by Temple students and the increased difficulty for them to gain access to credit.
• The impact of falling endowment income.
• The impact of falling research activity and funding.
• The exposure Temple University has to the financial weakness of the Temple University Health System.
• Already mandated increases in costs from fixed contracts and fixes costs.

What’s the timeframe for the planning process for next year’s budget?

A: A comprehensive budget planning process is currently underway and will likely result in an approved budget by the university’s Board of Trustees in June.