MALVERN, PA — Penn State Great Valley in Malvern faces potential spending reductions as Penn State University moves to close a projected $124 million shortfall in its $2.2 billion education-and-general budget for fiscal 2026-27, driven by declining enrollment revenue and rising employee health insurance costs.
The university attributed $87 million of the projected deficit to lower-than-anticipated tuition and fee revenue and another $37 million to employee health insurance expenses exceeding budget projections.
Penn State plans to reduce budgets across its education-and-general units by an average of approximately 1.25%, with individual reductions varying according to institutional priorities.
The reductions must come from non-personnel spending and be returned to the university’s central budget by June 30, 2027.
Penn State Great Valley, the university’s graduate and professional education campus in Chester County, operates within the education-and-general budget structure affected by the spending measures.
The university has not identified a specific reduction for the Malvern campus. Individual budget executives will determine how their units meet the required reductions.
The financial adjustments follow an enrollment decline of more than 3,000 students between fall 2025 and fall 2026, despite record applications and enrollment increases at some campuses.
The decline includes anticipated reductions at Commonwealth Campuses scheduled for closure. Those enrollment effects were not incorporated into the original fiscal 2026-27 budget projections because of the timing of the university’s budgeting process.
The resulting $87 million revenue gap accounts for approximately 70% of the projected shortfall.
Health insurance expenses represent the remaining $37 million.
Employee health insurance claims increased 15.7% between August 2025 and August 2026, exceeding the national average and contributing to higher costs than university officials had anticipated.
The university is responding through a combination of operating budget reductions, centralized savings and tighter controls over capital expenditures.
Among the measures, Penn State will collect salary and fringe benefit savings associated with vacant positions dating to July 1, 2026, rather than allowing those savings to remain within individual units.
The university will also reduce the president’s strategic funds and the Office of the Vice President for Commonwealth Campuses budget.
One-time expenses associated with Commonwealth Campus closures will instead be financed through fiscal 2026-27 investment income.
Penn State is also changing how it finances certain maintenance and capital expenditures, using investment income to replace a portion of the Office of Physical Plant’s education-and-general funding.
Capital projects financed through education-and-general funds will require advance approval from both the provost and chief financial officer.
The university will also require all year-end budget surpluses to return to its central budget and will prohibit year-end transfers to capital projects.
Budget executives may apply unspent operating funds toward their required reductions, providing some flexibility in how individual units meet their targets.
The measures are intended to address the current budget gap while preserving academic programs, research activities and student support priorities.
Previously approved tuition and fees will remain unchanged.
The financial adjustments come as Penn State continues implementing its multiyear Road Map for the Future initiative, which focuses on institutional efficiency, student success and the university’s long-term operating structure.
For Penn State Great Valley, the universitywide measures establish new spending constraints as campus administrators operate within the revised budget framework.
Additional information about Penn State’s fiscal 2026-27 financial adjustments is available at https://budgetandfinance.psu.edu/fy-2026-27-eg-budget-update.
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