Penn State has projected a $124 million shortfall in its $2.2 billion Education and General (E&G) budget for fiscal year 2026-27, according to a news release.

The university said lower-than-anticipated enrollments led to about an $87 million reduction in projected tuition and fee revenues.

Penn State hit a record-high undergraduate population (43,010) and incoming class of first-time, full-time students (9,907) at University Park in fall 2026, but overall enrollment fell by just over 3,000 students.

According to the news release, the university’s budgeting timeline also did not allow it to include the impacts of the Commonwealth Campus closures in the original budget modeling.

The university said a 15.7% increase in health insurance claims also contributed to the shortfall.

The news release said the shortfall will not affect the previously approved tuition and fees. Instead, Penn State is expected to implement a series of steps to address the expected shortfall while “protecting core research, academic and student success priorities.”

Proactive Steps

The university has planned a series of actions to adapt the budget, which include:

• A decrease to the president’s strategic funds.
• A decrease to the Office of the Vice President for Commonwealth Campuses’ budget. The fiscal year 2026-27 investment income will fund the one-time campus closure costs.
• Consolidating vacant salary and fringe benefit savings, starting from July 1, 2026.
• A portion of Office of Physical Plant E&G funds will be replaced with funding for major maintenance or capital funding from fiscal year 2026-27 investment income.
• Capital projects using funds from the E&G budget must be preapproved by the provost and chief fiscal officer.
• Any year-end budget surpluses will return to the central budget, and year-end transfers to capital projects will not be approved.

Penn State said it’s “not unusual” for E&G units to have unused funds at year-end. If so, budget executives will decide how to use unspent dollars from E&G units. Additionally, budget executives will decide how to manage the shortfall for their specific unit.

“University leaders have long acknowledged industry trends that contributed to the shortfall and reinforced the criticality of Penn State’s ‘Road Map for the Future‘ strategy in helping to prioritize student success and ensure focus and efficiency in delivering on that mission,” Penn State said in a news release.

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