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July 22, 2010

Budget includes compensation hike

Pitt will increase its salary pool 3 percent and its tuition from 2.5 percent to 5.5 percent this year.

The budget and executive committees of Pitt’s Board of Trustees lifted the fiscal year 2010 salary freeze for faculty and staff, approving the increases as part of a $1.89 billion fiscal year 2011 operating budget. The committees also approved a $182.45 million capital budget. (See related story this issue.)

Salaries and wages are budgeted at $836 million with another $254.7 million budgeted for benefits, bringing total compensation to $1.09 billion, the largest expense in the FY11 operating budget.

Research grants and contracts totaling $775 million, including $70.16 million in stimulus grants and contracts, are Pitt’s largest revenue source, with net tuition of nearly $468.2 million the second-largest source of University revenue.

In presenting the budget, Arthur G. Ramicone, vice chancellor for Budget and Controller, enumerated several examples of streamlining and cost-cutting undertaken by the University, such as conservation and cost avoidance efforts that have saved $2.2 million in utility costs and online budget reporting and telecommunications savings that cut another $1.6 million in expenses.

“However,” he said, “The University cannot move forward by simply cutting costs. To support critical investments in programs, meet rising expenses, offset low yields on our fixed-income investments and flat-level commonwealth funding, the University must raise additional revenue through tuition increases.”

The board raised tuition for in-state students on the Pittsburgh campus 5.5 percent while tuition for out-of-state students on the Pittsburgh campus was raised 3 percent. School of Dental Medicine students and students at Pitt’s four regional campuses will see a 2.5 percent increase in tuition.

With the 2.5 percent increase, in-state students at Pitt’s Bradford, Greensburg and Johnstown campuses in programs other than nursing, engineering and respiratory care will see tuition rise $274 this year to $11,286; their out-of-state counterparts will see a $514 increase to $21,086. At Pitt-Titusville, in-state students in programs other than nursing will see tuition rise $242 to $9,942, while out-of-state tuition at UPT is increasing $458 to $18,778.

A 5.5 percent increase means most in-state undergraduates on the Pittsburgh campus — those in arts and sciences, education, social work and general studies — will see tuition rise $732 to $14,076. A 3 percent increase for similar out-of-state undergrads raises tuition to $23,732, an increase of $690.

Commenting on the higher increase for in-state students on the Pittsburgh campus, Chancellor Mark A. Nordenberg said, “That cost does directly reflect an extended period of eroding support from the commonwealth for its public research universities in particular.

“That’s not a complaint about this year because this is a very difficult year and holding level actually is something of an accomplishment in this environment.”

State legislators held the University’s appropriation flat at $185.4 million for FY11, including medical school funding.

“This is a process that has been in place for a number of years. The basic understanding struck at the time the University of Pittsburgh [in 1966] and Temple [in 1965] became state-related universities was that there would be a state appropriation that would be adequate to maintain a tuition differential between in-state and out-of-state students and as the level of state support goes down, then inevitably the tuition for in-state students goes up,” the chancellor said.

Excluding federal dollars that come through the state (the FY11 appropriation for Pitt includes $7.5 million in federal stimulus funding and $9.5 million in federal Medicare money), Ramicone said the overall increase in Pennsylvania’s support for the University has grown only $408,000 between FY00 and FY11, an increase of 0.2 percent.

“This lack of commonwealth support has sharpened the University’s focus on reducing and controlling costs since salary freezes cannot remain in place for extended periods of time without resulting in the  loss of key personnel,” Ramicone said.

Nordenberg said, “Given the financial pressures we face, those brought by the great recession, we made the difficult choice during the past year to freeze the salaries of University faculty and staff. Obviously we could not continue that practice indefinitely, either as a matter of fairness or as a matter of maintaining our strong competitive position. One of our very highest priorities was to include a salary increase pool in this year’s budget.

“Though there are some signs that an economic recovery is underway, virtually all of our revenue streams continue to be under stress. Returns on fixed income investments are at or near all-time lows, private donors remain understandably cautious about making significant commitments, even to worthy institutions, and our state appropriation is flat … and has not seen any significant growth over an extended period of time,” Nordenberg said.

“But many of our expenses continue to rise and that necessarily brings pressure on tuition. We believe that we struck the best possible balance between containing costs and growing revenue, including tuition revenue, in this budget,” the chancellor said.

“Obviously we wish that our tuition increases could have been lower, but believe that those increases will prove to be moderate in the marketplace while also being adequate to maintain program quality and to meet the needs of our employees.”

Looking toward the following fiscal year’s budget, Nordenberg noted there are efforts in Congress to provide additional support for public education even though the current federal stimulus funding is scheduled to expire this fiscal year. “It’s difficult to predict because we don’t know what is going to happen. Certainly the prospect of losing that stimulus money and not having it replaced either at the state or at the federal level is a very serious challenge for us,” he said.

Other operating budget revenue line items are $52.44 million in state construction grants, $52.59 million in gifts and pledges, $25.35 million in endowment/investment income and distributions and $329.7 million in sales and services/other revenue.

Other expenses are $117.8 million for supplies, $279.35 million for business and professional expenses, $60.1 million for utilities, $41.23 million for maintenance and facilities costs, $129.7 million in depreciation, $48.66 million in interest and $54.8 million in other expenses.

—Kimberly K. Barlow

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