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March 17, 2011

Budget shock: How would Pitt absorb deep state cuts?

Pitt stands to lose nearly $100 million in funding in a state budget proposed last week by Gov. Tom Corbett.

As part of his $27.3 billion general fund budget proposal for the fiscal year that begins July 1, the governor cut state funding in half for Pitt and its fellow state-related universities, Penn State, Temple and Lincoln. He similarly slashed funding for the 14 State System of Higher Education schools.

Excluding medical school funding, Pitt’s current appropriation includes $160.49 million in state money plus $7.5 million in American Recovery and Reinvestment Act (ARRA) funds for a total of nearly $168 million. Pitt’s current operating budget is $1.89 billion.

Corbett’s proposed budget cuts Pitt’s general appropriation to $80.245 million. In addition, Pitt would lose nearly $17 million in support for the School of Medicine, Western Psychiatric Institute and Clinic, the Center for Public Health Practice and Pitt’s dental clinic, and more than $7.5 million in ARRA federal stimulus money.

Initial fears that Pitt also would lose more than $9 million in tobacco settlement fund support for biomedical research appear to have been allayed, according to Vice Chancellor for Governmental Relations Paul A. Supowitz, who said the Corbett administration has said it intends to administer those dollars in the same way but is proposing to move them into the general fund.

The University had asked for a 5 percent increase in its annual appropriation request, made last fall. For FY12, Pitt sought a total of $194.1 million including nearly $176.4 million in general support and $17.7 million in academic medical center funding. (See Oct. 14 University Times.)

Corbett, in announcing a proposed budget that he said “sorts the must-haves from the nice-to-haves,” said that Pennsylvania entered 2011 more than $4 billion in debt.

Regarding higher education, the governor said, “This fiscal crisis is a time to re-think state spending on higher education. Despite state subsidies over the past decades, tuition has continued to increase. If the intent was to keep tuition rates down, it failed. We need to find a new model. When it comes to higher education we should do the same thing that we do in basic education: the dollars should follow the student. It’s their money.”

Chancellor Mark A. Nordenberg called a press conference March 8 to react to Gov. Tom Corbett’s proposal for deep cuts in the state’s higher education support.

Chancellor Mark A. Nordenberg called a press conference March 8 to react to Gov. Tom Corbett’s proposal for deep cuts in the state’s higher education support.

Everything is on the table

The loss of ARRA funding for higher education was expected because the program was designed to expire this fiscal year, and administrators were bracing for a “funding cliff” as the result of state budget deficits. However, at a March 8 press conference in response to the governor’s announcement, Chancellor Mark A. Nordenberg expressed surprise at the “stunningly deep” cuts to higher education included in the governor’s proposal. “I had no idea that cuts of this magnitude would be envisioned by the governor,” he said.

“Obviously the prospect of cuts of this size almost means that everything has got to be on the table. But beyond that it’s difficult to say what actions or combinations of actions might in the end prove to be the best response to the budget if it should move forward as proposed,” Nordenberg said.

The chancellor said Pitt is not seeking to retreat from its designation as a state-related university. “If that relationship has now been called in question it is only by the announced actions by the governor today of these proposed cuts that would take our level of support to historically low levels,” he said.

State support for Pitt in the 1970s represented about 30 percent of the University’s operating budget, but since has fallen to less than 10 percent. “If the governor’s proposal was to be accepted, it would fall beneath 5 percent. When you reach that level, then I think there are a new range of questions to ask,” Nordenberg said.

Tuition differentials

“If you’re not funded like a public university, it’s difficult to maintain the traditional programs of a public university. The basic agreement between the commonwealth and the University of Pittsburgh in 1966 was that we would maintain a lower tuition level for in-state students than the tuition we had been charging as the private university that we had been for nearly 200 years at that point in time, and the commonwealth would provide an appropriation that would enable us to do so,” he said.

“We clearly have met our end of that bargain,” Nordenberg said, noting that tuition for in-state undergraduates in the School of Arts and Sciences is nearly $10,000 less than for their out-of-state counterparts.

“[If] half of the money that ostensibly is used to support that differential is being taken away, that’s a sizeable loss of revenues for us,” he said. “More significantly … our in-state undergraduate tuition is about $14,000, which is about one-third of peer private universities,” Nordenberg said. “Obviously, if the commonwealth is to decide it no longer includes as a priority supporting that lower tuition structure for in-state students, it would be difficult for us to maintain it.”

Nordenberg would not estimate the amount of any tuition increases that could be in store.

“We would do everything we can to keep that increase within manageable ranges. We do have a commitment to our students. We do believe in access to higher education. We don’t want this to be an institution that is affordable only for the well-to-do,” he said.

Capital expenditures

Nordenberg pointed out that the recession previously had prompted Pitt to put some construction projects on hold. “What people don’t realize is that’s not a good thing for western Pennsylvania,” he said, noting that investments in Pitt’s physical plant generate economic activity and support local jobs.


“The same is true when you talk about layoffs,” Nordenberg said, noting that he disagrees with the concept that in tough economic times “you’re not effectively managing your organization until you’ve laid people off.”

He said, “The truth is, we’re not an organization that has had trouble sustaining demand for the services it provides,” citing increases in research funding and in the number of students enrolled at the University.

“In order to maintain the quality of what we do, whether that’s in research or whether that’s in education, we need adequate numbers of good, talented, committed people and we have been blessed with having them,” the chancellor said.

“My view as we went through the recession, for example, was that, first, making layoffs the lowest possible priority was the humane thing to do.

“Second, making layoffs the lowest possible priority made good business sense for the University of Pittsburgh, which faced increasing demands for its services.

“And third, that the increasing employment levels at the University of Pittsburgh was important for the overall health of the economy of western Pennsylvania,” Nordenberg said. “Now, with cuts like this … everything’s on the table.”

He continued, “But we have a history that suggests that certain alternatives are not good for us, they would not be good for our students, they would not be good for the consumers of our research and they would not be good for the region. And wouldn’t it be ironic if, in a situation in which jobs is listed as the number one economic development priority, if spending policies in effect had the key impact of undermining the very forms of economic growth and job generation that have been a hallmark of the region through these difficult times.”

Preparing for funding cuts

Nordenberg said he and the University’s senior leadership needed time to review more closely the governor’s proposal. “Our first item of business is to try to ensure that it is modified in ways sensible for the University, sensible for our students, sensible for their families, sensible for the region and its communities and sensible for the commonwealth.”

As far as closing the resulting gap in the University budget that would result from a cut in state support, Nordenberg said the responsibility would lie with him and senior administrators in conjunction with the University Planning and Budgeting Committee. “We do have an agreed-upon set of processes and procedures to follow,” in the University planning and budgeting system, he said.

“It is important to underscore the fact that sensible responsible budget building and cost-effective operations have been characteristics of the University of Pittsburgh now for a considerable period of time. Remember, we’re facing a huge, surprising proposal for reductions today. But again, we’ve had budgets reduced six of the last 10 years. We had midyear reductions, we had normal budget cycle reductions and the system seems to work quite well.”

—Kimberly K. Barlow

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