Pitt will increase its salary pool by 2 percent — although raises for most employees will be deferred until January — and will increase its tuition by 8.5 percent for the majority of in-state students on the Pittsburgh campus.

Those moves were approved July 8 by the budget and executive committees of Pitt’s Board of Trustees as part of $1.94 billion operating budget for fiscal year 2012.

In a University Update, Chancellor Mark Nordenberg announced that the 2 percent increase in the salary pool will be distributed as follows: 1.5 percent salary maintenance award for all non-union employees who have received at least a satisfactory performance review for the past year, and 0.5 percent to be allocated on the basis of merit, market and equity.

“However, as a further reflection of our challenging circumstances,” the chancellor stated, “those increases will be retroactively effective to July 1 only for employees whose base earnings are $40,000 or less. Salary increases for all other employees will take effect on Jan. 1.”

Approximately 39 percent of non-union full-time employees earn $40,000 or less in salary, Pitt officials said.

The trustees also approved a $136.7 million capital budget for FY12, that is directed almost entirely toward ongoing renovation and preservation projects. (See related story, this issue.)

Salaries and wages are budgeted at $852.2 million with another $260.8 million budgeted for benefits, bringing total compensation to $1.113 billion, the largest expense in the FY12 operating budget.

Research grants and contracts totaling $766.4 million, including almost $52 million in stimulus grants and contracts, are Pitt’s largest revenue source, with net tuition of nearly $520.8 million the second-largest source of University revenue.

Pitt officials said the combination of a compensation increase, unavoidable increases in areas such as health insurance, facilities costs and technology improvements, and, in particular, the “historic cuts” in Pitt’s commonwealth appropriation led to the tuition increase decisions in crafting the FY12 operating budget.

Lawmakers in Harrisburg cut nearly $32 million from Pitt’s fiscal year 2012 appropriation, a decrease of 19 percent from the $168 million Pitt received in FY11. The University’s general appropriation of nearly $136.1 million for the fiscal year that began July 1 includes $134 million in general funding and $2.08 million for rural education outreach.

In addition, funding for Pitt’s academic medical center was more than halved from $16.9 million last year. Pitt is slated to receive $8.1 million from the state this year.

Combined, the $40-plus million budget reductions represent an overall cut in state support of nearly 22 percent. Commonwealth support now represents 7.7 percent of Pitt’s total operating budget, down from 9.8 percent the previous year, officials said.

In a prepared statement issued following the trustees’ actions, Nordenberg said, “The deep and disproportionate reductions in state support built into the commonwealth’s budget made it very difficult to craft this year’s operating budget. Pitt’s existing appropriation was cut by more than $40 million, a reduction of 22 percent. This compares to an overall reduction in state spending of about 4 percent.”

As a result, the board raised tuition for most in-state undergraduates on the Pittsburgh campus by 8.5 percent to $15,272 and by 4 percent to $24,680 for out-of-state students.

“For an institution facing a $40 million cut in state support … we simply could not go lower,” Nordenberg told reporters following the trustees’ actions.

No student fees were raised, the trustees noted. In addition, the University aims to offset some of the tuition increase pain by increasing the available need-based financial aid budget by $13 million to a record high $163 million.

But the chancellor noted that difficult budget decisions still remain. In addition to the $40 million reduction in state support, Pitt has budgeted $30 million to offset unavoidable cost increases and the cost of additional investments tied to maintaining academic quality, creating a total budget gap in excess of $70 million. Tuition increases will cover 40 percent of the gap, he noted.

Nordenberg stated, “Consistent with our expressed commitment not to place the entire burden of this year’s funding crisis on the shoulders of our students, we expect to cover 60 percent of that [$70 million] gap through a combination of central and unit-level budget reductions and adjustments.”

Following the trustees meeting, the chancellor told reporters that in the coming weeks the senior administration will alert unit heads as to how much they will have to cut. Cuts will be both across the board and targeted within units, Nordenberg said.

“Certainly, we have already planned for some of the reductions to be managed centrally and so some of those will be targeted operational opportunities,” Nordenberg said. “And then, as is typically our case, we’ll assign a certain level of responsibility to the most senior managers and they then will look at the units reporting to them and make decisions about how those burdens should be allocated.”

He added that it was premature to offer specifics.

“But everybody in positions of responsibility has been aware since the beginning of March that pressures were coming and they needed to be thinking about how they were going to be dealing with them in their own areas of responsibility,” Nordenberg said. “It wouldn’t be appropriate for me to talk in any detailed way until we’ve had a chance to have those conversations, but people are not going to be surprised that this is coming.”

The trustees also approved what officials called modest compensation increases. In his July 8 University Update, Nordenberg rejected adopting a salary freeze, which was the action taken during the 2010 fiscal year.

“Repeating that pattern would make the creation of a balanced budget easier and almost certainly would be politically popular in some quarters,” Nordenberg stated.

“However, we continue to live with lingering, negative consequences of that earlier action. Pitt salaries, which always have been at or somewhat below the mid-range of our peers, are less competitive than they were before that freeze. In the main, they also are lower than salaries paid by Pennsylvania’s other public research universities,” he said.

“It is one thing to ask employees to sacrifice for a year or two as an institution moves through difficult times. However, when the success of an enterprise depends so heavily on human talent, when employees are known for their hard work and dedication and when demand for the services that they support continues to be high, it is more problematic to indefinitely defer all action with respect to compensation,” Nordenberg said.

The full text of Nordenberg’s update is posted at www.chancellor.pitt.edu/news/2011-07-08.html.

The FY12 operating budget revenue line items also include nearly $62 million in state construction grants, $58.3 million in gifts and pledges, $34.3 million in endowment/investment income and distributions and $351.1 million in sales and services/other revenue.

Other expenses are $111.3 million for supplies, $284.9 million for business and professional expenses, $51.5 million for utilities, $47.3 million for maintenance and facilities costs, $143.1 million in depreciation, $45.8 million in interest and $61.3 million in other expenses.

Two other state-related universities also announced their tuition increases. Temple University was the first of the four state-relateds to set tuition for the fall term, announcing on July 1 that in-state tuition will increase by nearly 10 percent, to $13,006. Tuition for out-of-state students will be $22,832, an increase of 5.4 percent.

Last week, Penn State’s trustees approved a 4.9 percent increase in tuition for in-state students and 3.5 percent increase for out-of-state students on the University Park (main) campus. Satellite campus students will see an increase of 2.9 percent.

Penn State has a tiered tuition system with different tuition rates for lower-division students (freshmen and sophomores) and upper-division students (juniors and seniors), as well as different rates depending on the campus and the program.

At University Park, in-state lower-division students will pay $15,124. Most in-state upper-division students will pay $16,352 in tuition.

In-state upper-division students will pay $17,322 in the business, science, information science technology and engineering programs, with such nursing students paying $19,524 in tuition.

Out-of-state students in the lower divisions on the main campus now will pay $27,206 in tuition.

Most upper-division out-of-state students will pay $28,590. Such students will pay $29,696 in the business, science, information science technology and engineering programs and $32,212 in the nursing program.

Penn State also raised some of its student fees.

Schedules of the new tuition rates at all the Penn State campuses are posted at www.tuition.psu.edu/.

Earlier, both Temple and Penn State announced a salary freeze for the coming fiscal year.

As of press time, Lincoln University had not set new tuition rates.

—Peter Hart

What Pitt students will pay

The trustees raised tuition for in-state undergraduates in Arts and Sciences, General Studies, education and social work on the Pittsburgh campus by 8.5 percent to $15,272 and by 4 percent to $24,680 for out-of-state students.

In-state undergraduates in engineering will pay $16,292; out-of-state undergrads will pay $26,968.

In-state undergraduates in information sciences will pay $16,448; out-of-state undergrads will pay $26,664.

In-state business school undergraduates will pay $17,058; out-of-state undergrads will pay $27,804.

In-state dental medicine undergraduates will pay $14,838; out-of-state undergrads will pay $24,562.

In-state undergraduates in both nursing and health and rehabilitation sciences will pay $19,226; out-of-state undergrads in those programs will pay $31,368.

Tuition for students in the School of Medicine, which suffered the highest percentage cuts in commonwealth support, is rising by 12 percent for in-state and 6 percent for out-of-state students. Tuition for in-state first-professional medical students is rising to $43,424, and to $44,512 for out-of-state students.

All students at the regional campuses will see a tuition increase of 4 percent. Most in-state students at the Bradford, Greensburg and Johnstown campuses will pay $11,736, while most out-of-state students will pay $21,928 for tuition.

At Johnstown, students in engineering will pay $12,590 (in-state) and $23,994 (out-of-state); in nursing, $15,034 (in-state) and $27,964 (out-of-state), and in respiratory care, $12,550 (in-state) and $23,436 (out-of-state).

At Bradford, nursing students will pay $15,034 (in-state) and $27,964 (out-of-state).

At the Titusville campus, most in-state students will pay $10,338; most out-of-state students will pay $19,528. In-state nursing students will pay $15,034 and out-of-state students will pay $27,964.