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January 26, 2012

Provost seeks documentation, ideas for cost cutting

In light of a mid-year rescission of $6.8 million in state funding, the Office of the Provost is soliciting grassroots ideas for additional cost cutting from deans, administrators and the University Senate budget policies committee (BPC).

BPC chancellor’s liaison David DeJong, vice provost for Academic Planning and Resources Management, shared details of a Jan. 6 memo from Provost Patricia Beeson and invited discussion at BPC’s Jan. 23 meeting.

“All the help we can get is welcome. That’s the spirit in which we’re sharing this memo,” DeJong told BPC members.

“We are asking for help in identifying areas where in the past we have achieved cost savings and, I think more importantly, looking forward in the planning process that we’re engaging in to have a watchful eye on further opportunities for savings,” DeJong said, adding that he and Beeson “agreed that it would be a useful thing for this committee to engage itself in as well.”

In her memo, Beeson, who as provost chairs the University Planning and Budget Committee (UPBC), asked Council of Deans members, Executive Vice Chancellor and General Counsel Jerome Cochran and Chief Financial Officer Arthur Ramicone to solicit cost-cutting proposals from departmental planning and budgeting committees or other governance committees and to submit their recommendations to UPBC by March 15.

UPBC each year presents a budget recommendation to the chancellor, who then submits budget proposals to the Board of Trustees for action.

Beeson also requested that the deans and administrators document for her by Feb. 1 the cost-saving measures their units have implemented since fiscal year 2009. Citing recent state support that has been flat, at best, Beeson stated, “We have managed to advance our mission and our institution by focusing on our priorities and finding ways to do more with less.” Noting that conservation and reallocation “has become such an ingrained part of our culture that our cost-saving efforts often go unnoticed both internally and externally,” she stated that it is important to document the savings not only to share best practices within the University, but also to “make our case more effectively with those whose support we need if we are to succeed.”

DeJong told BPC, “Obviously we’re always looking for opportunities for savings, but now we’re in a situation where on top of the significant reductions we took at the beginning of the year, now we’ve got this mid-year rescission, which is 5 percent from the state.” (See Jan. 12 University Times.)

“When you recognize that the commonwealth appropriation is about 17 percent of the set of funds that you can describe as somewhat discretionary, and the fact that we’ve already made a lot of commitments, given that the rescission happened midyear, this is a difficult piece of news.” DeJong said that since the governor’s Jan. 4 announcement he has been working with heads of Pitt academic units “looking to achieve more than 1 percentage point reductions in their budgets.”

Although the state appropriation makes up about 7 percent of Pitt’s $1.94 billion budget, cuts disproportionately affect the education and general budget because many other sources of revenue, such as research grants or designated gifts, must be used for their specific purposes.

As administrators await Gov. Tom Corbett’s fiscal year 2013 state budget proposal on Feb. 7, there is little optimism that it will include much good news for higher education.

Ramicone noted that a recent report by the state’s Independent Fiscal Office (IFO) projecting the economic outlook and budget for FY13-17 assumes state budget cuts for higher education won’t be restored. The IFO report stated that higher education was cut 16.1 percent, or $150 million overall, in Pennsylvania’s FY12 budget.

DeJong said, “We’re trying to prepare the best we can for any possible scenario.”

In committee discussion on the provost’s memo, BPC member Michael Spring cited the University’s streamlined purchasing system as one operation that has reduced costs and suggested considering whether other administrative processes and overhead costs could be reduced through similar innovations.

BPC pro-tem member Balwant Dixit brought up the flip side of the financial issue. “You’re asking each unit to come up with ideas to reduce spending; why [can’t] some units be asked to come up with ideas to increase their revenues?” he asked DeJong, noting that student demand is high and some departments and programs have capacity.

“We are looking at that very closely. That’s not something we’re leaving off the table,” DeJong said, adding that administrators are considering to what extent the University may be able to increase admissions.

He noted that undergraduate admissions are now 10 percent higher than in 2007. “We’ve done that very carefully, making sure that we were bringing in additional resources to keep our quality high.”

DeJong said, “We work very hard to build up the quality of our academic programs. In part that quality has a lot to do with faculty-student ratios and staff-student ratios, so it’s not something you take lightly, but you carefully weigh the costs and benefits.”

Adding students requires sufficient capacity in classrooms and labs, plus advising resources, DeJong said, noting that students expect a high-quality education at Pitt. “That’s something we don’t want to sacrifice.”

University Senate President Michael Pinsky, a medical school faculty member, agreed. Maintaining educational quality  “should be our Job 1,” he said, noting that increasing student numbers, particularly in the Health Sciences areas, isn’t as simple as merely admitting more students.

“These are very labor-intensive schools, so there are certain schools where you are not going to have the ability to expand very fast because they just don’t have the resources,” he said, adding that the number of faculty members, patients and labs is finite. Pinsky also noted that it is not desirable to create mega-freshman classes in arts and sciences “because that decreases significantly the academic experience of the students as they start their freshman year.”

BPC chair John J. Baker, a faculty member in dental medicine, pointed out that tight classroom space is a problem in some areas of the University.

“I think it would help us a lot if we could bring in more students, but there’s a limitation with classrooms,” Baker noted.

DeJong agreed, adding that he is working with the Registrar’s office “to determine where Pitt’s classroom capacity issues are and where our opportunities are.”

He said lab space also is at a premium. The expense of keeping labs up to date is one challenge; student demand is another. “Part of that’s because of absolute numbers, part of that’s because more and more of our students are taking double and triple majors,” DeJong said, adding that the number of students in arts and sciences majors who have chosen to be in a lab-based area “has increased significantly.”

Pinsky re-emphasized the importance of maintaining the University’s reputation for quality as possible cuts are being considered. “We are now a world-famous institution in every sense of the word,” he said. “Whatever we do in terms of these budget cuts, we should always have as our underlying philosophy to maintain the excellence.”

In related discussion, DeJong noted that no hiring freeze has been implemented. Ramicone said hiring for staff positions remains subject to approval by unit heads.

DeJong also discussed the impact of the recent cut in state capital budget funding for projects at the state-related and State System of Higher Education universities. Pitt’s $40 million share has been cut back to $20 million.

Projects currently under construction, such as the GSPH and Salk additions, DeJong said, are covered by the current allotment. However, other projects including the Parran/Crabtree Hall infrastructure redesign and some mid-campus and Benedum Hall addition work may be slowed. “Facilities [Management] is mapping that all, trying to match up cash flows,” he said.

Ramicone noted that the residence hall under construction at Fifth Avenue and University Place is not affected because it is being paid for with auxiliary funds.

In other business, Ramicone said his office is putting the finishing touches on a new revenue and cost attribution report. The report shows the revenues and expenses attributable to each of the University’s academic units and other responsibility centers. At one time, the report was made annually, but amid debate over both the usefulness of the document and whether the content was to be made public, administrators agreed to prepare a detailed report every three years, with briefer reports in the two intervening years. (See Jan. 6, 2011, University Times.)

The report is prepared for UPBC and typically is reviewed as well by BPC. The most recent attribution report, for FY07, was presented to BPC in draft form during a closed meeting in May 2008.

—Kimberly K. Barlow

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