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January 24, 2013

Impact of cost-saving measures outlined

In a special presentation at Faculty Assembly’s Jan. 22 meeting, Arthur G. Ramicone, chief financial officer, and David DeJong, vice provost for academic planning and resources management, outlined the impact of last year’s voluntary early retirement program for staff (VERP) and other recent efforts to cut costs and improve operational efficiencies at Pitt.

DeJong commended the work of Ramicone and his staff: “When we look at the very difficult financial climate the University has been working under, it’s really been their focus to, as much as we possibly can, keep the University’s resources focused on the main components of its mission: teaching, research and public service.”

Ramicone noted that the goal of boosting operational efficiencies has a long history: It was among the Board of Trustees’ 1996 mandates for improving Pitt’s performance. (See Feb. 29, 1996, University Times.) Guiding principles behind recent aims to improve cost efficiencies include remaining student-centric, reinvesting in core strengths and focusing on technology, he said.

When it comes to cutting costs in Pitt’s $1.94 billion budget, reductions come mainly from the $815 million education and general (E&G) budget, rather than from medical school, research or auxiliary funds, Ramicone said. Of the E&G budget, some two-thirds of expenses are related to compensation.


Ramicone said the voluntary early retirement program, which motivated 352 staff members to retire as of June 30, 2012, saved an estimated $22.8 million. The University budgeted 30 percent to replace departed staff, yielding a net savings of about $16 million, he said.

The provost’s area realized a $5.6 million net reduction after rehiring, DeJong said. The areas in the provost’s area most significantly affected by VERP included the registrar’s office and the Office of Admissions and Financial Aid — areas where the administration is “trying to minimize the impact on the main planks of the University’s mission in particular.”

“As VERP has hit different schools, they’ve responded in different ways,” he said, noting that the Dietrich School of Arts and Sciences has been implementing cross-departmental administration sharing.

“That can involve some bumps and some compromises, but I think in the long run initiatives like that can be accomplished without disrupting too much of the level of service that’s being provided.” He added that some schools also are experimenting with sharing administrative staff. “We’re hopeful that we can help schools identify some synergies where real savings will come without disruption of service.”

In response to a faculty member’s question, DeJong said that there are no plans for a similar early retirement deal for faculty.

Other savings initiatives

Ramicone enumerated other areas of cost savings over recent years:

• For FY09-FY13, channeled spending, consolidation of vendors and renegotiation of contracts have helped cut some $78 million in costs.

• Changes to the post-retirement medical plan have saved some $40.5 million, or about $10 million per year.

• Energy conservation has saved some $8 million.

• The salary freeze in FY10 and delay in salary increases in FY12 saved $19 million.

DeJong noted that the salary freeze stands to yield long-lasting benefits to the University because it enabled Pitt to bring in new faculty. “It was remarkable to see the quality of the hires that we were able to accomplish in a year when there weren’t very many institutions like us that were active on the market,” he said, labeling the freeze a “strategic choice … one that allowed us to stay active in recruiting markets in a situation we otherwise would not have been able to do.”

DeJong enumerated other initiatives aimed at improving efficiency and cutting costs:

• Virtualization of enterprise and departmental servers, including centralizing Pitt’s computing power at the Network Operating Center (NOC) in RIDC Park. Virtualization cuts the amount of hardware while increasing computing power, he said. A side benefit is that it frees up valuable office space once occupied by that hardware, he said.

• Paperless initiatives including online evaluation of teaching (see related story, this issue), increased use of online messages to prospective students by OAFA, paperless payroll information, increased online library content and the medical school’s move to paperless promotion and tenure decision cases — a model DeJong said he hoped could expand beyond the medical school.

• Review and reduction of low-enrollment courses.

• Administrative reorganization, including combining the administration of Pitt-Titusville and Pitt-Bradford. “Certainly that has come with significant transition costs. But we are very hopeful that those costs will be rewarded with our ability to move forward in a long-run sustainable way, not just there, but in all of our operations,” DeJong said.

“Recognizing that there are transition costs with all these things, our real hope is that when we look back a couple years from now, we’ll see the level of our operations are where they were before we started doing these things. With that goal in mind, I hope that makes the transitions at least worth going through.”

—Kimberly K. Barlow

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