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February 7, 2013

Chancellor outlines budget challenges

nordenbergPitt is facing budget challenges on multiple fronts this year, Chancellor Mark A. Nordenberg warned.

In his Jan. 30 report to Senate Council, he cautioned, “There is a very real risk that we could be under significant pressures coming from four different directions: The state, the city, federal direct funding and then the benefits that typically flow to us through health care, which is also under stress.”

State funding

“This has all the makings of another very difficult year, especially again when it comes to governmental relations and issues of funding,” the chancellor said.

“Our interactions with the state have been particularly difficult in the last few years. To be clear, things would have been a lot worse if we had not mobilized and advanced our cause with some effectiveness. But under any set of circumstances, flat funding — which was our victory last year — isn’t such a victory when your costs aren’t flat. Instead that does mean that you’re headed into a significant set of challenges and you’d better not celebrate for too long.”

Nordenberg said he, along with Pitt governmental relations staff, met in late January with legislative leaders in Harrisburg. “Hopefully we’re making some progress and softening the territory a little bit for you up there, because Pitt Day in Harrisburg is just around the corner on Feb. 12,” he said.

“I am hopeful that this will be a less contentious year in terms of state funding than the last two years have been. But dollars are still short,” Nordenberg said.

And, in budget cycle terms, he noted it is a long time until the June 30 formal deadline for a budget, “so we really do need to be active over the course of those weeks in between — advancing our case within a framework of reasonable expectations.”

City issues

“Even as the state funding has either declined or stayed stagnant, we have been forced to deal with occasional attempts by the city to exact additional revenues from us and from other nonprofits,” Nordenberg told Senate Council.

“We face a similar challenge now,” the chancellor said, elaborating on the recently formed task force mandated by the Intergovernmental Cooperation Authority (ICA), one of two state-created oversight bodies charged with monitoring the city’s financial condition. (See Jan. 24 University Times.)

“This year the ICA imposed, as a condition of its approval of the city’s budget, that the city create a task force to examine ways in which there might be a larger and more dependable flow of revenues from the nonprofit community into the city,” the chancellor said.

Representatives from Pittsburgh’s colleges and universities are among the three dozen task force members. Paul A. Supowitz, vice chancellor for governmental relations, will represent the University.

G. Reynolds Clark, Pitt vice chancellor for community initiatives, also is serving on the task force in his role as co-chair of the Pittsburgh Public Service Fund, which collects and distributes voluntary contributions from nonprofit organizations to the city.

Nordenberg said, “The task force chair is also known to many of us. Don Smith today is the CEO of RIDC, the Regional Industrial Development Corporation, but for many years he was the director of joint economic development initiatives for Pitt and CMU. So we expect that there will be a fair and balanced mindset from the chair, but there are numbers of people on the task force who are not friendly to nonprofits, who seem not very appreciative of the contributions that we have made and continue to make to the economic strength and vibrancy of the city.

“As a result, I’m absolutely certain, as this group moves forward with its work, there will be challenging moments in terms of public relations and in terms of the proposals that will surface and be considered by the group,” the chancellor said.

Federal sequestration looming

The biggest challenges are coming from Washington, D.C., Nordenberg said, citing the threat of sequestration, or across-the-board federal budget reductions, set to occur March 1.

“If a budget agreement is not reached in Washington and if sequestration is instead implemented, it will put a big squeeze on so-called discretionary spending. And two big areas that fit within that category are federal aid for students and federal support for research,” Nordenberg warned.

“There will be large cuts,” he said, noting it will be a problem not only for the University and other institutions, but also for the city and the state as well.

Information on the potential impact, including a calculation of how much each state may lose if sequestration takes effect, can be found at

“It only confirms what I said earlier, that is, that Pennsylvania will be one of the very biggest losers,” Nordenberg said. “I think most of us believe we lose in many other fundamental ways as well,” he added.

“It isn’t just short-term problems that can come from cuts in these areas. There is a longer-term kind of damage that also could be irreversible,” the chancellor said, noting that the future of the country, the state and the city are tied to the education of the young and to innovations driven by research universities.

Health-care funding cuts

“Beyond those direct reductions, we also are facing an environment in which changes in health-care payments almost certainly will have an impact on large academic medical centers like UPMC, which has been such a dependable and comparatively generous funder of research within the University, particularly within the schools of the health sciences and even more particularly with the School of Medicine,” the chancellor said.

—Kimberly K. Barlow

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