University Times

A 2.5 percent increase in the salary pool and a 3.3 percent blended tuition-rate increase are part of the University’s $1.97 billion fiscal year 2015 operating budget approved last week by the Board of Trustees executive committee.

While students have a clearer picture of their finances for the coming year, as of the University Times press time on Wednesday Chancellor Mark A. Nordenberg had yet to announce how the salary pool increase will be distributed among Pitt employees.

Typically the pool is divided with portions allocated for salary maintenance for employees whose work has been assessed as satisfactory; for merit, market and equity adjustments at the unit level, and for distribution by senior officers to address imbalances among the various units that report to them.

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John J. Baker, co-chair of the University Senate budget policies committee (BPC), which provides input to the chancellor as part of the budget process, said BPC made a recommendation on the salary pool, but declined to disclose details, pending the chancellor’s pool distribution announcement.

“Chancellor Nordenberg and the Board of Trustees have approved an operating budget for the coming fiscal year that keeps tuition increases to a minimum and gives a modest 2.5 percent salary increase to employees, despite flat funding from the state and decreased federal grant funding,” Baker commented.

Baker said he hopes the pool is distributed 1.5 percent for satisfactory performance and 1 percent for merit/market/equity to guarantee employees who perform satisfactorily a raise close to calendar year 2013’s 1.7 percent rate of inflation.

“Whatever the final breakdown, the 2.5 percent salary increase for employees is very welcome and, like last year, is higher than what was recommended by the University planning and budgeting committee. In the official press release, Chancellor Nordenberg said: ‘This year’s modest salary-increase pool, crafted in times that continue to be very challenging, reinforces the fact that our people are a high priority.’ I agree that this reinforces that Pitt faculty and staff are a high priority, and thank the chancellor and his administration for finding a way to give Pitt employees a modest, but reasonable, salary pool increase in difficult times.”

Senate President Michael Spring also commended the University for awarding the increase amid difficult financial times, but expressed concern for how Pitt salaries keep pace with inflation.

“At a time when the financial environment within which Pitt operates continues to provide challenges, the announcement of a 2.5 percent increase is great news. The University continues to make all the right moves and seems to always be positioned to deal with the challenges that arise,” Spring told the University Times.

“The matter of how we divide funds for satisfactory performance and merit increases is, in my opinion, much ado about very little in the context of such small amounts,” he said.

“I continue to be concerned about the fact that our most junior staff and faculty are faced with real increases in the cost of living that are not easily offset by the increases we can afford,” Spring said, citing federal consumer price index (CPI) data that showed increases in the 2-5 percent range in food and utility cost categories over the past 12 months, and rentjungle.com figures that estimated a 9 percent increase in average rental housing costs in the Pittsburgh area in the past six months alone.

“I am reassured by discussions with some of our responsibility center heads who indicate a high level of sensitivity to this issue,” Spring told the University Times. “It is clear that what is on the one hand a significant salary pool increase by the University is on the other hand not as much as some need to stay up with cost increases for the necessities.”

Rich Colwell, president of the Staff Association Council, said, “Any pay raise is a good thing.” However, he too expressed concern for lower-paid staff members whose raises may be wiped out by inflation and rising health insurance costs.

As an example, for a staff member earning $30,000 per year, a 2.5 percent increase would be $750, Colwell said. The U.S. Bureau of Labor Statistics reported this week that the CPI rose 2.1 percent over the last 12 months, which equates to $630 less in buying power. Coupled with this year’s $10 per month ($120 per year) increase in the cost of Panther Gold HMO family coverage (see April 17 University Times), that staffer would see no real gain, Colwell said.

He added that deans and department heads often have discretion in awarding a portion of the increase, meaning that some employees may not receive the full 2.5 percent raise. “Hopefully that will not happen this year when we are working with a low amount that does not give you much room for a real increase,” Colwell said.

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Gov. Tom Corbett’s approval on July 10 of a $29.03 billion state budget and his signature on the University’s $135.99 million appropriation bill paved the way for Pitt trustees to take action on the University’s operating budget, as well as on a $69.25 million capital budget for the fiscal year that began July 1. (See related story this issue.)

Following nearly $70 million in state funding cuts four years ago, Pitt’s appropriation has remained flat. Likewise, Pitt’s own operating budget has remained flat — at approximately $1.94 billion in the past three fiscal years, before the current year’s increase of  $27.7 million, or 1.42 percent.

Nordenberg, in presenting the budget proposal to the board’s budget and executive committees on July 18, said: “This is a budget that is a sound budget. It is a budget that advances the goal of quality as well as attaching a continuing priority to cost-effectiveness.”

The chancellor said, “It is important that there has been input from all of the constituent groups of the University at critical points along the way and the activities of each of us are driven by the knowledge that our resources are limited, that we must continue to do more with less, that we’ve got to be careful stewards, that we need to invest wisely, that our investments must be driven by a commitment to deliver quality in everything that we do.”

Revenue

Grants and contracts of $669.4 million are the largest revenue item in the University’s FY15 operating budget of $1.97 billion, but the amount is down from a year ago.

In the FY15 budget, Pitt expects revenue of $229.14 million in grants and contracts from education and general (E&G) operations and nearly twice that amount, $440.26 million, from the School of Medicine division.

Last year, research contracts were budgeted at $705.25 million, with an additional $5.82 million in stimulus grants and contracts.

The second-largest revenue source is net tuition, budgeted at $579.18 million — nearly $557.7 million from E&G and $21.49 million from the medical school division.

Pitt’s commonwealth appropriation, including medical school funding, is expected to remain essentially flat, totaling $147.39 million in FY15.

Endowment distributions and investment income are budgeted at $109.21 million, up significantly from last year’s $34.44 million.

Arthur G. Ramicone, Pitt’s chief financial officer, said philanthropic outreach has gone well, adding that the endowment distribution per share is increasing 5.3 percent in the FY15 budget.

“That helps support chairs and fellowships and also student aid. So that’s quite helpful,” he said. A $110 million draw from the endowment is projected, for a distribution of 4.25 percent of the three-year trailing average.

Expenses

Compensation is relatively flat — increasing $2.2 million in the FY15 budget to $1.13 billion. The FY15 compensation line item is made up of $877.17 million in salaries and wages and $255.6 million in fringe benefits.

While E&G compensation rose 2.5 percent, up $17.96 million, to nearly $735.44 million in FY15, medical school division compensation dropped by 3.81 percent, down $15.76 million to $397.33 million.

Rounding out the University’s $1.91 billion in FY15 expenses are:

Business and professional expenses, $294.79 million; supplies, $100.01 million; utilities,  $51.21 million; maintenance and facilities, $43.75 million; depreciation, $170.1 million; interest, $44.96 million, and other expenses, $69.12 million.

—Kimberly K. Barlow