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July 26, 2007

Salary pool up 3.5%, tuition up 6.5%

Pitt’s Board of Trustees has approved a 3.5 percent increase to the employee salary pool as part of a 2008 fiscal year operating budget of $1.64 billion.

The University’s largest expense in the FY08 budget is an estimated $919.5 million for employee salaries, wages and benefits, making up more than 59 percent of the budgeted expenses.

While the overall salary pool exceeds the most recent Consumer Price Index (CPI-U, all urban consumers) inflation rate of 2.5 percent, the way the pool will be distributed means that, as has been the case for the past decade, not all University employees will realize an increase in their buying power.

Chancellor Mark A. Nordenberg on Wednesday announced the 3.5 percent salary pool increase will be allocated as follows: 2 percent for salary maintenance increases for employees whose performance has been rated to be at least satisfactory; 1 percent for merit, market and equity adjustments to be made at the unit level, and 0.5 percent to be distributed by senior officers to address market imbalances among various units within the University.

The University Planning and Budgeting Committee (UPBC) and the Senate budget policies committee (BPC) both recommended a 3 percent salary pool increase, recommending as well that if more funds were available they be placed in the maintenance, or cost-of-living, component.

“Because of a successful debt refinancing that was concluded in June, we did find ourselves in a position to invest further in the salary increase pool, raising its level to 3.5 percent,” Nordenberg stated. “Building on UPBC’s recommendation, with which I agree, I am allocating that added 0.5 percent to the cost-of-living component.”

The pay raise, retroactive to the July 1 start of the fiscal year, will appear in September paychecks.

The last time the maintenance increase portion of the pool at least matched the corresponding CPI-U figures was in Pitt’s FY99 budget, when the 1.7 percent maintenance component equaled the 1997 CPI-U rate. (CPI figures are reported on a calendar year basis and affect Pitt salaries for the fiscal year numbered two years later.)

Faculty and staff representatives commended the administration for its efforts to minimize the pay slide in the face of a difficult budget year.

Staff Association Council President Rich Colwell told the University Times, “The salary and job classification committee of the Staff Association Council made a recommendation of an annual salary increase of 6 percent. Although the salary pool did not meet those recommendations, SAC is encouraged to see that for the second year in a row the pool increased by 0.25 percent over the previous year. This was accomplished by proper stewardship of the University’s budget. It is heartening that the University is recognizing that staff members sustain and facilitate the mission of the University; therefore it is essential to have staff salaries competitive.”

Last year, trustees set the FY07 salary pool increase at 3.25 percent, up from 3.0 percent increases in each of the prior three years.

University Senate President John Baker commended Pitt administrators for allocating an overall salary pool that surpasses the rate of inflation in spite of the state’s small funding increase.

“This 3.5 percent increase is nearly 1 percent higher than the 2.54 percent rate of inflation for the 12-month period ending Dec. 31, 2006. It is welcome news because it ends a two-year slide in which the annual salary pool increase has been below the annual rate of inflation, causing many faculty and staff to lose buying power. It also shows that the administration is committed to trying to keep our salaries competitive with those of other universities and employers, which is essential for retaining high-quality faculty and staff,” Baker stated.

Pitt’s FY08 budget, recommended July 20 by the board’s budget committee and immediately approved by its executive committee, represents an increase of 5.8 percent over last year’s budget of $1.55 billion.

The budget also includes tuition hikes raging from 2 to 6.5 percent with net tuition revenue of almost $387.7 million.

Tuition increases for Pitt students include a 6.5 percent increase for in-state students and a 4.5 percent hike for out-of-state students on the Pittsburgh campus. At the regional campuses, in-state students will see a 4 percent increase, while out-of-state tuition will rise 2 percent.

To assist students in need, Pitt’s financial aid budget was increased accordingly, Pitt Vice Chancellor for Budget and Controller Arthur G. Ramicone said.

Under the current two-tiered system, Ramicone said that tuition for in-state students in the School of Arts and Sciences who enrolled prior to fall 2004 will be $10,910; those who enrolled later will pay $12,106. University spokesperson Robert Hill said that this is the final year for the tuition differential.

Baker noted that Pitt’s tuition increase may present a hardship for students and said Chancellor Nordenberg undoubtedly will be criticized for the decision, “but given the continued lack of adequate support from the state, it was necessary in order to provide Pitt faculty and staff a pay raise pool that exceeded the inflation rate for the first time in three years.”

He added, “Pitt must stay competitive in faculty and staff salaries if it wants to continue as an elite public research university. The state legislature seems not to care about this, nor the fact that Pennsylvania has the most expensive public universities in the nation. If they do not increase their support for higher education, tuition will keep going up and college may become unaffordable for some Pennsylvania residents.”

Senate BPC chair Stephen L. Carr echoed Baker’s concerns about the need for salaries to stay competitive in order to attract and retain faculty and staff.

He stated, “More funding for faculty salaries is crucial to attract and retain the teachers, scholars and researchers who provide the central core of what the University offers; again, more endowed chairs and funds are going to become ever more necessary in this arena. There are also long-term concerns among staff, especially those who have done excellent work for the University over many years. At this stage of the process, it’s hard to know if these concerns will be able to be addressed; we’ll all need to attend carefully to the implementation of this budget.”

He also expressed concern over the tuition increases, adding that in addition to seeking more endowed scholarships, he’d like the University to explore additional options for helping students financially.

However, Carr commended the budget, given the current fiscal climate. “The current levels of state support and ever-increasing utility costs ($57 million in the current budget) impose strong constraints on the budget. I believe this is a smartly constructed proposal that continues to address the long-range goals of the University. It makes necessary compromises across competing interests and concerns, and I support this budget,” he stated.

Trustees on July 20 also approved an FY08 capital budget of nearly $194 million. Two projects accounted for 40 percent of the budget: $41.7 million for renovations to Parran and Crabtree halls, home of the Graduate School of Public Health, and $35.8 million in continuing renovations to Benedum Hall, which houses the School of Engineering.

Also included are what Ramicone called “substantial investments” in the University Club and Falk School. The capital budget includes $13.7 million for renovations and expansion of Falk School and $15.6 million for University Club renovations. Exactly what is included in the University Club project is “still being programmed,” Ramicone said, adding that the plan is expected to be brought to Pitt’s property and facilities committee in September.

Ramicone said the University has budgeted $41 million in state funding toward the capital budget, with the remainder being funded through auxiliary funds, plant reserves, debt service from the E&G budget and gifts.

Nordenberg said the University was prepared to move forward at the June 29 trustees meeting on a budget for the fiscal year that began July 1, and had a backup plan to take action at budget and executive committee meetings July 13, but delayed taking action because the state legislature had not yet approved its budget.

The state legislature on July 16 approved a 2.16 percent increase in Pitt’s appropriation, including a 2 percent increase to Pitt’s largest line item, the education and general (E&G) budget.

Pennsylvania’s appropriation toward Pitt’s FY08 budget totaled $186.9 million, including $164.3 million in E&G funding.

In spite of Pitt’s request for an 8.5 percent increase, the only change to Gov. Edward G. Rendell’s proposed 2 percent increase for Pitt was an additional $300,000 allocated by the legislature for rural education outreach.

Ramicone noted that the 2 percent increase is less than the rate of inflation, which, he said, “disadvantages the University as we move forward.” While the most recent CPI-U figures put the inflation rate at approximately 2.5 percent for 2006, the University’s costs are better reflected in the Higher Education Price Index, which was 5 percent in 2006, he said.

Ramicone said Pitt made a realistic request based on needs, but that the needed amount “was not what we received, so we adjusted accordingly.”

He made pointed reference to the continuing decline of state support for the University. The state’s appropriation fell from 32 percent of Pitt’s operating budget in 1975 to 19 percent in 1995. It has continued to fall, now representing a little more than 11 percent of the budget.

Ramicone noted that the percentage of support from the state has been flat for the past seven years, while the state’s own budget has gone up 36 percent — rising from $19.9 billion in 2001 to more than $27 billion now. Had state support for Pitt kept pace with the state’s 36 percent budget increase since 2001, Ramicone said, the University would be receiving $55 million more than its current appropriation.

He said that $10.2 million of the commonwealth’s support is funded by federal Medicaid dollars through the state Department of Public Welfare budget, leaving the actual amount of direct state support for Pitt at $176.7 million.

Ramicone said the state’s support is $700,000 less than in fiscal 2001, not adjusted for inflation, adding that had state support kept pace with inflation, Pitt would be seeing an additional $20.7 million in this year’s appropriation.

“Clearly the commonwealth has made a decision to invest commonwealth dollars in other initiatives,” he said, adding that the result is tuition increases.

—Kimberly K. Barlow

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