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September 3, 2009

State budget impasse holds up Pitt appropriation

Pennsylvania’s 2010 fiscal year has entered its third month without a full budget in place and with no firm word on how much state funding and federal stimulus money could be coming Pitt’s way. The stalemate is causing headaches for Pitt administrators who are trying to plan University finances not only for the current fiscal year, but also for the upcoming one.

Noting in a Sept. 2 University Update that “there have been few tangible signs of progress,” Chancellor Mark A. Nordenberg stated, “At this point, it could not be viewed as surprising if the state was without a budget, and the University was without an appropriation, for a prolonged additional period,” adding, “We will attempt to manage our finances in ways that minimize disruptions.”


If state appropriations are set prior to the University Board of Trustees’ June meeting, the board can act on a University budget.

In years when the state appropriation has not been finalized, Pitt has relied on a later meeting of the board’s budget and executive committees to set the University budget, salary pool and tuition rates for the upcoming year.

In this year’s July 16 meeting, only one of those three issues was addressed — with an asterisk.

Given that a pay freeze was announced in March, the salary pool issue was moot. And without the state appropriation confirmed, the trustees could not act on a University budget for the 2010 fiscal year.

The committees approved tuition increases of 4 percent for most in-state students and 2.5 percent for out-of-state students on the Pittsburgh campus for the 2009-10 academic year with the caveat that a tuition surcharge could be imposed if an estimated $31 million gap in state funding to Pitt remains. (See July 23, 2009, University Times.)


Gov. Edward G. Rendell signed a budget bill on Aug. 5, but vetoed all funding except for approximately $11 billion in line items related to payroll and public protection.

Pitt and its fellow state-related universities Penn State, Temple and Lincoln, are not funded through the main state budget bill, but as “non-preferred” institutions receive their appropriations through individual bills that are approved after the state’s budget is passed.

(Two bills have been introduced for Pitt. As they currently stand, each would appropriate $160.49 million in state money for Pitt, but House Bill 1711 includes $10.24 million in federal stimulus funds for the University, while Senate Bill 1036 would give Pitt nearly $7.68 million in stimulus funds. None of the numbers is definite until a bill is approved.)


Pitt receives its state appropriation in the form of monthly wire transfers of approximately $15 million-$16 million, said Vice Chancellor for Budget and Controller Arthur G. Ramicone. Because the transfers for July and August have not been received, “We’re doing without about $30 million,” he said.

Ramicone also said some state-funded research money is being delayed due to the lack of a state budget.

On a positive note, revenues from fall tuition bills that were sent in July are being received.

And, he said, July and August are relatively low-expenditure months compared to the months ahead, now that students have returned for the fall term. Costs for compensation, supplies and utilities all increase. “Everything goes up when you have 30,000 students on campus,” he said.

Without the state dollars in hand, the University is using existing cash reserves and could dip into lines of credit it has established. However, Ramicone said, Pitt managed without borrowing money in 2003 (when a state budget was delayed until December) and likely would not tap into its lines of credit this year in order to avoid the expense of borrowing.

He said the University had built up its cash reserves during the previous fiscal year — not expecting there would be a delay in receiving its state appropriation, but in response to earlier disruptions in the economy and in case credit markets would freeze up again. Given the current low interest rates, using the reserves results in a “modest loss” of investment income, Ramicone said.

A bigger impact on the University is on planning. Ramicone said although unit leaders have planned accordingly for flat or reduced state funding, budget amounts remain undefined.

Not knowing the net level of funding prevents the University from moving ahead with target budgets for the University’s responsibility centers.

Without budget amounts to enter into Pitt’s financial system, monthly level reports can show expenses, but information on funding levels is absent.

The University also is hampered in preparing its annual budget request for the fiscal year that begins July 1, 2010. The document must be submitted to the state Department of Education by Sept. 22. The lack of a University budget complicates the process, Ramicone said, because next year’s request builds on current year budget figures, which are not yet set. “Without it, it’s hard to do anything,” he said.

Vice Chancellor for Governmental Relations Paul A. Supowitz said the University is working on the narrative portion of the budget request, but can’t complete the remaining portions without 2009-10 budget amounts.

The University found itself in a similar situation in 2003, Supowitz said. That year, the University was permitted to submit the document later than usual rather than sending one full of blank spaces, he said, adding that he hopes the Department of Education will take a similar tack this year if a state budget is not passed soon.

A state Department of Education spokesperson said Wednesday that pushing back the deadline is under consideration, but no decision has been made.

Another financial consideration for the University is that the lack of a state budget has prevented the Pennsylvania Higher Education Assistance Agency from finalizing or disbursing grant awards for the new academic year. (PHEAA loans, which are not funded by an appropriation from the state, are not affected.)

Consequently, Pitt cannot tap into PHEAA grant reimbursements that Ramicone said typically would be received in late August or early September.

Betsy Porter, director of the Office of Admissions and Financial Aid, said the issue is invisible to students, but essentially means the University is providing short-term, no-interest loans to students who are expecting PHEAA grants.

This term Pitt has 3,291 full-time students with fall PHEAA grants totaling nearly $4.84 million and 99 part-time students with PHEAA grants totaling $83,705, she said.

As is typical each year, Pitt’s financial aid office receives eligibility information and grant amounts from the agency and posts the data to Pitt’s student financial aid system, Porter said. The grant amounts are credited to the students’ accounts and, depending on the balance of the student’s account, either a bill is generated or a credit or refund is due.

What’s different in light of the lack of a state budget is that Pitt — and most universities, Porter pointed out — have disbursed the estimated grant amounts to student accounts, but cannot draw down the funding from PHEAA.

Porter said, “In essence the University has provided disbursements to the students without having the ability to be reimbursed,” noting universities have been assured by PHEAA that the money will be passed through quickly once its state appropriation is approved.

—Kimberly K. Barlow

Filed under: Feature,Volume 42 Issue 1

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