By SUSAN JONES
Last week’s hiring freeze announcement may have come as a surprise to some Pitt employees, but Dwayne Pinkney, Pitt’s executive senior vice chancellor for administration and finance and chief financial office, told Faculty Assembly on March 12 that people in higher education finance have known for some time that costs were outpacing revenues and something was going to need to change.
While the uncertainty of funding from the federal government has accelerated the need to take action, he said, “We probably still would have been in this place maybe nine months from now, maybe 12.”
When asked at the meeting what other measures the University is considering to deal with the financial uncertainty, Pinkney wouldn’t speculate on any specifics, but he did say, “We will be considering other measures to slow our spending and to make sure that we are fiscally sound.”
At an interview this week, Pinkney expanded on some of the financial pressures that Pitt and all institutions of higher education have been experiencing.
“We have been in this relatively high inflationary period for a sustained period of time,” he said. “In the most recent years, … revenues have been growing, as have expenses. But more recently, expense growth has started to eclipse revenue growth. … That obviously isn’t sustainable.”
Pitt is in a better position to weather this storm than some of its peers — with modest rises in tuition the past few years and continued high demand among new applicants.
“The actions that we’ve taken are designed to make sure that we are positioned to navigate through this and that we’re not cavalier in our approach, and that we don’t take for granted the relative good position we’re in,” Pinkney said.
Compensation, he said, is the largest of Pitt’s expenses, “so the freeze in hiring is designed to address that.”
While there will be exceptions, those policies are still being worked out for faculty and staff. Pinkney said they’ll be looking at every hire, including replacements for existing positions and particularly any new positions, to see if there’s a critical need to fill that job. Some of the possible exceptions might be in direct student support roles and in public safety, he said.
Cutting expenses
The other announced cost-cutting measure is “asking all university leaders, responsibility center heads, department heads, to be very circumspect in taking on new expenses and managing existing expenses.”
The decisions on what expenses will be cut will be left up to the unit heads, Pinkney said, but the idea is to limit discretionary spending on items like travel, equipment, supplies, furniture — “things that are good to have, that are useful but not necessarily needful.”
Pinkney said there’s no specific target on how much expense reduction is needed, because it’s still very much up in the air how much Pitt might lose in federal funding.
“We knew that we needed to pump the brakes anyway,” he said. “We didn’t do that with a specific dollar amount or percentage. It’s general guidance that we need to slow down, and we will be monitoring that to see if, in fact, expenses have slowed, and will continue to have conversations and lean in where we need to to make sure that’s taking place.”
As part of the overall review of expenses, Pitt also is taking a look at the capital budget.
“This is probably a good moment for us to pause and to get our arms around where we think things are going to net out, and that should inform our plans with respect to capital,” he said. “We don’t think we’re falling off of a cliff here, but we do think … that it would be a bit tone deaf for us to move down a path where we are out actively promoting a very ambitious capital plan in this moment. I think it would be confusing to our constituents, both internally and externally, if we weren’t recognizing the moment that we’re in.”
Pitt is in the midst of updating its master plan, and that work hasn’t stopped, Pinkney said.
“It’s important to do master planning, and we wouldn’t stop that work, because it’s critical to what we do,” he said. “In fact, I could argue that the work is just as important, if not more important, now than it ever was before. But we want to be clear in our signals, and we don’t want to suggest that we are promoting a very ambitious plan to build new buildings. We always have the responsibility to think about our current space, the configuration of that space, how we are using that space.”
Pinkney said he plans to keep the lines of communication open with the Pitt community about any upcoming changes, and share information in a timely fashion. He also wants to hear from the University community. He recently gave a presentation and took questions at Faculty Assembly and is planning a town hall for the people who are in the units that report to him.
NIH and other federal funding
There have been varying estimates of what Pitt stands to lose if the National Institutes of Health and other federal agencies indirect costs reimbursement is reduced to 15%. The current NIH rate for Pitt is 59%.
If the number is calculated on the awards Pitt received in 2023-24, the loss would be $163 million if just the NIH funding is cut; $169 million if it is all agencies in the Department of Health and Human Service (which includes NIH); or $197 million if cuts are made to funding from all federal agencies.
Pitt ranked sixth in NIH funding for 2023-24, with 1,238 awards worth $661.2 million, according to the Blue Ridge Institute for Medical Research’s annual list.
So far, Pinkney said, Pitt has been able to draw from already allotted federal funds for current grants, but for new awards, the panels that need to be formed to review them are being delayed.
Right now, there’s no move by Pitt to negotiate a new indirects rate separately until its scheduled renewal, he said. The process for setting that rate is traditionally long and comprehensive.
Susan Jones is editor of the University Times. Reach her at suejones@pitt.edu or 724-244-4042.
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