Against Backdrop of Record-Breaking Successes, Pitt Board Approves Budget, Sets Tuition Rates

PITTSBURGH-Against the backdrop of record-breaking successes in advancing key institutional priorities set by the University of Pittsburgh Board of Trustees 10 years ago, its Executive Committee approved on July 15 a $1.52 billion operating budget for Fiscal Year (FY) 2006. This action follows the enactment, earlier this month, of the FY 2006 Commonwealth budget, including appropriations for Pitt and for Pennsylvania's other state-related universities.

In commenting on this action, Pitt Chancellor Mark A. Nordenberg said, "The principal lesson of the last decade is that our remarkable progress as a University has been directly tied to our demonstrated commitment to the highest levels of quality. That commitment has been critical to our successes in attracting larger numbers of better-qualified students, in recruiting and retaining outstanding faculty members, and in expanding and enhancing our programs. This budget positions us to sustain our momentum by making further investments in institutional quality. It also is shaped by our continuing commitment to cost effectiveness and by the reality that our state appropriation remains several million dollars lower than it was just a few years ago."

In a public presentation to the University's Board of Trustees at its annual meeting late last month, Chancellor Nordenberg reported on a decade of remarkable progress as the University pursued its multiple missions as a leader in education, a pioneer in research, and a partner in regional development. Among the key examples he cited, undergraduate applications more than doubled in the last decade and the academic credentials of enrolled undergraduates soared, faculty and alumni of the University received national and international recognition for their achievements, and the programs of the University became even more critical, not only to the educational needs of the Commonwealth, but also to the economic development ambitions of the region.

The single largest revenue component of Pitt's budget, and by far the fastest growing, is the funding attracted, generally through highly competitive peer-reviewed processes, to support research conducted at the University. Those funds grew from $230 million to about $600 million from FY 1995 to FY 2005 and are projected to increase to about $633.5 million in FY 2006, a further increase of 5.6 percent. These are the funds that support much of Pitt's pathbreaking research, that help generate jobs throughout the region, and that have enabled the University to increase its own employment base by nearly 25 percent during the last 10 years. Pitt's progress on this important front is reflected in rankings released by the National Science Foundation last year showing that, during the most recently measured five-year period, the University moved from the 20th position to the 10th position among all American universities in terms of total federal science and engineering research and development support.

Another critical revenue component is the Commonwealth appropriation, which this year includes a welcome, but modest, 2.5 percent increase in the Educational and General Expenses (E&G) funding, set at $154.1 million. The Commonwealth's FY 2005-06 budget also presents a new form of uncertainty with respect to the funding provided for Pitt's Schools of the Health Sciences, including the School of Medicine. The Commonwealth hopes to obtain matching funds from the federal Medicaid program in order to provide approximately half of the governmental funding for these Health Sciences programs at Pitt. In the event that this proposal, known as "Federalization," is approved at the federal level, Pitt's School of Medicine would receive a $2.2 million increase in total funding, combining state and federal dollars, compared to 2004-05. If federal approval is not forthcoming, the budget bill passed earlier this month expressly states that these programs shall receive funding that is no less than last year.

Even with the increased funding possible through the Federalization proposal, this fiscal year's total appropriation of $175 million is about $3.5 million less than the amount appropriated to Pitt in FY 2002, in actual dollars unadjusted for inflation. If the Federalization initiative is not successful, this fiscal year's appropriation would be about $5.7 million less than the amount appropriated in FY 2002. From FY 1996 to FY 2006, Pitt's state appropriation has fallen from being more than 19 percent of its budget to less than 12 percent. These appropriation funds, unlike research grants, are invested principally in educational programs. In fact, the state appropriation and student tuition and fees are the principal forms of support for any public university's instructional mission.

In commenting on state support, Nordenberg said, "The University recognizes that this was a very difficult budget for the Commonwealth because of the increasing costs and declining federal support for medical assistance programs. The University has enjoyed a productive and effective partnership with the Commonwealth of Pennsylvania since Pitt became a state-related university nearly 40 years ago. Adequate Commonwealth support is vital for the University to continue to excel in its educational, research, and economic development roles."

In commenting on the budget and more generally on the economic climate, Arthur G. Ramicone, Pitt's vice chancellor for budget and controller, stated, "In its new budget, the University is balancing a careful mix of targeted new investments with disciplined budget reductions totaling $5 million. Although we can again this year speak about the many positive features of our strong financial position, the budget reductions continue the administration's policy of seeking greater efficiencies, focusing a critical eye on current operations and programs, and redirecting financial resources to higher-priority programs. As always, rising costs continue to place a strain on resources and make the achievement of the University's aspirations more challenging. Like all business enterprises nationwide, Pitt must confront rapidly rising healthcare and utility costs, and continue to invest in both physical security and security measures for the protection of the institution's information technology resources. And, of course, universities must continually cope with challenges peculiar to them, including the rapidly rising costs of technical journals and other library materials, the highly competitive market for top faculty members, unusually heavy dependence on new technologies, and the investments required in emerging areas of education and research. As has been true in past years, both aggressive cost control and forward-looking investments have been at the core of the new University budget."

According to Nordenberg, "Astute targeting of investments in academic and student life enhancements has been a key driver of our recent successes. Quite clearly, we are viewed as an attractive provider of high-value programs by prospective students." Continuing that pattern of investments in the quality of the academic and student life experiences, areas targeted for increased funding in the FY 2006 budget include curricular innovations, laboratory renovations, faculty recruitment and retention, information technology upgrades, library enhancements and acquisitions, public safety initiatives, student service enhancements, and research development.

To help fund these initiatives and to meet rising costs, the approved budget includes a 6 percent tuition increase for in-state students and a 3 percent tuition increase for out-of-state students. The lower out-of-state percentage increase produces a dollar increase that is roughly equivalent to the dollar increase for in-state students and was prompted by the University's desire to stay competitive with peer institutions. Tuition increases will be somewhat lower for students enrolled in the Schools of Medicine and Dental Medicine. The financial aid component of the budget has been increased from $110 million to $121.7 million, an increase of nearly 10 percent, to help meet student needs, including those related to tuition rate increases.

The approved budget also includes a faculty and staff salary increase pool of 3 percent. In commenting on this element of the budget, Nordenberg stated, "This is an absolutely essential investment that better positions us to successfully retain and support the very people whose work has been so central to our many successes and to recruit those who will help take us to even higher levels of achievement and impact."

Building Pitt's budget is a process that spans most of the year. It begins with the recommendations of planning and budgeting committees within the various responsibility centers of the institution and includes subsequent recommendations to the chancellor from a University-wide planning and budgeting committee, which is chaired by the provost and includes administrators, faculty, staff, and students. Recommendations made by the chancellor are submitted first to the board's Budget Committee and then to the board or its Executive Committee for final approval. Because the Commonwealth budget had not been finalized by the time of the annual meeting of the full board in late June, the Executive Committee took action July 15.

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7/15/05tmw