To: Members of the University Community
From: Mark A. Nordenberg
Date: July 18, 2006
Re: Budget for the New Fiscal Year

Continuing a pattern that we have seen for the past several years, the Commonwealth’s budget, including appropriations for higher education, had not been adopted by the time of the late-June meeting of our Board of Trustees. Therefore, the Board as a whole could not act on the University’s own Fiscal Year 2007 budget at that time. Instead, meeting in a joint session, the trustees’ Budget and Executive Committees approved that budget late last week.

As most of you realize, that Board-level action is the culmination of institution-wide, budget-building efforts that span essentially the entire year. Those efforts begin within responsibility centers and ultimately produce a late-spring recommendation to me by the University Planning and Budgeting Committee. At the same time, of course, we are engaged in continuous efforts to expand revenue streams, including our state appropriation.

The Governor’s budget proposal, released in February, proposed a 4 percent increase to our “education and general” appropriation. As I said at the time, this was the best news that we had received from Harrisburg in a number of years, having moved through a period of budget freezes and cuts. Therefore, we were genuinely grateful to the Governor for this recommended increase.

Other contextual factors were less encouraging, however. The “purchasing power” of our appropriation, for example, would remain significantly below Fiscal Year 2001 levels, even with the proposed increase. According to the Chronicle of Higher Education, state appropriations to higher education had increased by an average of 6 percent the preceding year—when, according to the same survey, Pennsylvania’s had increased by less than 2 percent—clearly putting us at a competitive disadvantage. And even though it had been recommended that our education and general appropriation be increased, other items within our overall appropriation had been recommended either for no increase or for reduction.

Using the Governor’s recommendation as the basis for its own proposal, the University Planning and Budgeting Committee (UPBC) recommended that our Fiscal Year 2007 budget include a 3 percent salary increase pool distributed in the following way: 1.5 percent for salary maintenance increases for all employees whose work performance has been rated as at least satisfactory; 1 percent for merit, market, and equity adjustments at the unit level; and 0.5 percent to be distributed by senior officers to address market imbalances that continue to exist between units of the University. In advancing this proposal, the UPBC did express concern over the adequacy of its recommended 3 percent salary increase pool. The Senate Budget Policies Committee, in communicating with me, expressed its support both for the 3 percent salary increase pool and for the UPBC’s recommended approach to its distribution, while also recommending “that a larger salary pool should be the first priority if additional revenues can be developed.”

The Commonwealth budget subsequently approved did include a somewhat larger increase in state support—boosting our “education and general” appropriation by 4.5 percent, rather than 4 percent, and also increasing most of our other line-items. Those boosts carried with them a legislative expectation that we would work to moderate tuition increases. In the end, though the dollars required significantly exceeded the 0.5 percent increase to our state appropriation, we found a way both to reduce the percentage increases to our tuition to their lowest levels in years and to also add an additional 0.25 percent to the salary increase pool.

The salary increase pool built into the budget approved by the Board last week, then, is 3.25 percent. It will be distributed on the following basis: 1.75 percent for salary maintenance for all employees whose work performance has been rated at least satisfactory; 1 percent for merit, market, and equity adjustments at the unit level; and 0.5 percent to be retained by senior officers to address market imbalances between different units of the University. For continuing members of the faculty and staff, any increases awarded will be retroactive to July 1 and will first appear in September paychecks.

The weeks of summer have continued to bring good news to Pitt. On the fiscal front, the fact that we closed the best “giving year” in our history and were able to double our capital campaign goal to $2 billion is a very encouraging sign for the future. The recent redesignation of all four of our area studies centers as National Resource Centers by the U.S. Department of Education and this week’s announcement that Pitt and Carnegie Mellon, in partnership, have been awarded a five-year, $15 million grant from the National Science Foundation to establish a Quality of Life Technology Engineering Research Center are significant triumphs in their own right and also provide clear evidence of the breadth of our institutional strengths.

In recent months, many of our institutional activities have been advanced under the banner, “Blue and Gold and Building our Future Together.” In a wide range of ways, we are building a strong and exciting future here at Pitt—and it is particularly important to note that our successes are the product of the committed efforts of a large number of very special people. I am pleased to be in your company, thank each of you for your contributions to our progress, wish you the best for the remaining weeks of summer, and look forward to sharing another good year with you.