University Update: Fiscal Year 2011 Budget

Issue Date: 
July 26, 2010

To: Members of the University Community
From: Chancellor Mark A. Nordenberg
Date: July 26, 2011
Re: Fiscal Year 2011 Budget

The early days of the new fiscal year brought some welcome news on the “budget front.” Most obviously, our Commonwealth appropriation was approved more than five months earlier than had been the case in the last year. That, of course, eliminated at least one dimension of the uncertainty that had been a significant complication through much of that year.

At least in the comparative sense, the fact that our total appropriation equaled the amount received during this past year also was good news. We might have complained about the lack of an increase in almost any other year. However, these are not normal economic times, and flat funding is markedly better than the levels of support that many state-funded institutions, both here in Pennsylvania and in other places, will receive this year.

In developing the budget that was presented to our Board of Trustees for its review and action on July 16, three key priorities were pursued. We sought to maintain the high quality of our programs, to provide relief from last year’s salary freeze, and to moderate tuition increases as much as possible. Given the economic challenges that we continue to face and the market data available to us, we believe that the best possible balance was struck.

Of particular importance to everyone who worked on this budget—and of special interest to the committed members of our faculty and staff—is the fact that we were able to craft a budget that includes a 3 percent salary increase pool. That is a clear improvement over the salary freeze that we were forced to impose last year.  From what we now know, it also seems most likely that this raise pool will place us in a favorable position competitively—with many other universities still imposing salary freezes, implementing furloughs, or awarding more modest salary increases.

To fund that salary increase pool and to meet growing expenses, it was necessary for us also to provide for tuition increases in the operating budget for the new fiscal year. Though these increases are higher than we would have liked, they do appear to be moderate when measured against the tuition increases approved at other major public universities, some of which were well into double digits. These trends, of course, are not new. Instead, they reflect the steady and ongoing erosion of state support for public higher education, which inevitably shifts higher cost burdens to public university students.

In tendering its recommendations to me, the University Planning and Budgeting Committee (UPBC) was dealing with a proposed budget that included a 2.5 percent salary increase pool. Under those circumstances, the UPBC recommended that the pool be allocated so that “1.5 percent goes to maintenance of salary and 1 percent to merit/market/equity.” The Committee further recommended that “if you can add more funds to the salary increase pool . . . those funds [should] be used to increase the pool for maintenance of salaries beyond the 1.5 percent of the current recommendation.” These UPBC recommendations were supported unanimously by the Senate Budget Policies Committee.

It is my intention to accept these recommendations. Therefore, the 3 percent salary increase pool built into the budget for this fiscal year will be distributed as follows: 2 percent for salary maintenance for all employees whose work performance during the past year has been rated as at least satisfactory and 1 percent for merit, market and equity adjustments to be made at the unit level. For eligible members of the faculty and staff, any increases awarded will be retroactive to July 1 and will first appear in September paychecks.

I should specifically note that it has been our consistent pattern to centrally distribute some portion of the salary increase pool to address market imbalances throughout the University. Given the size of the pool and the fact that salaries were frozen last year, funds will not be held back from that pool for that purpose this year. However, as the UPBC expressly noted in its report to me, there is a shared expectation that addressing such imbalances will be a part of its recommendations in future years.

It also is important to underscore the fact that the lifting of the salary freeze and adoption of a budget with a salary increase pool does not signal that economic challenges are behind us. Looking at the global economy, some experts believe that, even though a “double dip” recession is unlikely, that possibility is less remote today than it was just a few months ago. The state budget passed earlier this month is built around $850 million in federal funding that has not yet been approved and that may not be approved, which would trigger serious problems for the state in the very short term. Locally, neither the Port Authority’s large budget deficit nor the City’s significant pension shortfall have yet been effectively addressed. And the “funding cliff” that is expected to materialize when the federal stimulus program comes to an end now is less than one year away.

Further financial difficulties, then, almost certainly await us. But given all that we faced during the past two years, our record of sustained progress is nothing short of remarkable. There is every reason to believe, then, that we will find ways to maintain our momentum, whatever new challenges may come our way.

I am deeply grateful to each of you for what you have done to keep Pitt moving forward, wish you the very best for the remaining days of summer and look forward to launching the new academic year with you in just a few short weeks.