University Update

Facing the Specter of Enormous Budget Cuts

Mark A. Nordenberg

Because of the wonderful work done by so many of you, the University of Pittsburgh is moving through what should be another banner year, building on its enviable record of impact and accomplishment in education, research, and public service. Pitt also is moving through an historically important year, with the end of this month bringing the 225th anniversary of our founding. Unfortunately, what almost certainly will prove to be most memorable about 2012 is that an already brutal budget year has been made far worse by today’s proposal for deep and disproportionate cuts emerging from the state capitol. To put that proposal in perspective:

• It would take our cumulative two-year cuts in state support well in excess of $100 million;

• It would reduce our state support, in absolute dollars, to levels that we have not seen since the mid-1980s, more than a quarter century ago and when the state’s own budget was about one-third its current size;

• It would reduce our state support, if adjusted for inflation, to the lowest level since Pitt became a state-related university; and

• It would reduce the percentage of our total budget provided by the state appropriation to less than 5 percent, from a high of more than 30 percent in the 1970s, shortly after Pitt became a state-related university.

In terms of proportionality, perhaps nothing is more telling than the proposed general fund budget’s bottom line. Overall state funding would be reduced by less than one-tenth of 1 percent, or $22.456 million. The cuts proposed just for Pitt are more than double that amount.

What follows, then, is a somewhat longer account.

Abandoning a Focus on the Future

The act of February 28, 1787, chartering the frontier academy that would become our University began with a straightforward declaration that “the education of youth ought to be a primary object with every government.” Even in that earlier, simpler, more physically demanding time, our founder, Hugh Henry Brackenridge, saw the development of the mind as both essential to individual success and critical to our collective progress. “We all know,” he stated, “that the strength of a state greatly consists in the superior mental powers of its inhabitants.”

More than two centuries of history clearly have established that Mr. Brackenridge, and those embracing his message, were correct. Access to higher education has long been viewed as a key to individual pursuit of the American dream, and a well-educated populace is universally considered essential for national and regional prominence and prosperity. These twin beliefs drove the conversion of Pitt and Temple, two well-regarded private universities, to state-related status in the mid-1960s, a public status already claimed by Penn State. In effecting this change, there was a desire to meet the growing demand from Pennsylvanians for reasonably priced, but high-quality, university experiences, and there was a desire to invest in anchor institutions that could help drive the economies of Pennsylvania’s two major urban areas.

The most thoughtful in a succession of state master plans, issued shortly after the creation of the State System of Higher Education, labeled Pitt, Penn State, and Temple as the “Commonwealth Universities” and described their expected contributions in the following way:

The Commonwealth Universities . . . serve as the state’s major public research universities. Together, these institutions offer a broad range of educational programs and services and carry special responsibilities for research, advance graduate instruction, and for education in the professions, including law, medicine, engineering, business and agriculture. . . . The scope and quality of their programs and their geographic distribution permit them to serve the needs of the state and nation in the fields of undergraduate, graduate and first professional education, research and public service. Along with the major independent universities in the state, the Commonwealth Universities are the principal centers for research and development in Pennsylvania.

Pitt’s performance in this assigned role has been nothing short of remarkable. The strength of our educational programs at all levels has made us a magnet for ambitious, hard-working, high-potential students from across the country and around the world. However, consistent with our public mission, we have attracted particularly large numbers of Pennsylvania students, increasing the likelihood that, over the longer term, they will live, work, and contribute here. We also have become an internationally respected center for pioneering research, ranking among the top five American universities in support attracted from the National Institutes of Health and among the top 10 American universities in total federal science and engineering research and development support. During the last fiscal year, our research expenditures exceeded $800 million—expenditures that are an accepted measure of institutional strength, that fund important work, and that support, directly and indirectly, more than 28,000 local jobs.

Though our service mission takes many forms, none has been more important than the role that we play as an engine for economic development and as a generator of jobs. We sit at the heart of the education and health services “supersector”—by far, this region’s largest employment sector and a source of what has been substantial and dependable job growth, even as the country moves through the “jobless recovery” from the Great Recession. Just last weekend, respected analyst Harold Miller wrote in the Pittsburgh Post-Gazette that, while a recent surge made this region the national leader in job growth, many still had been left behind. He described the situation in the following way: “Most of the new jobs were created in sectors such as health care and higher education, where we’ve become accustomed to seeing growth.

. . . The strong job growth in sectors such as health care and higher education is masking the fact that more than 21,000 jobs lost in manufacturing, construction, retail, and the information sector still haven’t returned.”

Given this impressive record of success, the Commonwealth’s current retreat from support for its public research universities may be even more surprising than the belief in the power of education that drove the creation of that frontier academy 225 years ago. However, it is absolutely clear, both from last year’s cuts and from the state budget proposed today, that these institutions—long exceptional contributors to the social vitality and economic strength of the Commonwealth—once again are being targeted for dramatically disproportionate budget cuts.

Successive Waves of Deep Cuts

To be fair, the budget pressures faced by our elected leaders are daunting. Dealing with them can involve painful funding decisions, with success depending upon a spirit of shared sacrifice. But to be clear, those of us at Pitt never have resisted doing our fair share. And what we must resist—not only for ourselves but for the many who depend upon us—are disproportionately deep cuts that threaten our ability to continue making critical contributions, either to deserving individuals or to a vibrant, more productive society.

To repeat what I said earlier and what you knew before today, this has been a brutal budget year. This fiscal year began with a 22 percent—or $40 million—combined reduction to our education and general appropriation and our academic medical center support lines. As another reminder, this 22 percent reduction to our state support came during a year in which overall state spending decreased by only 4 percent. Late in the fall, we also were notified that our annual capital projects support would be cut in half, from $40 million to $20 million. Then, just last month, we were directed to put another 5 percent—or $7 million—into “budgetary reserve.” This is a polite term of art for a mid-year budget cut. And to return to the issue of proportionality, the state-related universities, whose appropriations account for less than 2 percent of the state’s budget, were directed to shoulder nearly 16 percent, or about eight times that amount, of this midyear reduction.

To this point, then, our accumulated cuts for this fiscal year total $67 million. Without meaning to generate unnecessary anxiety but wanting to be more contextually descriptive, let me try to give that very big number more practical significance. If we had tried to deal with a $67 million cut solely through work-force reductions, that would have required us to eliminate more than 1,000 Pitt staff jobs carrying average levels of compensation and benefits. Or if we had tried to deal with a $67 million cut solely through tuition increases, that would have required an average tuition increase of about $2,600 for each of our in-state students. For an in-state undergraduate student enrolled in the arts and sciences on the Pittsburgh campus, that would have been an 18.5 percent increase and would have taken tuition to $16,676 per year. For an in-state undergraduate student enrolled in the arts and sciences on a regional campus, that would have been a 23 percent increase and would have taken annual tuition to $13,886.

Of course, we did not adopt either of those approaches. Instead, we worked to maintain employment levels while dealing with part of our deficit by delaying salary increases for most employees. We also did not impose the level of tuition increases that might have been justified by pure “budget math.” Instead, we imposed more temperate increases, with tuition rising by 8.5 percent to $15,272 for in-state undergraduates in the arts and sciences in Pittsburgh and by 4.0 percent, to $11,736, for in-state undergraduates in the arts and sciences on our regional campuses. And, in the spirit of shared sacrifice, we made up for much of this massive loss of state support through budget reductions that either were managed centrally or were distributed by senior leaders to the units reporting to them. We believed that this approach was fairer in human terms and also made good business sense, because the demand for our services remains high and does depend upon the quality of those services.

After a past decade that brought cuts to our appropriation almost every year and a past year that brought the steepest cuts in our history, the budget proposal released today hits us very hard again. The Governor has proposed an additional cut of 30 percent to our education and general appropriation for the next fiscal year and a 10 percent reduction to our academic medical line items, a blended reduction of about 29 percent and totaling nearly $42 million. Though this is somewhat harder to discern from the early releases, it also appears that this budget proposal would totally eliminate a long-standing program that has invested tobacco settlement fund revenues into health-related research. The dollar amounts flowing to Pitt have varied from year to year but have averaged more than $9.2 million annually over the course of the last 11 years.

The state budget spreadsheets covering the Governor’s general fund budget proposal do present the cuts to our appropriations in the same format used for all state government agencies and for other institutions receiving state funding. That is, to give the primary Pitt example, those budget sheets show a 30 percent cut to our general appropriation, which accurately depicts that reduction. However, the subsequently issued media release masks the depth of the reduction by avoiding any mention of the appropriation cut itself and referring, instead, to a “2.1 percent decrease in its [Pitt’s] operating budget.” That form of calculation essentially imposes a mathematical penalty on a research university like Pitt for importing $800 million of research funding into the local economy. It may also reflect a fundamental misconception about such funds—which can only be spent on the projects for which they were awarded and are not a source of revenue that can used for more general purposes or to reduce tuition levels.

In the budget address that he delivered one year ago, the Governor described the process that he had initiated to deal with a large, inherited budget deficit in the following way:

In many ways, what we need to do is the same as reviving an abandoned apple tree. If the tree isn’t tended and the branches pruned, that tree will grow into a tangle of limbs and leaves. But it will bear no fruit. We need to take this tree, so long overgrown, and cut back what isn’t fruitful. And we need to do that essential pruning on all branches of government. We need to do the hard cutting so the tree can once again bear fruit. And that fruit is jobs.

The process actually implemented is quite different. It is a process that chops rather than prunes, and it is a process that has targeted among the most fruitful of the Commonwealth’s investments, measured by job growth or in almost any other way.

A Glimmer of Hope

Beyond the huge dollar losses it has imposed, one distressing dimension of this two-year budget process is that, at least in higher education, it seems to have been driven principally by assessments of what funds can be most easily seized and not by more reasoned judgments tied to determinations of the relative returns produced by particular state investments. Put another way, there appears to have been no analysis of current Commonwealth needs as we move further into the innovation economy or of the long-term social and economic impacts likely to flow from these massive reductions in support for public research universities.

The creation of a new commission, announced by the Governor today, may provide the first opportunity for a longer-term look at the educational needs of the Commonwealth and its people. Both the Governor and the Secretary of Education have personally committed to me that there will be no attempt to advance pre-conceived policy results through this process. And in a fair and open process, the unique contributions tied to the work done by public research universities should provide a strong case for enhanced, not reduced, support.

That general message was supported by the National Science Foundation’s recent release of its report, Science and Engineering Indicators 2012. In commenting on it, the Chair of the National Science Board stated, “The decline in support for postsecondary education, especially public research universities, is a cause for great concern as we examine the condition of U.S. global competitiveness.” In Pennsylvania, of course, public support for public research universities began at a lower point, and the cuts imposed here have been steeper than almost every other state. In fact, the report reveals that Pennsylvania already is in the bottom quartile of the 50 states in terms of “appropriations of state tax funds for operating expenses of higher education as a percentage of gross domestic product.”

Diminished levels of state support, of course, stand as a primary contributor to rising public university tuition and its impact on access and affordability. Virtually everyone who has seriously examined these issues has fairly called for colleges and universities to do even more to control their costs but also has recognized that the key culprit is reduced state funding. The situation described in a recent Washington Post editorial has direct application to Pennsylvania:

States facing dwindling resources have cut back on support to public universities and colleges. It’s been seen as an easy way out, since the institutions, unlike many others receiving public funds, could fall back on raising tuition. But the consequences of this disinvestment are a decline in quality and more students denied affordable access to higher education. . . . To be sure, colleges need to be smarter about how they spend their money. But the challenges confronting public higher education go far beyond the savings that can be realized through efficiency. A commitment of ideas and resources [is] needed if America is to continue its grand tradition of its citizens bettering themselves—and itself—through education.

Pushing Forward

One can never predict how a group process ultimately will unfold, and it certainly would have been far better if the commission announced by the Governor had been at work before we were targeted for such deep and disproportionate cuts to our state funding. Still, if the commission lives up to its potential, it could shape the face of public higher education in Pennsylvania for years to come. And if returns on investment are fairly assessed, then Pitt and other public research universities should occupy an even more prominent position as we move further into the new century.

Even while that assessment process is getting under way, there are other important tasks at hand. This is just the beginning of the state’s budget-building process. We now will move through legislative hearings and will seek to advance our case in other settings as well. Knowing the daunting challenge that we now face, we need to build upon the outstanding advocacy efforts undertaken by students, faculty, staff, and alumni during the budget-building process last year. Officers of the University Senate, the Staff Association Council, the Student Government Board, the Graduate and Professional Student Assembly, and the Pitt Alumni Association already have stepped forward to express their desire to be advocates for Pitt. In the end, though, the success of this effort depends upon even broader participation throughout the University community.

In the weeks ahead, we also will need to move forward with the processes of fashioning an operating budget for the next fiscal year. Sadly, we will do so knowing that the budget almost certainly will be built on a foundation of substantially diminished state support. But we also move forward knowing that we already have built a record of successfully meeting a broad range of difficult challenges.

In today’s budget address, the Governor declared, “We cannot allow the debts of today to crowd out the dreams of tomorrow.” Unfortunately, it is hard to look at the cuts proposed for Pitt and Pennsylvania’s other public research universities without feeling that this is just what has happened—that dreams are being sacrificed in an effort to deal with crushing current debt.

It might be said, in fact, that our basic activity is the business of building dreams. We do that through the power of higher education, as we help position tens of thousands of students, each and every day, to more effectively pursue their own goals for life. And we do it, often more dramatically, through our programs of research. Sixty years ago, all of America was desperately dreaming about a cure for polio, and that dream became a reality through work done at the University of Pittsburgh. Thirty years ago, both physicians and patients were dreaming about a future time when human organ transplantation might become a widely available treatment for a range of deadly diseases. To a large extent, that dream, too, became a reality through work at Pitt. Today, when people think of a world without Alzheimer’s disease or cancer or diabetes or Parkinson’s disease, they often look to the work of Pitt researchers. The same also can be said about dreams of a world made better by more accessible and less expensive energy or by the miracles of nanotechnology or quantum computing or by any of a number of other advances.

In a very real sense, the Governor perfectly defined our challenge, but the deep and disproportionate cuts proposed will not let us travel to where we hope to be. Now, we need to work with him, with members of the Legislature, and with others to find a better way to advance what should be our shared goal.