University Update

To:    Members of the University Community
From:    Mark A. Nordenberg
Date:    February 18, 2009
Re:    The Economy and Our Community

In certain respects, the early weeks of February were very good ones for our University, confirming that we continue to build momentum on many important fronts. Let me offer a small number of telling examples.

• In terms of outstanding student achievement, senior Katherine MacCord became the first Pitt student to win a Gates Cambridge Scholarship—one of just 37 students selected for this honor nationally. That scholarship, created by the Gates Foundation in 2000, was the only major national scholarship that had not previously been won by a Pitt student.

• Alumnus and trustee John Swanson, already one of the country’s most highly honored engineers and also Pitt’s largest individual benefactor, added another very special form of recognition when he was elected to membership in the National Academy of Engineering.

• Just yesterday, Pitt professors Brent Doiron, from the Department of Mathematics, and Michael Grabe, from the Department of Biological Sciences, were publicly identified, in a full-page New York Times announcement, as recipients of 2009 Alfred P. Sloan Research Fellowships. They are among 118 “early-career scientists” selected for this honor because of their “outstanding promise and potential to contribute substantially to their fields.”

• Internally, we have identified the members of the faculty and staff selected to receive our annual Chancellor’s Awards for excellence in teaching, research, and service. As always, they were selected from pools of very impressive nominees, and their records of impact and accomplishment are inspiring.

• In the area of community outreach, we sponsored our annual K. Leroy Irvis Black History Month Program with the premiere viewing of Blue, Gold & Black: From Doorway to Distinction. By chronicling the 180-year experience of Black men and women at Pitt, this documentary extends our strong, recent tradition of celebrating Black History Month through efforts that go well beyond the more typical lecture or panel discussion to lasting undertakings that actually do discover and preserve important parts of that history.

Of course, recent weeks also have been a very difficult time, as we have continued to move through a period of extraordinary economic decline. Late yesterday afternoon, to cite one very current assessment, The New York Times opened an online article by describing the distressing developments of the day in the following way:

“From Hong Kong to eastern Europe to Wall Street, financial gloom was everywhere on Tuesday. Stock markets around the world staggered lower. In New York, the Dow fell more than 3 percent, coming within sight of its worst levels since the credit crisis erupted. Financial shares were battered. And rattled investors clamored to buy rainy-day investments like gold and Treasury debt. It was a global wave of selling spurred by rising worries about how banks, automakers—entire countries—would fare in a deepening global downturn.”

Among the most troubling items of recent news was the report from the U.S. Department of Labor that nearly 600,000 American jobs had been lost in January (starkly described by the Times as “20,000 pink slips a day”) and that a total of 3.6 million jobs had been lost since December of 2007, which now is being labeled “the beginning of the recession.” The end of last week brought the sobering higher-education news that Harvard, in the wake of its endowment losses, would offer buy-outs to 1,600 nonfaculty employees.

The most-simple message from that latter development is that if Harvard has been affected in such a dramatic way by the continuing economic crisis, no other university can possibly be immune. Of course, we recognized that fact months ago and have been attentive to the stresses likely to have a negative impact on virtually all of our revenue streams.

More recently, though, much of our attention has been devoted to just one of those revenue streams—governmental funding. At this point in past years, I might have referred, more restrictively, to state funding. In 2009, though, there is such a strong link between state and federal funding that they really do need to be considered together. And while many of you have been following the unfolding events on your own, let me provide a brief overview.

The State Appropriation. The University already has been subjected to two separate rounds of “appropriation reserves,” mechanisms designed to reduce state funding for the current fiscal year. These amounts are scheduled to be withheld from our June appropriation payment, unless the Commonwealth’s own financial condition markedly improves by then. Those two “reserves” total 6 percent of our appropriation, or nearly $11.4 million, and we have been adjusting our current budgets to deal with that loss.

In his budget proposal for the next fiscal year, the Governor has recommended that our appropriation be held at that reduced level. Dealing with those substantial cuts on a permanent basis will be difficult, and none of us welcomes that particular challenge. However, we also need to be realistic in recognizing that the Commonwealth itself is facing a very large deficit and needs to budget prudently. Therefore, the fact that the state-related universities would be expected to help close that gap is neither surprising nor unfair, and many of us most directly involved in the process are grateful to the Governor for his efforts to avoid even deeper cuts.

However, the continuation of a pattern assigning deficit-reduction responsibilities in disproportionate ways across Pennsylvania’s public higher education institutions is problematic. As noted above, Pitt and the other state-related universities (Lincoln, Penn State, and Temple) were targeted for funding at levels reduced by their assigned midyear “reserve” responsibilities. In contrast, the 14 universities of the State System of Higher Education were recommended to receive an appropriation equal to what had been authorized for the current fiscal year, without any such reductions. Community colleges fared even better, with a recommendation that they receive

2 percent more than the levels that had been approved for this fiscal year.

The Tuition Relief Act. This pattern of differentiation was continued in a new proposal labeled the “Pennsylvania Tuition Relief Act.” The importance to Pitt of developing ways to provide tuition relief for our students already was clearly, publicly, and tangibly underscored when we made attracting additional scholarship support our highest capital campaign priority. For the state to step in and provide this new form of student support would help to offset comparatively low levels of funding for higher education in Pennsylvania that have been a major factor in escalating tuition rates.

The proposed act would rely on the legalization of video poker and the taxation of its proceeds to create a new revenue base. That revenue would be used to provide up to $7,600 in relief for tuition, fees, room, and board for Pennsylvania families with incomes less than $100,000—a group that includes the families of large numbers of Pitt students. Governor Rendell was forceful in articulating the need for this plan, saying:

“[T]he truth is we can’t afford NOT to provide this relief. Through no fault of their own, families who trusted that they could save for their children’s college education have seen those funds decimated. And if we don’t offer them a helping hand, we will reap the whirlwind of a future in which our citizens cannot compete for the high-tech and other quality jobs that demand a college education. We have to help them, and we have to do it now.”

The Governor’s address itself referred only, in general terms, to payments that would “greatly enhance the ability to fund a public or community college education” and added that “in helping these students, we are investing in a brighter future for ourselves as well.” However, the draft act, in its current form, limits these benefits to students enrolled in community colleges or universities of the State System of Higher Education, as opposed to all of Pennsylvania’s public higher education institutions, including Pitt and the other state-related universities.

Ironically, it is the state-related universities that have become the universities-of-choice for many of Pennsylvania’s most committed and talented high school students, and it is access to the state-related universities that keeps those students in Pennsylvania. To a considerable extent, it also is the public research universities within that group that most effectively leverage the state investments in them and that are generating many of the very high-tech jobs of the future, to which the Governor referred, through their research efforts. More than any other sector, it also is the state-related universities that have been disadvantaged by budgeting practices that have led to funding levels that lag well behind the support provided to peer universities in other states.

Judging from early legislative reactions, the tuition relief proposal faces many obstacles to enactment, including opposition to the proposed gambling-based funding stream. However, as the Governor noted, this is just the kind of initiative, if properly framed, that could give both the Pennsylvania families who depend upon public higher education and the Commonwealth itself a badly needed and mutually beneficial boost. As I stated during the Senate Council meeting on the day of his budget address, when many of the specifics were even less clear, working with the Governor, and others involved in the process, to ensure that Pitt students and their families are among the beneficiaries of any such legislation must be a high priority.

The Federal Stimulus Act. Amidst much drama and debate, the American Recovery and Reinvestment Act, federal legislation designed to stimulate the economy, was passed by the Congress late last week and signed into law by President Obama yesterday. It should be noted that U.S. Senator Arlen Specter played a major role in securing the passage of this act, which includes a number of provisions that are of great importance to higher education. Based on the summaries that currently are available, let me comment briefly on some of those provisions.

• The act includes several beneficial provisions relating to student aid, which will become increasingly important as more families feel the impact of the recession. Additional funding for the Pell Grant program will permit an increase in the maximum award from its current level of $4,731, to $5,350 in 2009, and to $5,550 by 2010. Support for the federal work-study program also was increased, and an expanded American Opportunity Tax Credit will replace the current Hope Scholarship Tax Credit—increasing the amount of the available credit, making its application more flexible, and expanding eligibility.

• The act authorized $16 billion in funding for research—including $10 billion for the National Institutes of Health, $3 billion for the National Science Foundation, and $2 billion for the Department of Energy. The University of Pittsburgh, as we all know, has an enviable record of competing effectively for such funds, which not only benefit Pitt programs but also provide a significant economic boost to the state that is our home. In fact, Pitt now attracts more than $3.60 in research support for every $1 of appropriation and supports some 23,000 local jobs through its research expenditures alone.

• Also important, though its specific applications are harder to predict, is the act’s creation of a State Fiscal Stabilization Fund. Most basically, to the extent that this fund—as well as other provisions in the act, such as those providing increased funding for state Medicaid programs—provides relief for the Commonwealth from its own budget pressures, that is a positive development for institutions depending on state support. Beyond that, the stabilization fund is designed to help states reverse cuts made to education budgets in the last two years, including those supporting higher education. The act does not include $6 billion of support for campus infrastructure projects that had been a part of the House bill, though some stabilization funds may be available for such purposes.

By last Friday, newspapers were reporting that the Governor was relieved by the passage of this act and that sharp additional cuts to the appropriations proposed for the state-related universities and other institutions would not be required. That, obviously, is good news because it places us in a far better position than we might have occupied had the stimulus act not passed. However, it is important not to lose sight of the challenging circumstances that remain. As noted earlier, we continue to be affected by what is a true economic crisis, all of our revenue streams are under stress, and crafting an operating budget for the next fiscal year will be very challenging. This will be our situation, even if things do not get worse—and they still might. Further, since we are part of a 222-year-old university and are “in it for the long haul,” we need to remember that much of the stimulus funding has a two-year life that will pass quickly.

As I noted in a recent column in the Pittsburgh Post-Gazette (see reprint of the article on page 4), analysts from around the country have looked with envy at this region’s comparative economic stability, which they trace largely to its companion strengths in higher education and health care. It is a source of both special satisfaction and real responsibility to know that we are positioned to help our home region move through these difficult times. And, whatever labels analysts may use, neither this region nor any other is truly “recession proof.” Instead, especially as unemployment rates rise, more of our neighbors will be individuals and families in need.

I spent part of last Friday afternoon with the president of the United Way of Allegheny County. Pitt always has conducted a model United Way campaign, and we will meet those high standards again this year. However, perhaps because of the new levels of uncertainty that many of us feel ourselves, we are lagging behind last year’s campaign totals, even as community needs are rising and United Way agencies are being asked to do more. Let me just say, then, that if any of you are inclined to make end-of-campaign donations, those funds will be put to good use.

Within the University community, recent student reactions to the destructive acts that were a part of Oakland’s Super Bowl celebrations have been heartening. Student leaders have made the avoidance of future disturbances a priority; other students have expressed regret and assisted with ongoing investigations; the Pitt News has published a reflective and apologetic editorial; and, late last week, a student drive to collect funds to pay for some of the damage was launched. As I said in my earlier Update, the quality of Pitt students is measured by the strength of their character, as well as by their academic abilities, and that character has been shining brightly in recent days.

The quality, impact, and importance of the work being done here at Pitt also continues to shine in inspiring ways, as is so clearly reflected in my opening examples. At the conclusion of his bicentennial history of our University, Robert Alberts concluded that “this is essentially a success story—a happy chronicle of a sound and worthwhile accomplishment.” In the 23 years since that volume’s publication, the successes of our University have continued to grow, which is a credit to you and others like you—people who have believed in our mission and who have worked both tirelessly and effectively to advance it. As the University moves further into its third century, that commitment will be essential in crafting what may be remembered as one of Pitt’s most critical successes—maintaining the momentum we already have built as we move through this very difficult time together.

To read previous University Updates, visit www.chancellor.pitt.edu/news/index.html.