NEWS & VIEWS: FROM THE CHANCELLOR

Looking Back and Moving Forward

October 1, 2008

The year that formally closed on June 30 was another outstanding year for Pitt—the most recent in a growing and unbroken succession of years in which our University has become a markedly stronger institution. That record of sustained progress should be a well deserved source of pride to all whose work has contributed to it, and to convey a general sense of our shared progress, let me offer some quick notes on just a few key areas.

• Here in Oakland, we recruited our best-credentialed freshman class from the largest applicant pool in our history, a pattern that was mirrored in many programs throughout the University. Enrolled students continued to perform at very high levels— among other things, bolstering an enviable record of success in major national scholarship competitions.

• Our annual research expenditures pushed past $640 million. We climbed into sixth place nationally in National Institutes of Health funding and rank eleventh nationally in terms of total federal science and engineering research and development grants won by members of our faculty. Pitt researchers and scholars in wide-ranging disciplines continued to capture the very highest forms of national and international recognition for the quality and impact of their work.

• Faculty members at earlier stages in their careers also enjoyed a remarkable year, clearly demonstrating that our pipeline of talent is filled with great potential. Key awards captured included a Presidential Early Career Award for Scientists and Engineers, two Howard Hughes Medical Institute Foundation Physician-Scientist Early Career Awards, six National Science Foundation Faculty Early Career Development Program Awards, and a Beckman Young Investigators Award.

• We moved further into our second billion dollar capital projects plan. Our current emphasis on renovation and restoration will dramatically improve our ability to support important programs well into the future, and our beautification initiatives continue to draw widespread praise.

• We recorded our best year ever in fundraising—setting records for gifts and pledges, individual support, foundation support, cash received, and number of donors. Trustee John Swanson made us the grateful beneficiary of the largest individual gift in our history, and we pushed our $2 billion campaign past the $1.25 billion mark.

• In a key external assessment of overall quality, we retained our position in the top cluster of this country's public research universities in the annual assessment conducted by the Center for Measuring University Performance. That top group consisted of Berkeley, Illinois, Michigan, North Carolina, UCLA and Wisconsin, as well as Pitt, which is very distinguished company.

That still-building momentum defines both our opportunities and our obligations. It positions us to continue our pursuit of the goal publicly adopted by our Board of Trustees in February of 2000: that "[b]y aggressively supporting the advancement of Pitt's academic mission, we will clearly establish that this is one of the finest and most productive universities in the world." And because our shared successes in pursuing that never-ending goal have advanced the University, we should be even more attentive to the ever-present danger of slipping back.

That risk now looms even larger than usual because of the serious economic challenges that almost certainly lie ahead. The current turmoil in the economy will affect Pitt, and most other institutions, in a range of negative ways. We know, for example, that historically high returns on our endowment will not be sustainable, even if we retain our position as a high performer among major university endowments. It will be difficult to maintain the pace of our fundraising growth if potential donors are focused on the declining performance of their own investment portfolios. Federal funding streams, including those devoted to student aid and research, will be under severe budgetary stress, as will the clinical revenues that are so important to many programs in the health sciences. And, of course, students and their families, as well as our employees, will be broadly affected by the economic decline.

As too often has been the case, particularly in the recent past, Commonwealth funding cuts already have emerged as a specific challenge. Last week, we received a letter from the Budget Secretary advising that, in light of state revenue shortfalls, the Governor had directed her "to place $200 million of current year appropriated funds into budgetary reserve." She went on to note that "4.25 percent of each nonpreferred appropriation is included within that amount." For Pitt, this means that some $7.25 million will be deducted from our June 2009 appropriation payment, unless the state's own revenue situation has improved by then, which seems unlikely.

Given the revenue shortfalls that already have emerged, it would be difficult to criticize a cautious approach to state spending. In fact, we now need to take prudent steps ourselves, and senior officers will be acting to reduce education and general budget lines, which are supported by the appropriation, in ways that permit us to meet this looming state revenue loss.

A "reserving process" that appears to be tied to a uniform percentage reduction also seems reasonable in conveying a sense that similar sacrifices are being asked of all recipients of Commonwealth funding. However, not all agencies and organizations receiving state support entered this process positioned equally. For an entity receiving a 4% appropriation increase for the current fiscal year¬—the approximate level of increase to the overall Commonwealth budget¬—to endure a 4.25% reduction, means that it would be pulled back to essentially its funding level for the past fiscal year. However, since Pitt's appropriation increase for the current fiscal year was only 1.4%, and followed a year in which our appropriation increase was only 2%, a 4.25% reduction would more than eliminate the combined increases approved for the past two years.

Being in this position, of course, is not something that is entirely new for us. In fact, if the recently announced reserving process results in a reduction to our appropriation for this fiscal year, this would be the third year out of the last eight years in which Pitt will have been forced to absorb a mid-year decrease to our authorized appropriation—in addition to one year in which a cut was imposed at the time the appropriation was approved. Because I did spend some time analyzing appropriation trends in my July 22 budget message, let me offer just a few updated contextual comments now.

• If the reserved amount ultimately is withheld, our Fiscal Year 2009 appropriation will be nearly $1 million less than our Fiscal Year 2007 appropriation—in actual dollars, unadjusted for inflation.

• If the reserved amount ultimately is withheld, from Fiscal Year 2001 to Fiscal Year 2009, the cumulative increase to our appropriation will have been 2.6%, while inflation will have risen by about 30% over that same period.

• Since our appropriation, as calculated by the Commonwealth, currently includes more than $10 million in federal matching funds, if the reserved amount ultimately is withheld, our appropriation for Fiscal Year 2009 will include five million fewer state dollars than our Fiscal Year 2001 appropriation did.

Because we all would prefer to have life unfold in less challenging ways, little personal comfort can be taken either from the knowledge that we have successfully met such challenges in the past or from the knowledge that others will be facing similar challenges in the year ahead. But our past successes can be a source of some confidence as we look to the future, and, as much as we might wish that the path ahead looked less challenging for all of higher education, we also have seen that turbulent times sometimes produce special opportunities for comparative progress.

In his book Troubled Times for American Higher Education: The 1990's and Beyond, Clark Kerr, the former Berkeley Chancellor and former Chair of the Carnegie Commission on Higher Education, described, in decidedly non-academic terms, the demands that a less hospitable environment would produce for academic leaders. “Everybody behaves more or less alike at a cocktail party (the 1980's), but not on the firing lines (the 1990's),” he said. After demonstrating that the reputational rankings of major universities changed very little over extended periods of time, Chancellor Kerr went on to predict that the period from 1990 to 2010 might emerge as a period of more dramatic change because of the challenges likely to be confronted.

Certainly, Pitt's position improved—in quality and impact, as well as reputation— over the course of most of that period. Now, as we approach the end of the two decades on which Chancellor Kerr had focused, it does appear that more "troubled times" await us. Meeting the challenges that lie ahead will not be easy. Instead, even more determined efforts and broadly shared sacrifices almost certainly will be required.

However, our momentum is strong, our mission is noble, and our case is compelling. Put in somewhat more human terms, both the broader community and countless individuals within that community are depending on us to continue our advances as a leader in education, a pioneer in research and a partner in community development. If we remain committed to the goal of fueling further progress at Pitt, there is no reason to believe that this year—though it clearly will not be an easy year—cannot be another good year for our University. And despite the struggles that appear to await us, I do look forward to building and sharing another year of progress with you.