Government
Affairs Update
Federal
Relations | City & Community Relations
| Commonwealth Relations |
Commonwealth Appropriation (chart)
Federal
Relations
President
Bush's FY 2003 Budget Proposal
President
Bush recently released his budget proposal for FY 2003. This represents
the first step in the crafting of the federal budget for the next
fiscal year. The budget calls for overall spending of $2.13 trillion,
an increase of 3.7 percent over FY 2002.
Discretionary
budget authority would rise by 9 percent, to $750 billion, more
than double last year's 4-percent increase. However, much of the
additional discretionary spending would be allocated for defense
and homeland security. The President would increase defense spending
by $45 billion, or 14.5 percent, to $379 billion. Spending for
homeland security is nearly doubled, from $19.5 billion to $37.7
billion. Discretionary spending not related to defense or homeland
security would increase by only 2 percent.
The
budget projects a deficit of $106 billion for the current year
and an $80-billion deficit for FY 2003, followed by a return to
surpluses. The President predicts an aggregate surplus of $1 trillion
over the next decade. It calls for $591 billion in new tax cuts
over the next ten years.
The
President is proposing tax cuts that would total $591 billion
over the next 10 years. His specific tax proposals include the
charitable IRA rollover, the non-itemizer charitable deduction,
and doubling the corporate tax deduction for charitable gifts
from 5 percent to 10 percent. Charitable initiatives in the proposal
total $40.2 billion.
The
President's budget highlights four interagency research initiatives:
antiterrorism research, networking and information technology,
nanotechnology research, and climate change research.
The
budget document also addresses academic earmarks, reiterating
the Administration's strong support for merit review and objection
to earmarking. It decries the rise in earmarking in recent years.
Budget
proposals for federal agencies of importance to the University
of Pennsylvania are as follows.
i.
The National Institutes of Health would receive an increase of
$3.9 billion (17 percent). This completes the five-year effort
to double the agency's budget to $27.3 billion. Within the NIH,
the focus is on funding efforts in the areas of bioterrorism and
cancer research.
The
new budget includes a proposal to reduce the salary cap for extramural
researchers from Executive Level I to Executive Level II, which
was rejected by Congress last year under pressure from the research
community.
Once
the doubling of the budget is complete, the budget projects funding
increases for NIH that are roughly the rate of inflation for FY
2004 and beyond.
ii.
The National Science Foundation would receive an increase of $241
million (5 percent). The request highlights the agency's nanoscale
science and engineering ($221 million total), information technology
research ($286 million total), mathematical sciences ($60 million
total), interactions between technology and society ($10 million
total), biocomplexity in the environment ($79 million total),
and learning for the 21st century ($185 million total) initiatives.
iii.
NASA would receive $15.0 billion, an increase of $98.3 million
(0.66 percent) over FY 2002.
iv.
The Department of Energy would receive $3.285 billion for science
programs, a slight increase of $4.35 million (a fraction of one
percent).
v.
President Bush's proposed budget does not include any cuts to
the Medicare program. However, it does not address academic medical
centers' concerns with the program, including restoring cuts to
Indirect Medical Education payments that compensate teaching hospitals
for higher costs.
vi.
The budget would severely cut resources to the Health Resources
Services Administration (HRSA), particularly in the Health Professions
training programs, which are slated for budget reductions of 75
percent. The HRSA program is almost entirely earmarked for university
and hospital facilities.
vii. Department
of Education:
(a)
A total of $10.863 billion for the Pell Grant program,
an
increase of $549 million (4 percent).
(b)
Level funding for the Graduate Assistance in Areas of
National
Need (GAANN) and Jacob K. Javits fellowship programs at $31 million
and $10 million, respectively.
(c)
Federal Work-Study, level-funded at $725 million.
(d)
TRIO early college readiness program, level funded at $803 million.
(e)
Overall funding for international education and foreign language
studies, increase of $4 million, (4.1 percent) to $102.5 million.
viii. The
Department of Defense would receive $1.365 billion for basic research
programs, a decrease of less than one percent. For applied research,
the Department of Defense would receive a total of $3.780 billion,
a decrease of 7 percent. The President's budget has shifted its
priorities to pay for the costs of the war against terrorism.
ix.
The President's budget requests $127.0 million for the National
Endowment for the Humanities, an increase of $2 million (1.6 percent)
over FY2002. The request for the National Endowment for the Arts
is $117 million, also an increase of $2 million (1.7 percent).
Federal
Relations | City & Community Relations
| Commonwealth Relations |
Commonwealth Appropriation (chart)
City
and Community Relations
Mayor's
Budget
On
January 29, Mayor John F. Street presented his FY 2003 budget
to City Council. The Mayor acknowledged challenges facing the
City in the coming year due to the downturn in the economy. Current
projections indicated that growth in revenues from wage, sales,
and business privilege taxes will remain sluggish. Homeland defense
initiatives will cost Philadelphia $21 million before the end
of FY 2002. The costs of the criminal justice system will continue
to outpace inflation. The Mayor's budget announcement emphasized:
1. City
services will be sustained at current levels.
2. A
restructuring of the City's Tax Reduction Program instituted in
1996. Overall tax reduction program will be reduced by approximately
$50 million over a five-year period. FY 2003 tax reductions will
be maintained, but beginning in FY 2004, the City will freeze
the wage tax at the FY 2003 rate of 4.5%. Instead, beginning in
FY 2004, the City proposes a greater reduction in the gross receipts
portion of the business privilege tax, considered to be the most
onerous tax on businesses in the City.
3. A
reaffirmation that his proposal for a Neighborhood Transformation
Initiative is the heart of his "Vision for a Better Philadelphia."
4. Higher
education as an important partner helping to attract the best
and brightest minds to study, work, and live in Philadelphia.
The Mayor also acknowledged Dr. Rodin and her work with "Innovation
Philadelphia."
5. The
City has mandated a 1.5% reduction in personnel expenditures for
every government department.
6. $45
million in new recurring revenues to fulfill the City's commitment
towards new funding for the School District. Of this amount, $25
million would be in the form of millage to be applied to the estimated
debt service on a $300 million deficit funding bond and the remaining
$20 million would be provided in regular, recurring support to
the School District.
Federal
Relations | City & Community Relations
| Commonwealth Relations |
Commonwealth Appropriation (chart)
Commonwealth
Relations
Penn's
Commonwealth Appropriations
This
past fall, the University submitted its Fiscal Year 2002-2003
Commonwealth appropriation request to the Department of Education.
The University's total submission was in the amount of $46,905,000,
a 7.9% increase over the current authorized fiscal year appropriation
(see chart below). The request consisted
of inflationary increases for the Veterinary School and for the
Cardiovascular Studies program. In two other line items--Medical
School and the Dental Clinics--Penn sought higher amounts to compensate
for the fact that neither of these programs has received an increase
from the Commonwealth in over twelve years. Since the time of
the original budget request, the Commonwealth's revenues are down
significantly and the prospects of a final appropriation at the
levels requested is somewhat diminished.
Last
October, Governor Ridge announced a freeze of 1% on all non-preferred
appropriations in order to mitigate a budget shortfall for the
current fiscal year. This was followed by an announcement on January
18 of an additional freeze of 2% on these appropriations. Although
these actions are being called freezes (the monies are being placed
in budgetary reserve), it is almost certain that they will become
cuts in light of recent announcements that the state's shortfall
has grown to $622 million. For Penn, this 3% cut will result in
a loss of approximately $1,304,000 for the current fiscal year,
including a loss to the Veterinary School of $1,099,000.
On
February 5, Governor Schweiker presented his proposed FY 2002-2003
Commonwealth budget, including recommendations on Penn's appropriations.
Due to falling revenue associated with the economy, the Governor's
budget is extremely austere, particularly in discretionary areas
such as higher education. The Governor is proposing a total of
$40,354,000 for the University, a decrease of $3,124,000, or 7.2
percent below the current authorized amount for this fiscal year.
(As described above, three percent of the authorized amount for
the current year has been frozen by the Governor as part of budget
balancing measures). With the exception of Cardiovascular Studies,
each of Penn's line items was reduced by 5 percent below the FY
2002 authorization. This is consistent with the 5 percent cuts
recommended for the state-related (Penn State, University of Pittsburgh,
Temple, and Lincoln) and other state-aided institutions. The proposed
funding is broken down into five line items-- $34,795,000 for
the Veterinary School, $3,832,000 for the Medical School, $600,000
for Cardiovascular Studies, $891,000 for the Dental Clinics, and
$236,000 for the University Museum. The reduction to Cardiovascular
Studies of $1,032,000 is equivalent to the additional funding
added to this line item by the General Assembly in the last two
years.
In
addition to the funding recommended for the University in its
non-preferred appropriation, the General Fund budget includes
a recommendation of $1,550,00 for regional cancer institutes.
Penn's Cancer Center is currently receiving $600,000 of the $2,000,000
appropriated for regional cancer institutes in the FY 2002 budget.
In
other higher education funding areas, the Governor proposed a
2 percent increase for PHEAA student grants. The Governor recommended
the continuation of the Higher Education Equipment Grant program
at last year's level of $6.0 million. In the current fiscal year,
Penn is receiving approximately $281,000 through this program.
Also included is $1 million in the Engineering Equipment Grant
program (no increase). Penn received $83,000 from this matching
program in FY 2002. The budget recommends level funding of $5.5
million for higher education technology grants. The Governor also
recommended $6.2 million (a reduction of $2 million) for the continuation
of the Sci-Tech and Technology Scholarship program. This program
offers scholarship support to Pennsylvania students majoring in
science or technology-related fields who agree to work for Pennsylvania
business following graduation. The proposed budget doubles the
amount available, up to $6 million, to provide low interest loans
to colleges and universities to install dormitory sprinklers.
The
Governor's budget eliminates all funding for the higher education
graduation incentive program, a program which had provided grants
to any institution graduating more than 40 percent of its students
within four years.
The
cuts to University programs are part of many cuts included in
this year's budget due to declining Commonwealth revenues. Governor
Schweiker indicated that he would tap $550 million of the state's
Rainy Day Fund to help balance the current fiscal year deficit,
projected to be about $677 million, and balance next year's budget.
He has asked the General Assembly to modify the Tobacco Settlement
requirements to place all unexpended tobacco funds into the General
Fund. Under current law, unexpended tobacco settlement funds are
to be placed in the tobacco settlement endowment. These unused
funds are estimated to be $66 million this year and $115 million
next fiscal year.
The
University is scheduled to defend its appropriation request before
the House Appropriations Committee on February 27. Following budget
hearings, the General Assembly will begin the process of crafting
a final budget, including approval of the non-preferred appropriation
for Penn.
Federal
Relations | City & Community Relations
| Commonwealth Relations |
Commonwealth Appropriation (chart)
University
of Pennsylvania
Commonwealth of Pennsylvania
History
of Non-Preferred Appropriation
(in
thousands of dollars)
|
FY
1999
|
FY
2000
|
FY
2001
|
FY
2002 Final
HB 1201
|
FY
2002 % Inc.
|
FY
2003 Request
|
FY
2003 % Inc. (Request)
|
FY
2003 Gov.
Rec.
|
FY
2003 Gov.
Rec. % Inc.
|
Instruction
|
$
0
|
$
0
|
$
--
|
$
--
|
--
|
$
--
|
--
|
$
--
|
|
Medical
Instruction
|
4,034
|
4,034
|
4,034
|
4,034
|
0.0
|
5,416
|
34.3
|
3,832
|
-5.0
|
Dental
Clinics
|
938
|
938
|
938
|
938
|
0.0
|
1,186
|
26.4
|
891
|
-5.0
|
Cardio-
vascular Studies
|
1322
|
6321
|
882
|
1,632
|
85.0
|
1,697
|
4.0
|
600
|
-63.2
|
Veterinary
Activities
|
31,489
|
32,276
|
34,783
|
36,626
|
5.3
|
38,341
|
4.7
|
34,795
|
-5.0
|
University
Museum
|
1992
|
2192
|
2413
|
2483
|
2.9
|
2653
|
6.9
|
2363
|
-4.8
|
Total
University
|
$36,792
|
$38,099
|
$40,878
|
$43,4784
|
6.4
|
$46,905
|
7.9
|
$40,354
|
-7.2
|
1
Includes $132,000 appropriated through separate non-preferred
appropriation.
2 Appropriated
through separate non-preferred appropriation.
3 Appropriated
through PA Historic and Museum Commission (not part of submission
to PDE).
4 Note:
Amount authorized by HB 1201. Does not reflect 3% freeze announced
1/18/02.
(as
of 2/5/02)
Federal
Relations | City & Community Relations
| Commonwealth Relations |
Commonwealth Appropriation (chart)