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Government Affairs Update

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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)




2002 Final
HB 1201

2002 % Inc.

2003 Request

2003 % Inc. (Request)

2003 Gov.

2003 Gov.
Rec. % Inc.


$ 0

$ 0

$ --

$ --


$ --


$ --

Medical Instruction










Dental Clinics










vascular Studies










Veterinary Activities










University Museum










Total University











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)

Almanac, Vol. 48, No. 23, February 19, 2002


February 19, 2002
Volume 48 Number 23

Penn has again proven to be the launching pad for presidents of colleges as two Penn people (Diver & Fry) are tapped for such posts where they will each be the 14th president come July 1.
GSE will have an acting dean in the fall while Dean Fuhrman will be on a scholarly leave.
The architecture department loses an award-winning long-time lecturer to cancer at the age of 51.
The Dental School opens a dental clinic specifically for children.
Phasing out the Wharton Evening School program which led to a bachelor of business administration brings changes and options.
The Government Affairs Update includes President Bush's budget proposal, Mayor Street's budge and Penn's Commonwealth Appropriations.
A description and composite sketch of the assailant who is wanted in connection with rape at the Sheraton Hotel as well as safety tips from Public Safety.
Penn Video Network and ISC now offer production and distribution services as well as streaming video and videoconferencing