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Government Affairs Update
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March 3, 2009, Volume 55, No. 24

Our federal, state, and local governments face challenging budget conditions this year. All are in the process of developing, negotiating, and eventually finalizing budgets for the 2009-2010 fiscal year. The following is a brief description of the current status of budgets and other financial activities.

The American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act includes significant funds for scientific research, including $10.4 billion for the National Institutions of Health (NIH), $3 billion for the National Science Foundation (NSF), $1 billion for NASA, and $600 million for the National Institute of Science and Technology. The Recovery Act also provides $1.6 billion for the Department of Energy’s Office of Science and $400 million for the Department of Energy’s Advanced Research Projects Agency. In addition, Pell Grants will receive $15.6 billion, and the National Endowment for the Arts will receive $50 million.

FY09 Federal Appropriations Package

The House passed the FY09 omnibus appropriations package on Wednesday, February 25. This $410 billion package includes $30.3 billion for the National Institutes of Health (NIH), which is a $938 million increase above the FY08 funding level; $6.5 billion for the National Science Foundation (NSF), which is $363 million more than the agency received in FY08; and $4.77 billion for the Department of Energy’s Office of Science, a figure that is $755 million above the FY08 funding level.  Also included is $17.3 billion for Pell Grants, which raises the maximum grant to $5,350 in school year 2009-2010 when combined with funds from the Recovery Act and other legislation. The Senate will now consider the omnibus package.

Governor’s Proposed FY 2009-10 Budget

On February 4, Governor Rendell released his proposed FY 2009-2010 Commonwealth budget. Included in the recommendations is a total of $45,579,000 in appropriations to Penn, a reduction of 9.2% below the amount originally enacted (before budgetary reserve actions) for the University in the current year (see chart below). The Governor proposed a reduction of 10% for the two Veterinary School line items—$35,682,000 for Veterinary Activities and $2,871,000 for the Center for Infectious Disease. Funding for the University Museum was proposed to be reduced 10% to $226,000. The budget proposal includes $6,800,000 in funding for the Physician Practice Program (Department of Public Welfare) through which the University provides funds to support the Medical School, Cardiovascular Studies and the Dental Clinics.

Recommended funding for other state-aided institutions was also cut by 10%. State-related institutions (Penn State, Pitt, Temple and Lincoln) were reduced by 6%, and the State System of Higher Education was held flat. Community colleges received a 2.1% proposed increase.

In a major new initiative, the Governor is proposing a Tuition Relief Act which would provide grants to incoming freshman next fall who are attending either community colleges or institutions within the State System of Higher Education. This program would provide grants for families earning less than $100,000 a year, with grants of up to $7,600 a year per student, depending on income. The Governor is proposing to fund this program through the legalization of video poker machines. Students at state-related and private institutions would not be eligible, although the Governor is proposing an additional $45 million to support the PHEAA grant program available to Pennsylvania residents attending all colleges and universities.

On February 24, President Gutmann and other University officials testified before the House Appropriations Committee in support of Penn’s appropriation request to the Commonwealth. Following budget hearings, the Legislature and the Governor will begin the process of negotiating a final budget. The process may be protracted this year due to a large and still uncertain Commonwealth budget deficit.

The chart below summarizes the history of the Governor’s budget recommendations for Penn and the final appropriations since FY 2005.

City Budget News

Since November 2008, City administration has twice revised its budget and Five Year Plan due to the impact of the national economic decline.  The decline of the economy locally has caused sharp decreases in City’s revenue collections and has produced declining pension fund earnings.  As a result, the City has been forced to contribute substantially more to the pension fund than originally budgeted.

The City budget is now incorporating an anticipated $2 billion shortfall over the 5 year projection contained in the plan through FY 2013-2014.  Only 41% of the City’s $3.9 billion General Fund budget, $1.6 billion, is discretionary and the budget shortfall is contained in the General Fund budget. While the City has delayed Business and Wage Tax reductions until 2015 in an attempt to save $230 million in revenue, all City departments have submitted to the Mayor new budget requests reflecting scenarios that project 10%, 20% and 30% reductions in their current budgets.

The Mayor has opened the budget process in an unprecedented fashion by personally holding budget conversations in citizen’s homes, stores, and other meeting places where the average citizen can express their ideas about what programs should be saved or cut and what revenues, if any, should be increased in order to balance the budget. The University of Pennsylvania’s Project for Civic Engagement has been involved with the City administration in facilitating a series of four community outreach events also seeking citizen input on budget issues. Mayor Nutter has visited Washington DC, along with several other mayors of major cities, more than a few times to press the case for urban America with top federal officials including President Obama.

The Mayor is expected to deliver his proposed budget to City Council on March 19, 2009.

—Jeffrey Cooper, Vice President, Government and Community Affairs

University of Pennsylvania Non-Preferred Appropriation

(in thousands of dollars)

 

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2009

FY 2010

FY 2010

 

Actual

Actual

Actual

Actual

Authorized

Revised**

Gov. Rec.

Gov. Rec.

 

 

 

 

 

 

 

 

% Inc.***

Veterinary School

  37,364

 38,111

39,254

39,450

39,647

37,268

35,682

-10.0

Center for Infectious Disease (Vet)

 

 

3,200

3,216

3,190

2,999

2871

-10.0

University Museum

        231

       231

254

254

251

236

226

-10.0

Medical Instruction*

     3,861

    3,919

4,037

4,057

2,012

1,891

 

 

Dental Clinics*

     1,035

    1,051

1,083

1,088

539

507

 

 

Cardiovascular Studies*

     1,531

    1,554

1,601

1,609

797

749

 

 

Physician Practice Plan Approp.*

 

 

 

 

 

 

 

 

(Med. Instr./Dental Clinics/Cardio. Studies)

 

 

 

 

3,751

3,526

6800

 

                     Total University

44,022

44,866

49,429

49,674

50,187

47,176

45,579

-9.2


*Approx. 50% of line item transferred to DPW and appropriated through physician practice plan appropriation, beginning 1/1/09

For FY 2010 all funding appropriated through physician practice plan appropriation.
** Reflects reductions due to 6% budgetary reserve announced 12/08

*** Percentage decrease below FY 2009 authorized amount

 

Almanac - March 3, 2009, Volume 55, No. 24