Minutes of January 30, 1995 Meeting The meeting convened at 2:07 p.m. in room 817 Cathedral of Lea= rning. UPBC members present were: Nitin Badjatia, Toni Carbo Bearman,= Jacob Birnberg, James Cassing, George Chambers, Ronald Gardner, Darlene Har= ris, James Holland, Randy Juhl, Peter Koehler, James Maher, Michael Stucka= rt, Bruce Williams, Philip Wion, Julius Youngner, and Judith Zimmerman. Also p= resent were: Jeffrey Liebmann, William Madden, Jeffrey Masnick, Robert Pack,= Louis Tronzo, and Lawrence Weber. UPBC members not present were: Thomas Anderson, Thomas Detre, = James Isaacs, Franklin McCarthy, Glenn Nelson, Jeffrey Romoff, Joan Slezak,= and Ben Tuchi. Approval of Minutes The minutes of the January 12 meeting were approved. Status of Federal Relations Tronzo discussed the impact of the recent change in Congressio= nal leadership, particularly the legislation included in the Contract wit= h America that proposes to eliminate the federal budget deficit by the year 200= 2. The impact of the proposed Federal Balanced Budget Amendment alone could = include a reduction of $15.9 billion in revenues to the Commonwealth of Pennsyl= vania.=20 He highlighted other items in the Contract with America that could im= pact universities, including Welfare Reform (HR 4), Family/Tax Relief (HR = 11), National Security (HR 7), Social Security Earnings Tax (HR 8), Capita= l Gains Reduction (HR 9), and Unfunded Mandate Reduction (HR 5). He explaine= d that proposed tax changes could further reduce Commonwealth revenues. In = addition, FY 1995 rescissions levied at the Department of Defense for the costs associated with the Iraq and Haiti invasions could reduce funding for= the DOD- University Research Initiative. Tronzo explained that the Republican plan calls for $147.9 bil= lion in reductions in the federal budget in each of the next five years. At = present, $29.3 billion is allocated over a five-year period as spending offset= s to programs that fund various higher education initiatives. Among the p= articular items being considered as the most likely targets for reduction are t= he following: -- Reduction of the overhead rate on federally sponsored University r= esearch reimbursements, which would freeze indirect cost recovery rates at approximately 90% of current levels ($1.6 billion). -- Reduction in Medicare Indirect Teaching adjustment to 3% with the subsequent impact on medical schools ($13.5 billion). -- Elimination of the Student Loan Interest Subsidy ($9.6 billion). = The American Council on Education is conducting a national campaign on th= is particular issue. -- Consolidation (elimination) of various student aid programs, inclu= ding Supplemental Grants, Work Study, and Perkins Loans ($2.9 billion). -- Limit the growth of the National Science Foundation ($350 million)= , as well as a recision of FY 1995 funds ($250 million). -- Elimination of the Advanced Technology Program, which funds joint = research and development ventures between the private sector and universities = ($820 million). -- Reduction of funding for the Arts and Humanities ($531 million). In response to Cassing's question, Tronzo added that USAID is = also likely to be an area of reduction. He added that while more definiti= ve information will not be available until Congressional budget hearings= begin, the release of the Administration's plan in the next few weeks will i= dentify those areas of agreement between the President and Congress. He sugg= ested that Pennsylvania, as a state with unified party leadership between t= he Governor's Office and legislature, may have some advantage in dealing= with the federal government as it tries to push expenditures down to the state= level. Zimmerman expressed concern over a Senate non-binding resoluti= on on the national history curriculum standards proposed by the NEH and asked w= hether this was an academic freedom issue to which the University should res= pond.=20 Tronzo responded that the Senate action was an item on the Associatio= n of American Universities (AAU) agenda for next week. Maher suggested th= at it would be appropriate for history departments of AAU institutions to e= xpress concerns. In response to Gardner's question, Tronzo replied that sli= ghtly more than $10 million of the University's research is defense related= . Health Sciences Planning Process Masnick described the long-range planning process being used b= y the Health Science schools. In 1994, the schools developed and approved = through their Planning and Budgeting Committees (PBCs) long-range plans that = were then submitted to the Senior Vice Chancellor. The plans were integrated, = reviewed, and approved by the Health Sciences PBC and the Senior Vice Chancello= r and submitted to the Chancellor in September. Following preparation of a= long- term budget context, each school was asked to prepare a five-year bud= get plan.=20 These budget plans have been reviewed and approved by the PBC of each= school and are now being compiled into an overall five-year budget plan for = the Health Sciences. Soon, a subcommittee of the Health Sciences PBC will be establ= ished to develop a budget reduction model for future years. For the FY 1996 b= udget process, it was determined that any necessary reductions will be base= d on differential cuts in hard money support rather than any form of acros= s-the- board reductions. Schools have been asked to identify cuts they woul= d make for their differential share of a potential 2% reduction in the overa= ll budget of the Schools of the Health Sciences. Budget increases and realloca= tions would then be designated using the priorities established in the plan= ning process. Once the final University budget parameters are set, each s= chool will prepare an FY 1996 budget for submission to the Senior Vice Chan= cellor, which will undergo the same review process used for the long-range pl= an. Wion expressed concern that the Health Sciences were using a b= udget reduction model that was different from the Provost's area in that un= its are not forced to prioritize and make contingency plans, thus making inst= itutional long-range planning more difficult. Juhl responded that external fac= tors, such as the effort to privatize Medicare, could have impacts on the H= ealth Sciences too large for such a reduction model to consider. He added = that because Health Science school funding sources are so broad, long-rang= e planning is especially difficult. Maher emphasized that the most imp= ortant aspect of current efforts is the ranking of programs in priority orde= r. He added that planning in the Health Sciences must be particularly flexi= ble and sensitive to unit needs because of the heavy tie to the delivery of c= linical services. Masnick stressed the need to appreciate how Health Science sch= ools are funded. Planning must allow for large cuts from external sources and= the UPMC, which remains in a downsizing mode. At the same time, new prog= rams will grow within the managed care environment. Birnberg discussed the con= vergence of a zero-based budget approach, rising from the bottom-up, and budge= t based cuts, determined from the top-down. He stated that such a model requ= ires overview to recognize synergies. Maher also emphasized that availabl= e funds =66rom central reallocation pools must go to visible, high priority a= reas and that coordinating similar activities may generate savings. He cited = recent efforts by Koehler to reduce certain offerings without losing track o= f students' need for discipline specific applications. Birnberg also e= mphasized the need to work smarter =FE by attaching names to savings, finding m= ore effective uses for existing resources, and not simply eliminating pos= itions. Schedule of UPBC Budgeting Activities Pack proposed the following schedule for UPBC participation in= upcoming budgeting activities. March 1 UPBC makes preliminary recommendation on FY 1996 budget= parameters May 1 Senior Vice Chancellors and Vice Chancellors reporting = to the Chancellor forward long-range plans and FY 1996 budgets to th= e UPBC May 1-31 UPBC reviews plans and makes recommendations to the Cha= ncellor June 1 The Chancellor adopts final FY 1996 budget parameters June 15 Chancellor allocates FY 1996 budget Wion suggested including further review of the long-range budget proj= ections as a context for long-range planning. Maher agreed, adding that the = FY 1996 budget submissions will include discussions of the long-term directio= ns of each unit. Wion also recommended, based on discussions held by the S= enate Budget Policies Committee, that the evaluation of the Planning and Bu= dgeting System originally scheduled for completion by March 31, 1995 be postp= oned until fall 1995. Members accepted this recommendation. The meeting adjourned at 4:06 p.m.