Monday, November 30, 2009

The state of our state:

Slippery Rock University is a member of the American Association of State Colleges and Universities as are all PASSHE institutions. In addition to promoting our interests in Washington, ASSCU monitors federal and state trends that influence us. At the most recent AASCU meeting, several important economic trends that will impact SRU were presented by ASSCU staff member Daniel Hurley. He noted:
  • For perspective, the recession resulted in total global output of about one percent, the lowest rate since WWII. "Following its worst six-month performance in 50 years, U.S. economic output returned to positive growth in the third quarter of 2009, with an expected year-end overall net increase of less than 1 percent.
  • Unemployment may be the most important indicator to watch as those are highly likely to be our students' families. The national unemployment rate reached 10.2 percent in October, the highest level in 26 years. The combined unemployment and "under-employment" rate is 17 percent, the highest level in the 16 years that this has been calculated.
  • The average time jobless individuals have been out of work extended beyond 6 months for the first time since data collection began 60 years ago. "All told, nearly 15 million Americans are currently seeking employment."
Is our mission worth our passion? Yes. Examine these points:
  • Those with a college degree are one-half as likely to be unemployed compared to those with a high school diploma (9.4% compared to 4.7%).
  • Facilitating college access and success doesn't guarantee individual prosperity but the odds greatly favor economic mobility, especially for traditionally underserved populations.
What can we expect as our legislature returns for consideration of the 2010-11 budgets? Other than the usual unusual political battles associated with Pennsylvania, watch for these issues in the coming term:
  • Medicaid costs will continue to exert upward pressure on the budget. With unemployment up and increased poverty, Medicaid goes up as it did in 2009 to the highest rate in six years (7.95).
  • Our state's favorite fallback to balance the budget: Gambling revenues tend to go down in recessions (if you are unemployed, you can't spend your paycheck at the tables). Illinois, Nevada and New Jersey were hit hard in 2009. Among the 42 states with lotteries, 38 suffered losses and the total revenue was down 2.6%. And forget about Ohio residences flowing across the border to those new casinos in Erie and Pittsburgh: Ohio voters approved a constitutional amendment for the construction of casinos in Cincinnati, Columbus, Cleveland and Toledo.
  • We depend on tax revenues and tax revenues come from income, sales, transfer of property and other events that required people to spend. Usually, tax payments come after the expense so there is a lag. That lag may be delayed. In his November 22 report on the Pittsburgh region, Harold Miller, one of my favorite analysts, said, "The real question now will be — will Pittsburgh recover as rapidly as the rest of the country, or will it lag behind as it has in past recoveries? Already, there are signs that the recovery here will be slower than in other regions — job losses reversed nationally before they did in Pittsburgh, and most regions have seen a bigger reversal than we have." He added: "Even with the slight improvement in October, the Pittsburgh Region still has over 33,000 fewer jobs now than it did a year ago. What's worse, the region has fewer jobs today than it did a decade ago. The recession was so severe that almost every industry in the region has lost jobs over the past year, including some sectors like higher education that seemed recession-proof for a long time."



SATURDAY, OCTOBER 31, 2009

Getting down to business: Budget Update

In late October, the state sorted out the budget allocation for 2009-2010 to the PASSHE with the following results:
  • For purposes of comparison across budget years, we will be receiving a total of $503,355,000 from state and federal sources. This includes an additional $27,068,000 in federal funds that is listed in the FY2008-2009 table but not received during that fiscal year. those are "stimulus dollars" (ARRA).
  • "Key 93" funds (part of our appropriation) used for repair and maintenance were eliminated for FY2009-2010, cutting $13,893,000 in FY2008-2009 that will need to be made up. The likely source is from the additional funds identified above since those dollars can only be spent one time (nonrecurring).
  • When the elimination of the Key 93 funds is taken into account, PASSHE total funding was reduced by 6.5% for funds identified as FY2009-2010. Most significantly, the state base recurring appropriation was reduced from $477,322,000 to $444,470,000. This difference was patched with additional federal stimulus funds as funds received in FY2009-2010, resulting in a net increase of 3.8% to PASSHE.
Follow this link to the TABLE that shows the details. What can be confusing is how the $27,068,000 is attributed to the 2008-09 fiscal year but paid in the 2009-2010 year. Remember: stimulus money (ARRA) is good only one time (nonrecurring). Very troubling is the reduction of the base from $477 million to $444 million. We will need political will to replace those dollars just to get back to even with the 2008-09 budget.

What happened between PASSHE and SRU is:
  • We received $32,644,467 (down $3,561,272 or 9.8%). Overall, money from all state and federal sources including performance was $39,970,301 (less AFRP).
  • In addition, our appropriation included $3,125,400 in stilulus money (ARRA) which is nonrecurring and represented 8.7% of our allocation.
  • Performance money earned was $4,396,829, which covered the remaining portion of the almost $5 million we had to reduce from the budget. This allowed us to balance the budget for 2009-10.
Note: It is easy to concentrate on revenue and compare to previous years and forget that we have expenses that are increasing much faster than revenue.