Government Affairs Update

Commonwealth Relations

On March 4, Governor Edward G. Rendell, as required by law, released the first part of an intended two-part proposed FY 2003-04 budget for the Commonwealth. Pennsylvania is facing a projected $2.4 billion deficit. This "first part" balances the budget by cutting programs and personnel, offers improved government efficiencies, but included no tax increases. Governor Rendell characterized this first budget as a "painful, barebones plan that met his constitutional requirement of offering a balanced budget, but would accomplish little else."

Governor Rendell also announced his intent to deliver to the legislature a "'second budget" on March 25. Governor Rendell indicated that his "Investment Plan for a New Pennsylvania" will propose new sources of revenue that would provide additional support for existing programs, and would help fund new programs he wants to support in areas such as basic education, economic development, and property tax reform. He asked the legislature not to take action immediately and wait to consider both budgets together.

'shortly thereafter, on March 7, the Republican-controlled House pushed the Governor's "first" budget (HB 648-General Fund Bill) through without debate or public hearings by a vote of 113-84 along party lines. On Wednesday, March 12, the Republican-controlled Senate passed the Governor's proposed first budget as well. The Governor is now faced with three options: veto of his own initial budget; line-item veto of some parts of the budget; or sign the passed budget and hope that the legislature will still consider his investment plan. Lawmakers have expressed willingness to consider additional spending proposals that the Governor will bring later this month. The Governor has until March 23 to decide how to proceed on HB 648.

Below is a summary of those parts of the Governor's first budget that affect the University of Pennsylvania:

• The Governor's first budget proposed for the University, in its non-preferred appropriation, a total of $42,946,000, a decrease of $2,260,000, or five percent below the amount authorized for the current fiscal year. All of Penn's line items were reduced by 5 percent below the FY ';03 authorization level. These cuts are consistent with the 5 percent cuts included for the state-related institutions (Penn State, Pitt, Temple and Lincoln) and most of the other state-aided institutions (several of the state-aided institutions had larger cuts). As shown in the chart below, Penn's funding is broken down as follows--$36,523,000 for the Veterinary School; $3,832,000 for the Medical School; $1,520,000 for Cardiovascular Studies; $846,000 for the Dental Clinics; and $225,000 for the University Museum.

The General Assembly has not yet taken any action on the approval of non-preferred appropriations, including Penn's. At this point, it is unclear when the legislature will begin consideration of these bills, which require a two-thirds vote.

• In addition to the University's non-preferred appropriation, the General Fund budget includes $899,000 for regional cancer institutes, a reduction from the current year's funding level of $2 million. Penn's Cancer Institute is receiving $600,000 under the current year funding.
• In other higher education funding programs, the Governor maintained PHEAA student grants at current levels. The budget eliminates the Higher Education Equipment Grant program. In the current fiscal year, Penn is receiving $95,000 through this program, which had been reduced by 2/3 through budgetary freezes. The budget eliminates the Engineering Equipment Grant program, through which Penn is receiving $85,000 in the current year. The budget includes no funding for the Higher Education Technology Grant program (funded in FY ';03 at $4.5 million), formerly called Link to Learn. The Governor recommended that the SciTech and Technology Scholarships program be cut from $6.2 million to $3.1 million. Finally, the budget cuts in half (from $6 million to $3 million) the amount available to provide low interest loans to colleges and universities to install dormitory sprinklers.
• In the area of health care, the budget proposes major cuts to various programs providing reimbursements to UPHS. The following programs are scheduled to be eliminated in the Department of Public Welfare Medical Assistance budget--Community Access Fund, Outpatient Disproportionate Share (DSH) and Medical Education. In the current fiscal year, our three urban hospitals (Hospital of the University of Pennsylvania, Presbyterian Medical Center and Pennsylvania Hospital) receive $13.9 million through these programs (Community Access Fund--$4.8 million; Outpatient DSH--$2.6 million; and Medical Education--$6.4 million).
• The budget makes no cuts in the existing tobacco settlement allocations, but does take $330 million from the Tobacco Settlement endowment to help balance the budget.

University of Pennsylvania Commonwealth of Pennsylvania
History of Non-preferred Appropriation (in thousands of dollars)

City and Community Relations

City Elections

The City of Philadelphia will hold municipal elections this November following a May 20 primary election for the following seats: Mayor, City Council, City Commissioners, Clerk of Quarter Sessions, Register of Wills, Sheriff, and trial judges for the Common Pleas, Municipal and Traffic Courts. The filing deadline for the May 20 primary election closed on March 11, 2003.

Challenging Mayor Street in the Democratic primary are protest candidate Quenna Bass and religious family activist Bill Devlin. Sam Katz is unopposed in the Republican Mayoral primary. Therefore, the general election for the Mayor's seat will likely pose the incumbent John F. Street against the same Republican opponent he faced in 1999, local businessman Sam Katz. Mayor Street won that election by a narrow 2% margin offset by approximately the same number of votes that went to a third-party candidate.

Candidates will also vie for all ten district seats and seven at-large seats on the City Council. All incumbents have filed to run in their respective primaries, with the exception of Republican at-large Councilman W. Thacher Longstreth. Because two of the 7 at-large seats are reserved for Republicans, and Councilman Longstreth is no longer running, this will be a hotly contested seat. In addition to incumbent Republican Frank Rizzo, four other Republicans have filed for at-large seats. On the Democratic side for the at-large seats, incumbents David Cohen, Wilson Goode Jr., Jim Kenney, Angel Ortiz, and Blondell Reynolds Brown have filed for re-election, along with eight new democrats hoping to unseat one or more of the incumbents. Democratic district council members facing challenges include Frank DiCicco, Rick Mariano, Donna Reed Miller, and Marian Tasco. Councilwoman Jannie Blackwell, the council member for the Third District in which Penn is located, is running unopposed.

Mayor's Budget

On January 28, 2003, the Mayor presented his budget address to City Council. He proposed a $3.3 billion operating budget for fiscal 2004 and outlined that the City's five-year plan forecasts an estimated $834 million deficit by 2008 due to the lagging national economy. His five-year budget continues minor cuts in the wage and business taxes by $319 million. His cost saving measures include: 5% budget reductions across all departments; 1.5% cuts in personnel costs; 16% reduction in outside legal fees; continuation of the hiring freeze; elimination of 500 positions through the DROP program; and reduction of the workforce by approximately 2500 positions over the course of the 5-year plan. His workforce reduction plan includes the elimination of 50 Administration positions within the Mayor's Office, Finance, and Managing Director's Office, several of these cuts have already been made. Mayor Street noted that Philadelphia supports a public infrastructure designed for a City population of 2.5 million. Because this represents a system designed for one million more residents than Philadelphia currently has, he warned of closure of city facilities specifically citing pools and recreation centers. The PHLASH shuttle bus for tourist sites is also slated to lose its city subsidy, saving $9.4 million through fiscal 2008.

The Mayor promised support for resolution of the Convention Center union issues and continued funding for Operation Safe Streets. He recommended changes to the Neighborhood Transformation Initiative spending that will result in more apparent physical changes, such as an acceleration of the demolition schedule and introduction of new housing development plans. Hearings in City Council on the Mayor's operating and capital budget are taking place throughout March, and it is anticipated that Council will vote on the budget in April.

Mayor's Report to the Greater Philadelphia Chamber of Commerce

On February 7, the Mayor delivered his annual report to the Greater Philadelphia Chamber of Commerce. The focus of this speech is to deliver to the region's business community an update on the City's financial and economic progress, and strategic investments and future plans. The Mayor echoed themes used in his City Council budget speech in expressing the difficult economic times facing Philadelphia and the nation. He outlined several of the challenges he inherited in his first years as Mayor, which he has helped turn around including: a financially stable Philadelphia Gas Works; retaining the Eagles and Phillies teams with new ballparks; improved on-line City government operations and information; new large-scale developments announced under the Mayor's Neighborhood Transformation Initiative; and new leadership and partnership with the Commonwealth for the School District.

The Mayor spoke of retaining Philadelphia's status as a world class city with a great future by investing in areas critically important to future growth. One of these areas focused on the knowledge industry fueled by the region's colleges and universities. He stated," In fact, our ‘knowledge industry'; of colleges and universities is to Philadelphia what the auto industry is to Detroit or the entertainment industry is to Los Angeles." He highlighted many initiatives in which Penn is involved.

• Mayor Street intends to rigorously support the expansion of Philadelphia's colleges and universities to further leverage the economic impact of higher education and research institutions in Philadelphia and the region. The Mayor highlighted the development of 1.2 million square feet of research and clinical facilities by the University of Pennsylvania and Children's Hospital on the old Civic Center site. He spoke of working with area university and college Presidents to develop a clear strategy to increase our share of federal research awards and maximize funding for technological innovation related to homeland security.
• Retention of college graduates was named as a major economic development priority for Mayor Street's administration. He outlined his intention to work with universities and the Commonwealth to make land, low cost financing and other needed support available to help universities develop campus student housing and grow their student enrollment. The Mayor announced his support of the "Knowledge Industry Partnership" chaired by Dr. Rodin. This effort is designed to bring more college students to study in Philadelphia, encourage existing students to explore the City and region during their stay here, and achieve successful careers in Philadelphia after completion of their studies.
• The City intends to take better advantage of the "creative class" cluster that exists in Philadelphia due to the convergence of culture, arts, technology and media, and competitive strengths in biotechnology, pharmaceuticals and life sciences industries. Mayor Street noted the concentration of local institutions such as the Moore College of Art and Design, the University of the Arts, the Pennsylvania Academy of Fine Arts, and the Art Institute of Philadelphia. He mentioned Temple University's commitment to move the Tyler School of Design from the suburbs to its main campus in North Philadelphia, which will further add to the City's creative resources. The Mayor credited the revitalization of neighborhoods such as Northern Liberties and Old City to many of the graduates of these institutions. He expressed that public and private support for these creative services can breathe new life into the Avenue of the Arts and the effort to bring the Barnes Foundation to the Benjamin Franklin Parkway.
• Mayor Street also announced that the City is providing financial support to the Schuylkill River Development Corporation to create exciting new development plans for institutional, recreational, commercial and market rate residential projects. The Mayor indicated that development along the Schuylkill River could present the next frontier for growth in Philadelphia. The University of Pennsylvania is working with the City, the Center City District, the University City District, and other institutional partners along the river on these plans.

Tax Reform Commission

Councilman Michael Nutter (D-Fourth District) received overwhelming public approval for his proposed Tax Reform Commission, which was presented to the electorate as a ballot question in the 2002 General Election. The Commission is charged with evaluating the City's current tax structure and developing recommendations to improve Philadelphia's ability to compete with other regional jurisdictions in retaining and attracting new residents, businesses and jobs. The fifteen-member appointed commission is supported by a 23-member Advisory Committee, on which Dean Patrick Harker of the Wharton School sits. We will watch the proceedings of the tax commission closely to determine whether there are any recommendations affecting the University and Penn Medicine.

Neighborhood Transformation Initiative (NTI)

On February 3, Mayor Street announced the first large-scale development sites of his NTI program. The projects will result in 2100 new homes and apartments and the proposed development of commercial space on approximately 350 acres throughout the city. The new housing will provide low and moderate-income homes to upscale townhouses. The total development value to the City will be $150 million. One of the sites includes the redevelopment of the recently imploded Philadelphia Housing Authority Mill Creek Apartments in West Philadelphia. The project will create a new community of 788 homes, which will include 247 homes for sale, 341 apartments for senior citizens, and 200 rental units for families. The City has allotted approximately $68.1 million of bond proceeds for FY2003 and $60.2 million for FY 2004 NTI activities.

Free Library

Penn continues to work with its neighbors to advocate for the restoration of the 40th Street Walnut West Library. It is scheduled to reopen January 2004 and remains on schedule. The City's recommended capital program for FY 2004 continues to provide funding to complete the construction project.

--Carol R. Scheman, Vice President for Government,
Community and Public Affairs