COUNCIL State of the University, Part One

At Council on November 10, the President and Provost presented their annual Stateof the University reports. Below is the report given by President Judith Rodin. Provost Robert Barchi's report is scheduled for publication on December 7.--Ed.

The State of the University, 1999-2000 by Judith Rodin

Many of you have heard me say that there is a kind of buzz on campus, an excitement that is quite palpable this year, although it escalates every year. The Provost will discuss with you many of the academic strengths and initiatives that have been moved forward over the past academic year, but there is an enormous amount that is happening in other spheres. I will have to be selective, but let me start by saying how proud I am to be president of this great institution, and what a privilege it is for me.

For Homecoming this past weekend, 18,000 alumni came back to the University--a record number. Many of them attended the Penn--Princeton game on Saturday, and we were appreciative that we didn't disappoint. For the first time we had a Young Alumni event for the classes of 1990 through 1999, with over 600 people attending an event at 30th Street Station; and we're looking forward to the Class of 2000 to burgeon those ranks next year when you come back for your first Homecoming.

At our last University Council meeting we talked about scholarships and undergraduate financial aid [see Almanac November 9]. A Scholarship Donors Dinner on October 21 honored not only the role that Roy Vagelos has played in the leadership of the University Board of Trustees, but also importantly his personal commitment to undergraduate financial aid and his leadership there. At Roy's request it was also a celebration of our student performing groups--14 of them, performing for 900 people who packed Zellerbach Theatre. They included 200 scholarship donors and their students, along with trustees, administrators, many other students from around the campus, and others. It was an incredible performance and it reminded me once again not only of the talent of our students, but of the extraordinary diversity we have. We had African dance troupes and Indian a capella singers and all manner of groups that represent so well the University of Pennsylvania. I'm very appreciative to those of you who participated--and those of you who weren't there really missed something sensational.

Engineering's New Dean

One of the hallmarks of Penn is the depth of our leadership and last week, after a very long search, the Provost and I announced that Eduardo Glandt will become the permanent dean of the School of Engineering and Applied Science.

It's a tribute to our distinguished faculty when a thoughtful and carefully conducted--and indeed quite exhaustive--search culminates in the appointment of one of our own. It reminds us once again what a very talented faculty we have and what depth of distinguished scholarship there is among our faculty.

Because of time I'm going to focus on just this one school in my report. Eduardo's stewardship this year has been exemplary. The school successfully completed its first external review. We made several significant new faculty appointments. This has been the best fund-raising year in the school's history, with all-time records both in annual giving and in number of donors as well as in the size of the gifts. We've announced our intention to build a new building, Melvine J. & Claire Levine Hall, for computer and information science. We are undertaking a very significant proposal which we hope will enable us to build a new building for bioengineering, to house new laboratories. We are in a wide recruitment mode within the School of Engineering and Applied Sciences, and much progress has been made because of the generosity of our Overseers and alumni in the school.

We've initiated many new endowed chairs including three Peter and Geri Skirkanich Chairs for Innovation which have allowed us to recruit both young and more established and senior scholars who will receive very strong support and resources for their research activities as part of the chairs. We are continuing to raise our sights with regard to fund-raising for faculty chairs--particularly fund-raising that allows the faculty a stipend associated with the chair for their research activities and Engineering has been extremely successful in this.

Agenda for Excellence

I'll take just a few minutes to tick off some of the highlights of progress made in the Agenda for Excellence this year, and the Provost will report on others.

[Slide shows Figure 1.]

Figure 1:

Penn in the Headlines

Penn #6 in 'U.S. News'

Fox gives $10M to create SAS Leadership Program

Pottruck donates $10M for Gimbel Renovation

Admissions yield hits 55%: a New Record

New College Houses at Full Occupancy

Combined SAT score is 1390 for Class of 2003

Redford to Open Sundance Cinema

Ground Broken on Wharton's Huntsman Hall

This reminds us of some of the headlines of last year-good indicators of the momentum that we've generated over the past few years. We're very proud of these achievements and the innovative approach that has gotten us there.

[Slide shows Figure 2.]

Some of you may have seen, and I hope all of you will have a chance to take a look at, a new interdisciplinary brochure that we now mail to all of our prospective applicants. It celebrates the extraordinary number of interdisciplinary and multi-disciplinary programs, the cross-school and joint degrees and multi-degree programs that represent such a distinctive niche for Penn relative to our peer institutions. In the brochure we have, if you will, testimonials from students in various programs, as well as very good descriptions of programs themselves.

I understand from the admissions staff that this piece has been quite successful in doing what we intended it to do, which is to demonstrate not only the ways in which Penn is outstanding and like our peers, but also the ways Penn is outstanding and different from our peers.

Figure 2:

Planning and Budget

We have been focusing a great deal--and I know this is of concern to this Council--on improving the planning and budgeting process over the years. This has been one part of our goal in the Agenda for Excellence , and I think we have much to be pleased about in this area.

We now have throughout the University and in every school a rigorous five-year budgeting procedure. In most of the schools when our administration took office we were working on year-to-year budgets, so it was very hard to do long-range planning, to link the financial planning to the academic planning, and to do a number of the things that good stewardship would require in terms of filling gaps between resources and resource needs. We're very pleased with that process and we think it is moving us successfully forward.

Progress in FY 1999

During this past year--and I'm reporting just on FY '99, which concluded last June--we've been moving toward completion of Perlman Quad. Samson Common is now completed; and I've reported to you at other times the great pride that we take in the fact that 45% of this project was based on minority and women's business opportunity, entry business opportunity to trades, to subcontractors and the like.

We've seen the Quad renovations and the acquisitions on the Civic Center site, and the opening of the Katz Fitness Facility. The GE building is now under construction, and we've begun the Dental School's "gateway" building, the Shatner Building, and the Wharton School's Huntsman Hall in the past year.

I understand the stress on the University with so much construction under way. One of the considerations that emerged last night as the group looking at lighting walked around campus, is to try to get more lights on some of those construction sites which really do represent a challenge in the evening. I want you to know that I share that concern and we will be on top of that very, very quickly.

[Shows Figure 3.]

We are doing wonderfully in terms of our fund-raising. We are trying to generate more revenue for the endowment because of, as I have mentioned before, our very notable underen-dowment per student relative to our peer institutions. But we also are eager to spend money that we raise because we want our current students and faculty to enjoy the benefits of the considerable fund-raising that has occurred at the University. As you can see, 63% of all of the money raised last year was specifically for Agenda for Excellence initiatives, trying to target our fund-raising towards those strategically designated highest priorities of the institution. Everyone is working very, very hard to make that happen.

Figure 3:

Funding for Strategic Goals: Progress in FY 1999

Of total $1.5 billion goal, $566 million raised by year-end.
63% of all FY99 subscriptions-$190 million--were for Agenda initiatives.
AEC--identified 250 new potential donors; committed $40 million in last 3 years.
FY99 Fundraising exceeded goal of $300 million with $302.5 million.

$73 million in $5 million+ gifts--11% above goal.
$56.3 million in planned gifts-- 69% increase.
Penn Fund raised $12.4 million--16% increase.
7 Reunion classes set records, including 20th with $5 million.
A record $90 million in receipts added to endowment--40% increase.
Undergraduate financial aid highlights:

Cumulative total of $85 million.
$36 million in FY99--20% above goal.
Over 125 new scholarships created in FY99.

Six Academic Priorities:

Cumulative total of $28 million.

Undergraduate Student Life:

Cumulative total of $13 million.
Exceeded fundraising goal for Perelman Quad.

Health System Issues

I was asked as part of this presentation to speak with you briefly about the Health System. Certainly the challenges facing the UPHS have been central to everyone's concerns over the last several months.

As many of you are aware, there is a great financial stress on teaching hospitals and academic medical centers throughout the United States. There are some very clear reasons why that is occurring. It is not simply a Penn problem, but truly a national one that we will have to confront as a public policy issue and as a health policy issue. Unfortunately, we are one of the institutions on the leading edge of the problem. The Balanced Budget Act of 1997 reduced Medicare payments overall, and reduced considerably Medicare payments for medical education, which was one of the ways that academic health centers funded their medical education.

It's not very efficient public policy but there it is. When Medicare was created, it was set up to fund portions of medical education through Medicare payments. Congress may have decided that's not a very efficient way to do it; but it pulled it all back in one year, and that has affected all of the medical schools and all of the academic health centers in the nation.

Also, there's been an extraordinary increase in the denial of claims by insurers across the United States--in some cases just delay, but more importantly outright denial. That has impacted all hospitals, not only academic medical centers. Pennsylvania does not reimburse hospitals for indigent care, and Philadelphia no longer has a county hospital. Think of your home towns. Many of you will have county hospitals that provide indigent care within your cities. But HUP is largely the indigent care provider of Philadelphia. We spent $60 million on unreimbursed indigent care last year.

One of the initiatives that has been undertaken is to try to encourage the Governor to think about having some of the tobacco money that will come to the state go to the hospitals--not just the academic hospitals--to reimburse indigent care in this Commonwealth.

You can see that some of these are really public policy issues, and we are very active on the state and federal scene to address these, hoping for some relief.

Unfortunately Penn's Health System must act before legislative relief is available, and that is one of the reasons that the cutbacks that you've read about were introduced. Our health system experienced an operating loss of almost $100 million in Fiscal Year 1998--that is, the year ending June 1998--and $200 million in the year ending June 1999. We expected an operating loss and we budgeted for an operating loss in that year--but the magnitude of that loss was not anticipated, and it rapidly escalated over the final few months of the fiscal year.

A large portion of that loss was "book" loss (that is, the need to write down tens of millions of dollars in patient charges that the Health System believes are not collectable from the insurers, although we continue to be very aggressively trying to collect them), along with restructuring charges and severance-related expenses from the workforce reduction. We are working with the Hunter Group, as many of you know, to try to take costs out of the health services component of the Health System, while not challenging the quality of the very, very excellent medical care that we provide at all of our teaching hospitals. But that's a significant challenge, and one that I would be naïve to guarantee as definite without a lot of hard work by a lot of people. We intend to be the high quality provider we've always been, but we're going to have to work very hard to continue to do that.

The Health System, importantly, has and did have sufficient cash reserves to cover its Fiscal Year '99 losses. No endowment funds have been or will be used for this purpose. No gift has been converted from its intended use, and the University has not covered these losses.

It was discussed at the end of last year that the University had on its books an interfund transfer between the Health System and the University, because of the number, truly the hundreds of transactions everyday and every week that flow between the University and the health system. That is the case, and we've worked out a timely repayment schedule from the Health System to the University and those repayments are being made.

I won't give you again the story on the layoffs except to say that it's a very sorrowful situation for the University of Pennsylvania and its valued employees, and there's considerable sadness in the hospitals. We are concerned for our employees who have been terminated, and for those who remain and are feeling the pressure of the loss of their fellow workers as well as the sense of continuing anxiety about their own positions. We're continuing to work hard to reduce that level of concern while realistically moving forward.

There will be changes in clinical resource utilization and other aspects of cost savings that are going to be implemented over the next several months. Interesting and important--and in some ways most disheartening--is that the Health System continues to experience record high inpatient admissions and record high outpatient visits. So this is not about filling the hospital beds or filling the hours of the clinical faculty's time. We have never had volumes as high. This is about the level of reimbursement for every procedure, and maybe the effectiveness and efficiency with which we are delivering those procedures; and everyone is hard at work at this.

Campus Development

Let me just say a few words about the Campus Development Plan.

The Provost last spring presented our approach to the development of a campus plan that would support our commitment to being one of the premiere research and teaching universities in the nation and in the world. Five committees have been very very hard at work.

There are two primary objectives of the plan and I would just like to remind the Council what the plan is really intending to do: It's to provide a flexible but integrated framework for decision-making, one that can be revisited and updated to provide guidelines for massing [of faciliites] and for transportation and categories of usage in various campus regions. There are requirements for green space and recreation, for visual gateways, and for development of alternatives for improving transportation both pedestrian and vehicular.

The committee that is examining the extent to which campus environment meets our teaching and research needs is the committee on Academic and Scholarly Purpose, chaired by Barbara Lowery. It is asking questions like:

Can campus regions be identified or should they be identified for particular aspects of the academic mission?
Should there be a common approach? Should we have common classrooms or a core of classroom facilities regardless of the school that's using them?
What's the effect of pedagogical trends and technical advances on our building of and use of academic space? Should we think about condominiumizing space to make it flexible so that we could change it every ten years without enormous expense?

The group on Student Life and Administrative Life, chaired by Ira Shwartz, is asking questions like:

How should our physical environment be organized to foster interaction?
What opportunities do we have to enliven the campus and its environment?
How can we best maximize our open spaces? And the like.

The Heritage and Historic Buildings group, chaired by David Brownlee, asks questions like:

Which are our historic buildings? (an important and interesting question).
What are the University's legal and ethical obligations for historic buildings?
How we can make progress here?

An important committee on Access, Circulation, and Transportation chaired by Eugenie Birch is hard at work and asking a variety of questions. I won't review all of those questions, but clearly the question of transportation, gateways and circulation is very much on all of our minds. I think what's important to say is that Laurie Olin has made presentations to the Senate Executive Committee and to the University Council Facilities Committee; and we will be holding town meetings and several open fora as these five committees continue to make progress before issuing a full report for the benefit of the Trustees.

[Ed. Note: Please see notice of fora on cover page.]

Bicycle and Pedestrian Safety

Finally, while transportation is on our minds let me just say a word about bicycle safety.

Clearly we are all mindful of the terrible tragic deaths that we have experienced in our community since the fall semester began. The issue of bicycle safety against vehicular traffic--and indeed of pedestrian safety against bicycle traffic--is very much on people's minds. A variety of experts and a variety of committees have been thinking about this issue.

Let me say that much progress has actually been made with the City since 1994, and we were already on course to make more progress, including bike lanes on Walnut Street and Spruce Street, by the end of the spring term.

But now we believe strongly, as I know many of you do, that this is an important time to take a moment--and literally just a moment-- to ask ourselves whether the initiatives we were planning with the City are sufficient: Whether bike lanes on Walnut and Spruce will serve the ends that we really need. So I've asked a couple of people who have thought long and hard about this to come together with a couple of organizations.

Among them are:

Glenn Bryan and Paul Cribbins from our Office of Government, Community and Public Affairs;

Laurie Olin, who of course is chairing our planning effort;

Vukan Vuchic, who is an expert on transportation in his own discipline and is chair of the University Council Committee on Facilities, and also a member of the transportation subcommittee of the Campus Development Plan;

Omar Blaik, our vice president for Facilities Management;

Mike Glick, who is chair for the UA Facilities Committee; and

Ken Wildes from University Relations.

I've asked them to look carefully at what kinds of aggressive proposals--aggressive in the positive sense--we can make to the City and the state given the tragic experiences we've had. We want to make to make sure that we put the right sets of programs in place to assure bicycle and pedestrian safety as we move forward with other campus planning.

I want to assure Council that we are very very mindful of this need and working quite hard on it in order to report back very shortly. We will solicit input so if anyone has ideas or thoughts on this issue, they will be most welcome. Thank you.

[Moderator opens the floor to questions.]

Kendra Nicholson: That last committee that you were just speaking about, bicycle safety: Is there a graduate student representative on that committee, and if not could we have a representative on that committee?

Dr. Rodin: Oh, absolutely. The only thing is that we want to make sure that this is not a long-enduring committee that will work for five months and come out with a report that will be too late to implement. The first meeting is Friday--perhaps Mike could give you the information since we were in touch with him about that-and if you would nominate someone, we would welcome the input.

Terri White: This doesn't pertain to bicycle safety, and I'm not sure if this is the right committee but a number of people have been complaining about the amount of truck traffic on Locust Walk--that it is quite dangerous now, and events held there are now in the midst of a lot of traffic. I was just wondering if anything could be done about that.

Dr. Rodin: The Transportation and Circulation Committee, one of the five campus development planning committees I just mentioned, will, actually; that's one of the specific questions that they will be taking up so we'll see that addressed in their report. I think that is an increasing concern.

Peter Freyd: I got confused during your health system talk; you said the Health System had sufficient cash reserves to cover its fiscal '99 deficit. But then you started talking about fund transfers between the University and the Health System. Were you in fact saying that the University in fact loaned the Health System money which it's now paying back?

Dr. Rodin: Right--unintentionally, that is. Fund transfers move back and forth all year between the "center" of the University and all of its schools and centers. As the Health System's finances worsened over the course of the year, the funds only flowed in one direction. So at the end of the year--and this was known by some, I think, but I certainly feel quite open about it--there was about $100 million; that's now been paid down to $75 million, with a monthly payment schedule that will bring the rest back so that it will be a zero fund balance by the end of fiscal 2000. We were concerned about it, and we have a mechanism for bringing it back to where it should be.

[Moderator moves the agenda to the Provost's Report, which is being prepared for publication in the December 7 issue.]

Almanac, Vol. 46, No. 13, November 23/30, 1999

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