Budget 2000-2001: President Rodin's Report to the University Council

President Rodin's report to Council on March 28 included the University's financial planning approach and the components of the University budget. The pie charts show the academic budget revenue by source as well as the expenditure budget.

Additionally, the charts highlight the challenges the University faces as well as goals to be achieved in light of fiscal constraints.

The tables, pies, graphs and text are from the slide presentation.

Components of the Consolidated University Budget

• The Consolidated University budget has two major components--"Academic" and "Health Services"
• The Academic budget includes:

--Schools (including the School of Medicine)

--Resource Centers

--Auxiliaries

--Central Service Centers

• The Health Services budget includes all components of UPHS except for the School of Medicine:

--Hospital of the University of Pennsylvania (HUP)

--Presbyterian Medical Center (PMC)

--Pennsylvania Hospital

--Phoenixville Hospital

--Clinical Practices of the University of Pennsylvania (CPUP)

--Clinical Care Associates (CCA)

Penn's Financial Planning Approach

• The University engages in strategic long-term financial planning.
• New programs, priorities and initiatives are discussed and planned long before they are included in the annual University operating budget.
• Consultation occurs through the Academic Planning & Budget Committee and in other forums.
• New initiatives that will be implemented and budgeted in Penn's Fiscal Year 2002 budget have been identified and publicized already--during the current year or prior years.

How the University's Budget Supports Goals and Priorities

• Provost and Deans work together to develop School budgets that maximize level of resources available for investment in strategic goals and priorities.
• Executive Vice President and Vice Presidents work together to develop Central Service Center budgets that maximize level of resources available for investment in strategic goals and priorities.
• Limited central resources--e.g., Subvention, Research Facilities funding, Facilities Renewal Program funding--are directed wherever possible towards investments in the Schools that support their most important goals and priorities.

Growth in Other Revenue Sources Will Be Constrained

• The federal ICR (grant overhead) rate is likely to decline in the coming years, limiting the growth in grant ICR income.

--Rate has fallen from 65% in FY 1991 to 58.5% in the current fiscal year.

--Budget planning parameters assume a further drop to 56% in FY 2002.

• The Governor is proposing only a 1.9% increase in the University's Commonwealth Appropriation for next year.
• Penn's spending rule provides for only a 3.1% increase in spendable investment income for FY 2002, in contrast to double-digit growth in each of the past three years.
• Most University business services either break even or generate narrow margins in sales and service income after meeting all operational and programmatic requirements.

FY 2001 Academic Budget Sponsored Program Indirect Cost Recovery

	FY 2000 Actual	FY 2001 Budget	FY 2001 Projected	% Change vs. 2000
Income ($000)	113,107	115,444	125,000	10.5%
ICR Rate	58.5%	58.5%	58.5%

• Direct Sponsored Program expenditures are projected to increase by 10.9% in FY 2001.
• Total direct and indirect Sponsored Program revenue represents approximately 33% of the FY 2001 Academic Revenue Budget.
• The School of Medicine accounts for about 65% of Sponsored Program dollars awarded to the University.

Peer Institution Endowment/Student
Among Top 20 Endowments as of June 30, 2000
Institution	Assets ($Billions)	($/Student)*
Princeton University	8.40	1,316,202
Yale University	10.10	918,766
Harvard University	19.20	913,546
M.I.T.	6.50	660,502
Stanford University	8.57	558,088
Dartmouth College	2.47	467,449
Washington University	4.30	389,035
Chicago, University of	3.70	335,753
Northwestern University	3.64	235,782
Columbia University	4.26	223,516
Cornell University	3.40	166,227
PENN	3.20	161,168
* Based on FTE students as of Fall 1999

Penn's Undergraduate Financial Aid Policy

• Undergraduate financial aid is based on level of financial need:

student expense budget (tuition, fees, living expenses) - family contribution = financial need

• Aid package components to meet financial need:

--Self-help (student loan, work-study)

--Grant (external, University)

• Penn grant is awarded to the extent financial need exceeds required self-help plus third-party grants.
• Penn instituted a variety of exclusions and adjustments to the "family contribution" to make Penn more affordable to middle income families years before other peer institutions who adopted similar measures just two to three years ago.

FY 2001 Financial Aid Budget General Operating, Gift, and Investment Income Funds ($000)

	FY 2000	FY 2001 Budget	% Change
Undergraduate Student Aid	56,000	58,300	4.10%
Graduate Student Aid	57,000	59,200	3.90%
Total Student Aid	113,000	117,500	4.00%

• Fundraising for financial aid endowment remains a top priority.
• Undergraduate need-blind policy is a competitive necessity.
• Penn remains significantly under-endowed relative to peers.

Note: Figures exclude Sponsored Program Funds.

Illustrative Needs for Academic Investment

Penn has a vital need to maintain and enhance its reputation and rankings through:

	5-Year Investment Required
Faculty recruitment and retention	$25 Million
Life Sciences building	$90 Million
Undergraduate quality of life--recreation, housing and dining	$350-400 Million
Continued investments in information technology	$50-100 Million
Facilities Renewal	$50 Million

Challenges We Face

• Extensive needs for strategic academic investments
• Enhanced generation of endowment revenue
• Fiscal stability in the Health System

How Penn is Achieving its Goals in Light of Serious Fiscal Constraints

• Efficiency

--Both in Central Service Centers and in administration of Schools

• Development

--Ambitious, successful, focused fundraising in support of goals and priorities

• University/Private Sector Partnerships

--Getting others to spend their money to do things Penn needs so that our own resources can be spent on core academic priorities

Almanac, Vol. 47, No. 28, April 3, 2001

| FRONT PAGE | CONTENTS | JOB-OPS | CRIMESTATS | 2001 SCUE WHITE PAPER | COUNCIL: University Budget 2000-2001 | CHARLES ADDAMS HALL | TALK ABOUT TEACHING ARCHIVE | BETWEEN ISSUES | APRIL at PENN |