a Balanced Budget
the University Community:
we begin 2002, we can look back over the past few years on a great
number of achievements in which we can all take pride. Our investments
in the campus and the community have produced real improvement
in both, with new academic facilities and neighborhood amenities
that have made Penn and University City such appealing places
to study, work and live. Our reputation as one of the world's
foremost research universities has continued to grow, enhanced
by the addition of outstanding scholars and the creation of important
new research programs. Our endowment performed well this past
year, posting a positive return in the face of a general market
decline. Our Health System has returned to profitability. We have
met virtually all of the major institutional goals mapped out
in our five-year Agenda
for Excellence, in many cases surpassing them.
of this leaves us well positioned for the future. But we are now
operating in a different climate from the one we enjoyed in years
past. The economic downturn that began last summer has been exacerbated
by the events of September 11 and has spread throughout the nation.
Each day's news brings new stories of corporations cutting back
on their operations and laying off workers. Although we are fortunate
to be in a sector that fares better in times of recession than
the economy as a whole, we are not completely immune to the current
operations have been affected by recent economic changes in several
ways. The biggest impact is in the cost of employee healthcare
benefits, where our costs have taken a sudden jump, climbing 13
percent this year after a decade of much more modest annual increases.
More students are applying for financial aid now than in recent
years, as layoffs and corporate downsizing have reduced some family
incomes. The decline in the economy has also caused state revenues
to fall. This has already led the Commonwealth of Pennsylvania
to reduce its appropriation to the University by one percent this
year, and further reductions are possible in light of the state's
fiscal straits. We are seeing across-the board increases in our
insurance costs, as insurers raise rates to pay for claims related
to the terrorist attacks of September 11. We are also experiencing
declines in enrollment in our executive-education programs as
companies cut back on expenses.
of these changes mean that we must take corrective steps now if
we want to maintain a balanced budget and continue to make important
investments in our key academic priorities over the next several
years. First, we must reduce administrative costs. To achieve
this, I have asked each central administrative department to plan
to reduce its budget by five percent in the coming fiscal year.
Our goal is to identify and eliminate unnecessary expenses and
realize increased efficiency so that our central administrative
offices will continue to provide vital services to our students,
faculty and staff, but at a lower cost. We must also offset the
sudden rise we are currently experiencing in employee healthcare
costs, and work proactively to keep future increases to a minimum.
And we must continue to make wise, strategic choices in our academic
to careful planning and extraordinary faculty, students and staff,
Penn has been able to flourish over the past five years. We are
now in the process of identifying the major goals we will seek
to achieve during the coming five years in our next strategic
plan and we look forward to community-wide input as the plan develops.
goal is not merely to weather the current recession. We are determined
to do much more--to build boldly on the momentum of the past five
years and make even greater strides over the next half-decade
in scholarship, research, teaching, community development, public
service and civic leadership.
our goals will require the active involvement of every member
of the Penn community. I look forward to working with you as we
seek to make a great university even greater.