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Fiscal Year 2004 Budget: Report to University Council

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The annual presentation of the FY 2004 budget (July 1, 2003 through June 30, 2004) was made at the March 24 Council meeting. President Judith Rodin gave some preliminary remarks. Then, Bonnie Gibson, acting director of the Office of Budget & Management Analysis, gave an overview of the Consolidated Budget and noted that the Academic component (schools, resource centers, auxiliaries, and central service centers) has been growing more quickly than the Health System component (Penn Medicine: HUP, Presbyterian, Pennsylvania Hospital, Phoenixville Hospital, CPUP, and Clinical Care Associates), (see table below).

She then focused primarily on the academic portion of the budget. Her presentation included expenditure and revenue perspectives (see pies)  as well as a look at the indirect cost recovery rate (see below) and Penn's endowment as compared to peer institutions' endowment per student (see below). In 2002, Penn was ranked 67, and in 2003 it is ranked 66 in the NACUBO Study. The following text, charts and pies are from her slide presentation.

Vice Provost for Strategic Initiatives Leslie Hudson then explained the role of his office which is relatively new to Penn. He said that the goal is to ńdrive revenueî  with a purpose to the University's core mission. Next week's issue will include highlights from his presentation, along with coverage of the remainder of the Council meeting.

 

FY 2004 Consolidated Expenditures Budget

 

Growth in Penn's Revenue Sources Is Constrained

  • NIH has completed the planned doubling of funding.  After years of double digit increases, our growth in sponsored research awards is slowing down.
  • The federal F&A rate (grant overhead) is likely to decline in the coming years, limiting the growth in Indirect Cost Recovery (ICR).
    --Rate has fallen from 65% in FY 1992 to 58.5% in the current fiscal year
    --The rate for FY 2005 is still being negotiated and may be reduced
  • For FY 2005, the Governor is recommending a 1.7% increase over FY 2004 Commonwealth Appropriation.  This would still be below the FY 2003 amount.
  • Penn's spending rule provides for a 2.2% decrease in spendable investment income for FY 2005, following a 5.0% decrease in FY 2004.
  • Most University business services either break even or generate narrow margins in sales and service income after meeting all operational and programmatic requirements.

 

Budgeting to Support 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.
  • 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 whenever possible towards investments in the Schools that support their most important goals and priorities.

 

FY 2004 Academic Budget Sponsored Program Indirect Cost Recovery

 

FY 2002 Actual

FY 2003 Actual

FY 2004 Budget

FY 2004 Projected

Income ($000)

143,815

161,586

170,001

174,545

Annual % Change

14.2%

12.4%

5.4%

8.0%

Federal ICR Rate

58.5%

58.5%

58.5%

58.5%

  • Total direct and indirect Sponsored Program revenue represents approximately 36% of the FY 2004 Academic Revenue Budget
  • The School of Medicine accounts for about 68% of Sponsored Program dollars awarded to the University
  • According to an analysis prepared by the Office of the Provost, Penn's total ICR is nearly $40 million less than the actual overhead required to support our annual research effort

 

FY 2004 Academic Budget Total Revenue by Source

Total = $2.009 Billion

 

 

Commonwealth Non-Preferred Appropriation
($000)

 

 

 

Annual Growth in Spendable Endowment Income Under the Spending Rule (Excluding Earnings on New Gifts to Endowment)

 

 

 

FY 2004 Academic Budget Expenditures by Expense Type

 

 

FY 2004 Academic Budget Expenditures by Responsibility Center Category

Total = $2.009 Billion

 

 

FY 2004 Academic Budget Expenditures by School

Total = $1.427 Billion

 

 

Peer Institution Endowment/Student

Rank

Institution

Assets ($B)

($/Student)

2 Princeton
8.73
1,306,706

4

Harvard

18.85

    996,431

5

Yale

11.03

    988,941

15

Stanford

8.61

    600,739

19

M.I.T.

5.13

    511,418

24

Dartmouth

2.12

    391,074

29

Washington U.

3.45

    317,849

36

Chicago

3.22

    262,364

52

Columbia

4.35

    217,196

53

Northwestern

3.05

    216,933

62

Brown

3.02

    190,674

66

Penn

3.55

    177,391

78

Cornell

2.85

    145,838

Note:  Source is the FY 2003 NACUBO Endowment Study

 

 

FY 2004 Financial Aid Budget

 

FY 2003 Actual

  FY 2004 Budget

   FY 2004 Projection

 % Change 04P v 03A

Undergraduate Student Aid

 $  78.2M

$  83.1M

 $  83.9M

7.3%

    Penn Aid

     66.2

    71.1

     71.8

8.5%

    Outside Aid

     12.0

    12.0

     12.1

1.0%

 

 

FY 2004 Financial Aid Budget

 

FY 2003 Actual

FY 2004 Budget

FY 2004 Projection

% Change 04P v 03A

Undergraduate Student Aid

$ 78.2M

$  83.1M

$83.9M

7.3%

    Penn Aid

    66.2

    71.1

    71.8

.5%

    Outside Aid

   12.0

    12.0

    12.1

1.0%

Grad. & Prof. Student Aid

$ 98.0M

$107.2M

$107.9M

10.1%

    Penn Aid

   74.6

    80.8

    82.0

 9.9%

    Outside Aid

   23.4

    26.4

    25.9

 10.7%

Total Student Aid

$176.2M

$191.3M

$191.8M

8.9%

 

Summary

  • The Strategic Plan and Budget are aligned
    --The President and Provost direct resources to our strategic priorities.
    --Deans and senior administrators develop budgets that support the underlying strategic plans.
  • Our Immediate Challenges
    --Sponsored Program Direct and Indirect revenue growth is slowing.  The Indirect Cost Recovery Rate may be reduced.
    --Financial Aid continues to grow faster than the rate of increase in tuition, driven by greater need and more generous packages for undergraduates, and by higher stipends and health insurance for graduate students.
    --Financial Aid is under-endowed requiring us to use unrestricted funds to meet financial need.
  • Our Long Term Opportunities
    --Building on Excellence has identified term and financial aid endowment, faculty chair endowment, and investments in new and renovated academic buildings as top priorities.

 

 


  Almanac, Vol. 50, No. 27, March 30, 2004

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