March University Council Meeting Coverage
April 3, 2012,
Volume 58, No. 28
In accordance with the University Council Bylaws, the March 28 Council meeting included “extended reports by the President, the Provost and other administrators covering budgets and plans for the next academic year.” The remarks below were adapted from the presentations given.
There was also a presentation on Faculty/Staff Benefits which was one of this year’s focus topics.
It will be summarized in the next issue.
March University Council Meeting Coverage
Reports on Budget and Plans for the Next Academic Year
Bonnie Gibson, Vice President, Budget & Management Analysis
Thank you very much. I’m so pleased to be here for my annual presentation. I’m going to be talking about the fiscal 2012 budget; I’d love to be telling you about the fiscal 2013 budget, but it’s not finished yet. So we’ll do an overview of ’12 and we’ll talk about the things that are finished, primarily undergraduate total charges, and I’m also going to spend a little bit of time talking about undergraduate financial aid and PhD financial aid.
University Operating Budget
So let me just start with some of our key facts: the biggest one is that this is a $6.26 billion budget, but that includes both the University and Penn Medicine. If we look at the University alone, it’s just slightly over $2.9 billion, which was about a 3.6% increase over our fiscal 2011 budget, and a little bit more, almost 5% over our fiscal 2011 actual. Sponsored Research Programs is a particularly interesting part of our budget this year, and I’ll talk about it a little later. The budget includes $367 million of capital expenditures, including the completion of Penn Park, Golkin Hall, and a number of other buildings that are being finished. We’re also doing the full design costs for several new projects.
If we look at our revenue (RCM refers to Responsibility Center Management, which is the way we manage ourselves internally) this is our $2.927 billion of revenue. An easy way to look at our revenue is to look at it in thirds. Basically, a third of our revenue is related to tuition and fees, a third of our revenue is related to research, and a third of our revenue is related to everything else. Everything else has a lot of categories, and the one I would like to point out is 9%, our investment income. That is a relatively low percentage for an institution like Penn, compared to some of our peer institutions, where that number is closer to 35, 40 and 45%. We looked at our expenditures for fiscal 2012, they’re up 3.6% compared to what we budgeted for fiscal 2011, and I think that the important point here is that 52% of our expenditures are related to compensation—to salaries and to benefits.
In 2011, our gross in both compensation and current expense was overwhelmingly driven by research. This year we’re actually seeing declines in research. Compensation is going down 1.1% in the research components of our budget, compared to an increase in the non-research, and on current expense, we’re seeing a decline of 9.2% in research. That would be alarming except for the fact that what’s really happening here is that we’re seeing a decrease in the Stimulus Funding that we received through research over fiscal 2009, ’10 and ’11, primarily in ’10 and ’11. We received in those years awards from the American Reinvestment and Recovery Act of 2009, commonly called the Stimulus Funds; we got over $220 million of awards of over 460 different studies. But those were very short-term awards, they were designed to be stimulative in nature, to help retain employment, to make investments in infrastructure. Consequently, they’re already beginning to phase out. So while we spent that money in ’10 and ’11, we’re now seeing the end and no new awards. This is a natural outcome of getting those stimulus awards, and one that we anticipated. What’s less natural is the fact that because of budget problems, the federal government is, in fact, not making the same level of investments, particularly in NIH funding that we had seen in the past. So we are liable to see, as we move forward over the next five years, flat research growth, but the FY12 research decline is directly related to the Stimulus Funding.
If we look at our budget by Responsibility Center types, this is where we’re spending the money. Who’s spending this $2.9 billion? Over $2 billion of it is being spent by the schools. The schools represent 70% of our total expenditures. If we look at that school segment and break it down, the Perelman School of Medicine represents 37% of all school expenditures, Arts & Sciences is 19% of all school expenditures, and Wharton is 16% of all school expenditures. That means that those three schools represent 72% of school expenditures, with the other nine schools making up the remaining 28%.
Total Undergraduate Charges 2012
Our 2012 total charges for undergraduates is $53,976, which is a 3.9% increase over fiscal 2011; these are the schools with which we compare ourselves routinely, and pretty typically we are right in the middle of that peer group. NYU is at the highest total and Princeton is at the lowest in our peer group; Penn is right about at the middle (see below).
Our financial aid budget in 2012 overall, including undergraduate, graduate and professional aid and graduate stipends, was $381 million, a 6.1% increase. Now I’d like to talk a little bit about next year, and specifically total undergraduate charges for 2012-2013. Currently we’re at $53,976. If you look at our statement of activities from our audited financial statements and look at the areas that are directly related to the cost of providing a Penn education, tuition actually covers only 71% of that cost. The balance is supported by philanthropy, by gifts, and by endowment. 57% of our students receive financial aid from either internal or external sources.
The average freshman grant for an aided freshman is $38,412 and all of our students have no loan packages. We do not package loans as part of a student’s aid package, so if we determine a student’s need is $40,000, that need will be met with grant and by work-study, with no loan. A student may opt to take a loan, and many of our students will opt to take a loan, but we do not include a loan as part of the package to meet need.
If we look at our peer group over a very extended period of time, Penn has been very close to the average in our peer group for this entire period. We actually are below the average for all private institution increases, and these are rates of increase, and we are substantially below the average for public institutions. For academic 2012-2013, the trustees have approved total charges of $56,106, that’s a $2,130 increase, and it’s a 3.9% change. This is total charges, it is tuition, fees, room & board. The room is based on the average standard room rate, typically a quad double, and the dining board is based on the Freshman Meal Plan. Obviously, once students are out of freshman year, they have a variety of room & board charges, depending on whether they stay in housing, whether they take a single, whether they take a triple, whether they take a full meal plan, a partial meal plan, so the charges can be different for our sophomores, for our juniors and seniors.
The projected increase in revenue is $20 million, based on this increase in tuition and fees. However, we’re also planning an increase in the undergraduate financial aid budget, by $13 million. So while we see a 3.9% increase in the revenue generated by total charges, we’re increasing the aid budget by 7.7%. The fiscal 2013 rate of increase is the fourth consecutive year that we have been under 4%. Since 1969 we’ve been under 4% in our rate of increase five times, and four of them have been the last four consecutive years. As a matter of fact, 3.9% is the same rate of increase that we have had for three years, and it is the second lowest rate of increase over this time period.
If we look again over time since 2002, what’s been happening to the average aided freshman package? Well, the obvious thing is it’s going up, and the second obvious thing is we’ve eliminated loans. We eliminated loans completely in 2010. 53% of all of our aided undergraduates and 57% of all of our aided freshman undergraduates received grants of at least $35,000 a year. In 2012, the average aided freshman is actually paying a net cost that is less than it was in 2004. In 2004, the average net cost—and I am defining net cost by taking total charges, tuition and fees, room & board, and subtracting from that the average freshman grant— in fiscal 2004, it was $15,900, and in fiscal 2012 it’s $15,500. And that’s not inflation adjusted, so in fact it’s even less.
If we look at our growth in aid expenditures from 2002 to 2013 budgeted, you can see that it has been extraordinary; it’s actually averaged over 10% a year from $65 million in 2002 to a budget of $181 million in 2013. This is an analysis that ties the number of students who actually qualify for aid to the national unemployment rate. The correlation was close enough that we actually did a regression analysis on it, and we used that regression analysis to help us plan for the future. So what I’d like to draw your attention to is the dramatic increase from fiscal 2008 to fiscal 2012. During that period we have added 849 aided students, which is a 23% increase. The numbers are so closely related it’s extraordinary, between what happens to unemployment and what happens to our number of aided students.
Using the professional forecasters report from the fourth quarter, we are anticipating that the unemployment rate nationally will decline slowly, and we are anticipating as a result that our number of aided students will actually decline as well. That does not mean that the dollars per aided student will decline, but we expect that the number of students with need will actually decline. And what we have budgeted on is using the regression analysis and using the unemployment rate and the predicted level of aided students, we’ve then added to that the standard deviation. So we’ve tried to take a conservative view.
Graduate and Professional Tuition and Aid
Now I’d like to talk a little bit about graduate and professional tuition and aid. We had, in 2011, over 3,000 PhD students across nine schools and 53 graduate groups. Almost all of them are fully-funded for a period between 3 and 5 years. Full funding includes remission of tuition and fees, a stipend, and health insurance in each of the funded years, and the five-year standard funding package, using SAS Humanities as our base, for students entering in the Fall of 2011, was worth $280,000 in constant fiscal 2012 dollars. PhD tuition will increase by 3.9%, the Masters degrees that are part of the graduate groups will also increase at 3.9%. Professional tuition is set by the individual schools and it can be set according to market. This year the increases that have been reported to us so far range from 0% to 7.6%. If we look at PhD funding by school, what you would expect to see is what you actually see: the School of Arts & Sciences has the most students and the highest level of total funding expenditures. So we’ve got $140 million of expenditures with $61.6 million of that in the School of Arts & Sciences and the Biomedical graduate group being the second highest, with $35 million.
Andy Binns, Vice Provost for Education
Thank you very much, I’m happy to be here. Every ten years, every institution of higher education undergoes a reaccreditation by a regional accrediting body. Our regional accrediting body is the Middle States Commission on Higher Education, and it is to them that we look for the standards by which we are evaluated. They ask the University to provide evidence that we meet and comply with each of the 14 standards that they elucidate.
The process is that the University does a self-study in which we address these standards. The University picks a topic and addresses that topic, and within the self-study it might address only a few of the 14 standards. We then provide documentation that we meet the other standards not addressed in the self-study. That was the strategy that we took in 2004, in which we focused on PhD programs and education, and that turned out to be a very valuable process for the University. A lot of issues were analyzed and talked about, and there were some extensive, important outcomes from that self-study.
For the 2014 review, we started months ago to get ready, and we have decided that our self-study will focus on undergraduate education. Right now, we’re in the midst of planning for the self-study, and this process involves consultation with various University committees and governance bodies. Just yesterday, our liaison from the Middle States Commission on Higher Education was on campus to talk to us about what we’re doing. We have a self-study design, within which we have many different working groups.
We’re in the midst of putting these working groups together, and we have chairs now for each of the groups related to the Penn Compact. Professor Kathleen McCauley from Nursing is going to chair Access & Equity. Professor Robert Ghrist, a PIK Professor in Math & Engineering, will chair Integrating Knowledge. Professor Matt Hartley from GSE is chairing Local Engagement, and Professor Mauro Guillen from Wharton is doing Global Engagement. In the assessment world, on undergraduate research, Professor Vijay Kumar from Engineering chairs that group. Professor Dennis DeTurck from Math—and the College Dean—is doing Finance and Administration, and Professor Georgette Phillips from Wharton is doing Curricular and Learning Outcomes. We’re in the midst of putting together the total working groups, which will include faculty, staff and students.
From now until March 2013, working groups are going to study our questions and write a report. In 2013-14, there’s a plan for the Middle States evaluation team visits. Once we submit the self-study, they then assemble a team that will come for a site visit and talk to us about it. The final visit of the Middle States team, and their evaluation and report, will be in the Spring of 2014. I’d say that Middle States expects two major things of us. The first is that the educational goals and programs need to reflect the institutional mission and vision. And second is that Middle States focuses very heavily on assessment; we’re making sure that we cover assessment not only because they’re asking us to but also because we think there are areas in which it is very much going to help us. They want us to demonstrate that we do what we say we’re doing. We’ll do this through a lot of analysis, and they’re also asking us to think about ways in which we can improve those things which we say are our critical goals. This requires broad engagement with the Penn community; you’ve heard a little about how that’s going on. Most importantly, we have to demonstrate institutional goals and how we’re achieving those goals.
I thought I’d spend a tad more time talking about the 14 standards. They address everything from finances and program offerings to faculty to academic integrity. The most critical standard for this review is assessment of student learning. As you know, that issue is getting attention nationally in conversations about accreditation and accountability and the future of higher education, and we feel this self-study provides us with an opportunity to show how the University engages in this. At a great University like Penn, we’re assessing ourselves and our students all the time, and we need to show how that process occurs. I’m pleased to say that we start from a position of relative strength in this endeavor: the faculty of the College of Arts & Sciences has been engaged in evaluating its curriculum, and educational offerings for over ten years, starting with the Pilot Curriculum and continuing through its recent work, with each major completing a review of its student learning goals and how student learning is evaluated. Thanks to their school-specific accreditation processes, the School of Engineering & Applied Sciences and the School of Nursing are doing this as part of their normal accreditation, so they’ll be able to feed directly into this discussion. And finally, Wharton engages in a number of assessment activities and will be focused on its curriculum and learning for this study.
How can you get involved and stay updated? We are setting up a self-study webpage, and the address is www.upenn.edu/provost/reaccreditation_2014 You can email us at firstname.lastname@example.org with suggestions, questions and ideas for the self-study, and I encourage students to contact the self-study email address or the UA and SCUE for information about the student working group that we have set up for the self-study.