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Fiscal Year 2002 Budget: Report to University Council

The annual presentation of the FY 2002 budget (July 1, 2001 through June 30, 2002) was made at the March 27 Council meeting. It included expenditure and revenue perspectives as well as a look at the indirect cost recovery rate and sponsored project activity. Also discussed was the endowment as compared to peer institutions and changes in undergraduate financial aid.

The text, charts and pies 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 Penn Medicine 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)

FY 2002 Budget Key Points

  • Total University operating budget of $3.206 billion.
  • Academic Budget of $1.544 billion.
  • Competitive increase in undergraduate charges:

--5.8% increase in Tuition & General Fee
--2.0% increase in Residence Fees
--2.0% increase in Dining Fees
--4.9% increase in Total Charges, versus 3.4% in FY 2001

Note: See Almanac March 26, 2002 for the FY 2003 undergraduate student charges.

  • Operating and capital budgets support strategic priorities.
  • Administrative restructuring and cost containment are continuing.

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.

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 the University's Revenue Sources
Will Be Constrained in FY 2003 and Subsequent Years

  • 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.
    --Current rate of 58.5% is guaranteed only through FY 2004.

  • The Governor is proposing a 7.2% decrease in the University's Commonwealth Appropriation for next year.
  • Penn's spending rule provides for only a 0.3% increase in spendable investment income for FY 2003, 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 2002 Academic Budget Sponsored
Program Indirect Cost Recovery

FY 2000 Actual

FY 2001 Actual

FY 2002 Budget

FY 2002 Projection

Income ($000)

115,445

125,872

128,741

138,500

Federal ICR Rate

58.5%

58.5%

58.5%

58.5%

  • Total direct and indirect Sponsored Program revenue represents approximately 34% of the FY 2002 Academic Revenue Budget.
  • The School of Medicine accounts for about 64% of Sponsored Program dollars awarded to the University.
  • According to data from the University’s most recently submitted Facilities and Administration Rate Proposal, Penn’s total ICR is nearly $40 million less than the actual overhead required to support our annual research effort.



Peer Institution Endowment/Student
Among Top 20 Endowments as of June 30, 2001

Institution

Assets ($Billions)

($/Student)*

Princeton University

8.36

1,291,098

Yale University

10.70

972,816

Harvard University

17.95

888,729

M.I.T.

6.13

620,964

Stanford University

8.25

563,841

Dartmouth College

2.41

455,286

Washington University

3.95

364,732

Chicago, University of

3.52

317,321

Cornell University

3.15

249,654

Columbia University

4.29

240,237

Northwestern University

3.26

220,307

PENN

3.38

177,094

*Based on FTE students as of Fall 2000


FY 2002 Financial Aid Budget General Operating,
Gift, and Investment Income ($000)

FY 2001 Actual

FY 2002 Budget

% Change

Undergraduate Student Aid

54,247

59,500

9.7%

Graduate Student Aid

61,950

67,350

8.7%

Total Student Aid

116,197

126,850

9.2%

  • 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
  • Effective 2002, Student Health Insurance premiums for eligible graduate students are reflected in the Graduate Student Aid figure

Note: Figures exclude Sponsored Program Funds.


Illustrative Needs for Academic Investment

Continuing major investment is needed to maintain the quality of Penn’s academic and co-curricular programs. Some examples:

Estimated 5-Year Investment Required

Additional funding--Faculty recruitment/retention

$ 25 Million

Undergraduate housing and dining

$ 200 Million

Undergraduate and graduate financial aid

$ 100 Million

Continued investments in information technology (Research System, Student System, Advancement System, HR System)

$ 30 Million

Pottruck Health & Fitness Center building

$ 24 Million

Life Sciences building (Phase I)

$ 57 Million

SVM new research building

$ 48 Million

Whitaker Bioengineering building/program

$ 57 Million

Bennett Hall renovation

$ 13 Million

Huntsman Hall building

$ 140 Million

Facilities Renewal (additional funding–next 5 yrs.)

$ 25 Million

Increased property/casualty insurance costs

$ 10 Million





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 strategic priorities and goals
  • 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. 48, No. 29, April 9, 2002

ISSUE HIGHLIGHTS:

Tuesday,
April 9, 2002
Volume 48 Number 29
www.upenn.edu/almanac/

It's once again time to recognize excellence in teaching at Penn, with the Lindback and Provost's Awards. And the recipients are….

A political science professor is appointed to a term chair.

Four of Penn's schools make the grade on the top ten list of U.S. News graduate schools.
Observations on the experimental SAS Pilot Curriculum, including insights, accomplishments and challenges.
An graphic report on the University's FY 2002 Budget, as reported to Council.
Research Roundup: a few of the many Penn projects and studies shed light on interventions, risk-reductions, treatment strategies and post-traumatic stress.