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COUNCIL State of the University: Report of the President
October 24, 2006, Volume 53, No. 9

President Amy Gutmann

I am pleased to report that we are making great strides toward realizing Penn’s potential as we prepare to launch two momentous initiatives: Penn Connects, our award-winning eastern campus development plan, and a major fundraising campaign to secure Penn’s future.

Penn Connects

Today I will briefly update you on each of these initiatives.

Let me begin with Penn Connects. Our vision, inspired by the Penn Compact, positions Penn for global leadership by boosting our teaching, research, and clinical practice capacity. The plan strengthens community by fostering more connections within our campus. It creates a neighborhood that connects Penn strategically, aesthetically, and economically to Philadelphia.

Penn Connects will transform our campus and surroundings. Picture:

• More green spaces and athletic facilities.
• More undergraduate and graduate student housing.
• New research buildings for nanotech, medicine, and neuroscience.
• More shops, restaurants, theaters, and underground parking.
• More jobs and economic opportunity for our neighbors in West Philadelphia.
• A beautiful gateway to Penn and easier access to and from Center City.
• Seamless links between the rest of campus and the museum and medical precincts.
• Spectacular views of the river.

Here is the pivotal point: Penn will remain one contiguous campus—but bigger, more vibrant, and much better connected.

Activity Bridges
Activity Bridges: Connecting Campus and City, new gateways.

Moreover, the eastern part of campus will not be an outpost. Walking from here to the river will take less time than trekking up to 40th Street— or waiting for the elevator in the Franklin Building.

Small wonder that Penn Connects has drawn raves from all quarters, and even an award from the Boston Society of Architects. The award citation calls the plan a “piece of work that says ‘Penn’ while also saying ‘Philadelphia.’”  

The “Penn” in that citation refers to our entire Penn community. Input from all our stakeholders, including many in this room, enabled Penn Connects to truly “have it all.”

We will launch the first phase of the plan next spring when we take over 24 industrial acres along the Schuylkill River. We will begin converting parking lots into green spaces and recreational fields. We also will begin planning for the Walnut Street gateway.

In February we will present a complete update on Penn Connects to this group.

Other priorities for the coming year include completing the first phase of our high rise renovations. Work also will begin to convert the 3900 block of Walnut into a new housing complex that will include student apartments and retail space.

The Hill Pavilion at our School of Veterinary Medicine will be dedicated in a few weeks. This much-needed research and teaching building follows on the heels of the magnificent Skirkanich Hall, the bioengineering building. 

Skirkanich Hall    Skirkanich Hall
Skirkanich Hall (interior at left and exterior at right) will have its formal opening later this week.
The new building provides state-of-the-art laboratory and office space, improves circulation through the engineering school’s complex and provides an entrance to SEAS from 33rd Street.

We are delighted that the Philadelphia Inquirer’s architecture critic recently called Skirkanich “the city’s best new building in years.”

Fundraising Campaign

Now let me turn briefly to our plans for a fundraising campaign. 

Penn today is one of the nation’s leading academic powers … with the vast potential to create new knowledge, connect it across all divides, and use it for the progress of humankind.

We have the potential to become an academic superpower: the great urban teaching and research university with the most far-reaching impact on our students, the city, country, and world.

Penn Connects will boost our physical strength. A great global university requires two other strengths:  faculty and students. We must be able to attract and support the best and the brightest. 

Financial Aid, Faculty Support, and Facilities

The fundraising campaign we are preparing to launch will make Penn a leader in combining intellect and impact, as our Penn Compact envisions.

In a moment I will ask Vice President of Development John Zeller to provide an update. Executive Vice President Craig Carnaroli will present an overview of our finances. Dr. Nancy Streim, associate dean of the Graduate School of Education, will give a brief status report on how we are helping support better public schools for Philadelphia.

First, however, I would like to say a few words about our admission policy in light of the current debate around early decision. 

As I told our freshmen at Convocation, at Penn we look for students with “passionate intensity” students who are passionate about academic achievement, about public service, and about Penn. Early decision helps us enroll a high-achieving, talented class who are passionate about being here. This enthusiasm enriches the Penn experience for all.

We therefore stand by and will stick with our early decision policy.

At the same time, I have been calling for the national discussion to focus on the urgent need to increase need-based financial aid.  Higher education as a whole in this country has been moving in precisely the wrong direction. In 2004, $7.3 billion were directed to merit aid—which is not based on need and therefore goes overwhelmingly to the well-off—16% of all financial aid. This was up from 6%—$1.2 billion—in 1994.

We at Penn are committed to being national leaders in the growing movement for financial aid based on need, which is essential to improving access for all middle- and low-income students.

In a democracy and at great universities, diversity and excellence go together. Equalizing opportunity enriches the experience of all students. We must focus on removing the economic constraints that prevent so many talented students from receiving a quality education.

Increasing financial aid is therefore one of the highest priorities in our upcoming fund raising campaign.

I would now like to call on Executive Vice President Craig Carnaroli, Vice President John Zeller, and Associate Dean Nancy Streim to complete my report.

Thank you.

Executive Vice President Craig R. Carnaroli

Thank you, President Gutmann.  Good afternoon.  I intend to provide you with a brief overview of the University’s financial status as well as a review of the major investments that our current positive financial status has facilitated.

Financial Perspective

I am pleased to share with you that fiscal year 2006 was a success by nearly every financial measure. The consolidated University’s total revenue increased $386 million, or 9.5%, to $4.43 billion. The Health System constituted 65% or $249 million of this overall growth in revenue, reflecting an increase in higher net patient service revenue. 

 On an internal basis, we evaluate our performance using our internal budget system, Responsibility Center Management (RCM). The news is equally encouraging. The FY06 actual results outperformed the approved budget, with operating revenues exceeding operating expenses by over $53 million. These results represent the third year in a row of positive RCM performance. 

Contributions also grew significantly during FY06. Operating contributions increased by 7.6% and non-operating contributions—gifts for endowment and capital­—grew by 23.6%.  Total cash receipts from contributions exceeded $408 million in FY06.

The University of Pennsylvania Health System, comprising the health-services component of PENN Medicine, strengthened its financial performance significantly last year. Total UPHS revenues increased by 11.6% during FY06 to $2.4 billion, up from $2.15 billion in FY05. This was driven by a 1.5% increase in admissions, a 25% increase in transplant cases, and a 13% increase in hematology and oncology admissions. Both outpatient and inpatient activity increased as well. HUP, Penn Presbyterian and Pennsylvania hospitals showed the largest gains in revenues. In FY06, due to continued strength in operations as well as the decrease in UPHS’ debt to unrestricted cash to below 60%, among other favorable comparisons to peer medians, UPHS received ratings upgrades from both Moody’s and S&P to A2 positive and A+ stable, respectively.

The University’s total endowment increased to $5.3 billion in FY06 as a result of higher investment returns as an increase in contributions. Student aid contributions grew 40%, the largest increase among all gift categories.


While the numbers are important and interesting, they don’t tell the entire story as to the status of the University. Equally important, is how we are able to use the budget resources to make key investments in our people, facilities and systems. I will now highlight a few examples. The University continues to make significant investment in providing financial aid to our undergraduate, professional and graduate students. In FY06, the University spent $247.8 million or approximately 10% of the University budget on all forms of financial aid. In addition, the demand for financial aid continues to outpace our growth in total charges. The University also made a substantial investment in its facilities spending $227 million in several capital projects, including the Hill Pavilion (SVM), Lynch Life Sciences (SAS), Skirkanich Hall (SEAS), and Fisher-Bennett Hall (SAS). 

Projects to improve student living that are in progress or have been completed involved renovations to the fire alarm and sprinklers systems in several college houses including Rodin, Hill, English and Sansom Place East and West. All residences have now been sprinklered. Over the summer, significant improvements were made to student housing, including total room renovations and common spaces in the Quad and new windows, entrances, security portals, kitchens and furniture in the High Rises. In addition, with the collaboration of several divisions, 500 wireless access points were installed throughout the College House system.

We have also made a substantial investment in staff development including several new training initiatives such as the successful launch of Leadership@Penn, a Financial Management Development Program, Sponsored Projects Compliance coursework, and interdepartmental cross-training through internal internships.

On the system front, we continue to develop new and innovative information systems to enhance service and overall efficiency of the lives of our students and faculty. Two noteworthy examples include:  The new Student Borrowing Management System has improved customer service through reduced processing time, has increased staff efficiency, and resulted in greater revenue opportunities. Following the implementation of our new research reporting system, effort reporting timeliness has improved significantly. Financial status report delinquencies have reduced dramatically.

I am particularly pleased that Penn has been recognized highest among its peers in the category of institutional effectiveness, as measured by an independent organization. This indicator assesses four key factors to determine how efficiently and responsibly an organization functions day to day: fundraising efficiency, fundraising expenses, program expenses, and administrative expenses. We rank in the top tier, scoring a 67 out of a possible 70, which indicates positive financial health and low administrative overhead.

The senior leadership team of the University of Pennsylvania is strongly aware of its stewardship and management responsibilities in the governance of the institution. The divisions that provide the core administrative services to the University work to fulfill their missions effectively while constantly identifying opportunities to increase efficiencies, contain costs, create additional resources, and improve the quality of life on campus. To that end, in FY06, the University achieved operational efficiencies totaling $110 million. This total is comprised of $55 million in revenue enhancements, almost $13 million in cash savings, over $11 million in productivity improvements and $30.7 million in liability reductions.

In closing, I would be remiss if I did not reference the positive momentum and progress of the Penn Compact. While the numbers are compelling, I am most proud of how the Penn community responded by engaging locally to assist victims and people impacted by Hurricane Katrina. I can recall how when Provost Daniels brought us all together to announce the University’s intentions, how positively the Penn community responded to clear the path to make the educational experience possible for over 100 students. While we had an enormously successful year, our collective response to Hurricane Katrina is the outcome of which I am most proud in FY06.

This concludes my report.

Vice President Development and Alumni Relations John Zeller

Thank you Dr. Gutmann.

As Dr. Gutmann has stated, the University will be embarking on the largest Campaign in our history in the next year. We have just concluded our first year of the quiet phase of the Campaign with recordbreaking support from alumni, corporations, foundations and friends. We will complete the quiet phase of the Campaign with the public launch of our effort in October of next year with the Campaign concluding in June of 2012.

We are delighted with the support we have received to date.  The FY06 saw a record set for gifts and pledges to the University in the amount of $493 million. 

Of this amount, nearly $150 million was added to the endowment, 187 new scholarships were created, the naming gift for the Center for Advanced Medicine was made by Ray and Ruth Perelman, and nine University interdisciplinary Professorships have been created to mention only a few highlights.

Let me now give you a brief timeline for the planning we have underway for the remainder of this year.

During the quiet phase of the Campaign, it is important that we test messages and the level of support we can anticipate leading up to the public launch next fall. As we receive this feedback, we continue to work with the Schools and Centers to refine their goals and focus on what Dr. Gutmann refers to as the 3 Fs. Financial aid for the undergraduates, as well as graduate and professional students, faculty support in the form of endowed professorships, junior faculty support, fellowships and research funds, and lastly, facilities such as a new College House, nano scale research, life sciences, medical research and clinical space and renovations to buildings such as The ARCH as well as other important projects.

Clearly we have great momentum as we enter one of the most exciting times in the history of the institution, and I look forward to reporting on our success in the coming months and years.

Thank you.

   New College House,
A new College House, with approximately 350 beds in suite-style units, resident assistant units, a housemaster apartment and faculty apartments is proposed for Hill Square. Common facilities include a dining hall, servery and kitchen, a café, lounges, computer rooms, and music rooms. The total gross square footage proposed for the site is 200,000 gsf. The layout for Hill Square maintains the sculptural walk and a central open space defined by new residential structures, which bound the site along 34th, Chestnut Street and 33rd Street. A central lawn is provided as an informal passive recreation space for residents and other members of the campus community.

GSE Associate Dean Nancy Streim

Dr. Gutmann, I am pleased to provide this update on Penn’s School Partnership to you and to the University Council.  The University’s partnerships in Philadelphia schools continue to increase in both depth and visibility. There are many, many different kinds of projects that Penn faculty, staff and students are engaged in, in local schools, particularly in West Philadelphia. Last year the University—if one were to quantify these contributions to the schools—contributed $10 million worth of grant-funded projects to the Philadelphia schools and an additional $1 million in operating funds to the schools, a portion of which includes the subsidy to the Penn Alexander School. There are many more programs than I can feature, so I would like to focus on Penn’s formal Partnership Schools.

   Penn Alexander School  
The Penn Alexander School serves a diverse catchment area in West Philadelphia, where families represent more than 30 countries. Children attend small classes through Penn’s financial subsidy of $1,000 per child per year.

Penn Alexander School

The first of course is Penn Alexander.  This year is the largest class in the Penn Alexander School, and the school continues to be very diverse.  There are 515 students in grades K through 8, and in terms of the demographic diversity, 56% of the students are African American, 23% are Caucasian, 13% Asian and 7% Hispanic.  We are often fighting a misperception that the school is primarily serving the children of Penn faculty and staff.  In fact, 19% of the students in the school are children of Penn employees,  19% as well are international—they are children of families who are not U.S. citizens and  20% of the students are English language-learners and 49% qualify for free and reduced lunches. 

The students’ academic performance continues to get stronger and stronger.  In 2006, the percentage of students in each grade performing at or above their grade level in reading on standardized tests ranged from 64% to 85%. In four of the six grades tested, Penn Alexander scored among the top ten public schools in Philadelphia in reading. In the third and the eighth grades, 50% of the students actually tested above grade level (advanced). To give you an idea of how the school has grown and matured, over the course of three years the eighth grade students who began as fifth graders improved their skills dramatically. When they entered in the fifth grade, 45% of the students were reading at grade level. When they exited in the eighth grade, 85% were reading at or above grade level.  As a result of their strong academic performance, 82% of the graduates of Penn Alexander were admitted into selective high schools in the Philadelphia area, up from 72% the year before. 

The math scores were equally strong. Over half the students in the third, fifth and seventh grades performed in the advanced category in math, and the Penn Alexander fifth graders’ scores placed Penn Alexander in the top ten in the City in reading and in math. 

Penn has been involved in the Penn Alexander School in many, many ways, and we are so gratified to see the degree to which the Schools, departments and centers have embraced Penn Alexander.  Just to give you an example of that level of involvement, we look to ensure that every grade in the school has some Penn presence, and this past year we have seen in the school GSE, Arts and Sciences, Nursing, Engineering and Applied Science, Penn Law, Veterinary Medicine, the Penn Museum, Penn Athletics, Dental Medicine, Annenberg Center and many student organizations and College Houses, so we are very, very pleased. 

interior atrium  The Sadie Tanner Mossell Alexander University of Pennsylvania Partnership School
The Sadie Tanner Mossell Alexander University of Pennsylvania Partnership School (above right), known as the Penn Alexander School is named in honor of a trail-blazing Penn alumna (Almanac September 3, 2002). The interior atrium (above left) of the school is a central gathering space for the neighborhood public, University-assisted school.

Lea and Wilson Schools: Penn Partnership Schools

You may also know that Penn has a management relationship with the Henry Lea School and the Alexander Wilson School—two of the schools that were assigned to outside providers when the state took over the Philadelphia schools. We have been working with the Lea and the Wilson schools for almost five years now and are showing really terrific results there as well. The Wilson School achieved ‘Adequate Yearly Progress’ under the No Child Left Behind Act in 2006 for the third time in the last five years. The number of Lea eighth grade students reading at or above grade level has nearly doubled in the three years since the students took the test as fifth graders. The data illustrate the “value added”  by Penn’s partnership at Lea, nearly doubling the percentage of students reading at grade level. As fifth graders, the Lea students were showing 19% reading at grade level, and when they took the test again, as eighth graders, in our partnership, 35% are reading at grade level. For the first time last year, 50% of Lea seventh graders performed at or above grade level in math as well.

I don’t like to brag about Penn in comparison to other institutions, however, Penn as a management partner to the schools is doing exceedingly well when compared to other provider organizations. Penn Partnership Schools have shown the largest five-year growth in standardized reading scores, 17.7%  among the educational management groups as well as schools run by the School District. We have also shown the largest five-year gain in eighth grade reading, 27.5%, and eighth grade math, 23.2%,  in the entire City when compared to the managed schools and District schools. We do this work with the tremendous support and help of many offices and centers and Schools throughout the University in much the same way as it occurs in Penn Alexander. 

International Studies High School

And then finally just to say a word about the high school. We continue to plan for the opening of an international studies high school. The school design calls for a small school of 500 students with an international studies theme woven throughout the curriculum, exchange programs both virtual and actual with schools around the world and a close relationship to Penn. There has been tremendous support already from University faculty in the design of the social studies curriculum and other such things. We are in the process of solidifying a site with the School District of Philadelphia, and as soon as that is determined, we are hoping to open our doors next September.

Almanac - October 24, 2006, Volume 53, No. 9