March University Council Meeting Coverage	Print Issue
April 6, 2010, Volume 56, No. 28

At the March 31 University Council meeting, Provost Vincent Price opened the meeting which focused on the annual reports on the budget and plans for the next academic year, followed by an Open Forum.

Vice President for Budget and Management Analysis Bonnie Gibson discussed the current fiscal year budget, FY10, and explained the tuition and fees for the upcoming year; a summary of her remarks is below.

Overview of the 2010 Budget

On a consolidated basis, the expenditure budget for the University and the Health System totals $5.667 billion. On an RCM basis—which is the way Penn manages internally—the University budget, excluding the Health System, is $2.73 billion, a 4.5% increase over the FY09 budget. That increase is driven by sponsored research, up 7.3% and by spending on capital projects, up 25%. Penn took the conservative approach and rather than spending what the spending rule would allow, Penn is capping spending at the FY09 level, rather than increasing it for non-aid endowments and increasing by 8.2% for financial aid endowments. 

Penn’s base budget only grew by 0.04% compared to FY09. The 25% growth in capital is driven almost entirely by the Translational Research Building that the School of Medicine has been building.

Slightly over a third of Penn’s revenue—$823 million, comes from tuition and fees: undergraduate, graduate and professional, and PhD tuition. Another 30%, is sponsored research—$814 million of revenue, and the last third is everything else—a series of other small categories that include gifts, investment income, transfers from the Health System, and Commonwealth appropriations. The income from endowment represents 8% of Penn’s operating budget. A 2% slice of the pie represents Penn’s appropriation from the Commonwealth of Pennsylvania. Since the budget was done, that appropriation has been reduced by $8.7 million. Most of that reduction has come in the School of Veterinary Medicine, which is the single largest recipient of commonwealth support. The loss of nearly $9 million of that $46 million allocation is significant to the School of Veterinary Medicine. In over two years the School has had a $12.7 million reduction in Commonwealth support.

Penn spends over half of its budget on compensation: on salaries, on stipends, on employee benefits, $1.4 billion of our budget is spent on compensation. The next largest area of expenditure is current expense, $688 million, followed by $375 million of capital, and $256 million in financial aid—both graduate and undergraduate financial aid. 

Research is driving a lot of Penn’s growth. The non-research compensation across the University grew by only about a percent. Research-based-compensation grew by 5.25%. The same thing happens on the current expense side, from 2009 to 2010, non-research current expense was budgeted to decrease by almost 6%, while research current expense was expected to increase by 9.3%. Part of this increase in research is being driven by the stimulus funds, the American Reinvestment and Recovery Act. Penn received $171 million in stimulus awards from the ARRA program. Those awards will be spent over this year, next year and probably phasing out in FY12. It has made a substantial difference in our research.  

$1.8 billion, or 67% of Penn’s expenditures is in the schools. Of that portion, 75% is in three schools, the School of Medicine, the School of Arts and Sciences and the Wharton School. The next largest category—$460 million, represents administrative center expenditures, which includes all of the maintenance of buildings and grounds including all utilities expenditures which alone are about $70 million a year.
 
In FY10, Penn’s total undergraduate charges are $49,986; that represents tuition, all fees, room and board. Compared with 16 other peer institutions, with which Penn competes for faculty for undergraduate students, Penn was in the median, with 8 above us and 8 below when it comes to total charges. Of the increases last year, there were several institutions that had increased at 2.9%, that was the lowest rate of increase. Princeton, Brown and Georgetown all came in at 2.9%. The highest increase last year, for this academic year, was Dartmouth at 4.8%. 

Penn’s financial aid budget for this year grew to $332.4 million across all types of financial aid. That includes $135.1 million in undergraduate aid, it’s a 16.4% increase over what was spent in 2009. That’s a combination of going no-loan and the recession. Graduate and professional aid went up 11% and graduate stipends up 3.3%. Our undergraduate financial aid numbers are very interesting this year. Penn has 363 additional aided students in FY10 compared to FY09; 262 of those are upper-class students, which means they did not receive aid previously, but showed need and got aid this year. That’s almost certainly recession-related. These are students who had need increase this year, most likely because of a change of employment on their parents’ part. 

Penn also had some increase related to lower-income students. Penn has made a point of recruiting lower-income students and the no loan package has made Penn more affordable for lower-income students. The budget anticipated a 5% recession factor to account for students who would in fact have need, or greater need than they had had in the past because of the recession. So that was a $6 million increase to the financial aid budget, and right now we’re tracking close to budget.

In summary, the Penn Compact guided our resource allocation decisions, a very significant one, increasing access. We put a lot of extra money into financial aid. We funded Penn’s highest priorities in the FY10 budget, the budget itself demonstrated minimal growth in compensation and actually decreased current expense compared to the 2009 budget. The schools and our centers were very responsible in putting their budgets together, and recognizing constrained resources. Fiscal 2010 is seeing significant growth in capital expenditures, primarily for previously approved projects, and also significant growth in aid. The direct research expenditures including capital are projected to grow 11% compared to the ’09 budget, in part related to the American Recovery and Reinvestment Act. 

Undergraduate Charges for 2010-2011

Penn’s charges are currently at $49,986. Only 70% of a Penn education is covered by tuition and fees. The balance is supported by philanthropy—gifts and endowment. 56% of Penn’s undergraduate students receive financial aid from internal or external sources. 

The average freshman aid package this year was $35,908 and the average freshman grant is $33,426. All of the grant-aided students this year have no loan packages, which means when Penn determines need, it is met with either a grant or with a work-study job. Students were free to take out loans if they chose to do so, but a loan is not a required part of meeting need. 

FY10 was the lowest increase in tuition and fees in 41 years. FY11 is going to be the second lowest increase in 42 years. Compared to the average increase at all public institutions, and the average increase at all private institutions, Penn has tended to be below average. Compared to the average private increase, of the past 13 years, Penn is lower than the av erage of all privates in 10 of those 13 years. Penn has been below the average rate of increase in public institutions since fiscal 2001. In that year Penn was almost exactly at the average increase. Penn has worked very hard to control the rate of increase in our total charges. 

For academic year 2010-2011, the Trustees have approved total charges of $51,944, a $1,958 increase which represents a 3.9% increase in total charges. Penn funds about 18% of the overall undergraduate financial aid budget using endowment income.

Several of Penn’s peers fund 80% of their financial aid budget using endowment income. While this increase in tuition generates an additional $14 million of revenue to the University as tuition revenue, Penn is immediately taking $6.5 million right off the top to fund the financial aid. The increase in financial aid this year is an $11 million increase. Net tuition that is available to pay for increased costs is $7.5 million, not the initial $14 million because $6.5 million needs to be used to fund financial aid. 

The freshman aid package from 2002 to 2010 has consistently grown. There is no longer a loan as a mandatory part of the package. Over the time period 2002-2010, the grant has increased from under $20,000 to over $33,000, a total increase of 70%. Tuition increased over that same time period by 44%, so Penn’s aid has outstripped the increase in tuition.  

Unemployment is the driver of financial need. As unemployment increases, the number of Penn’s aided students is going to increase. 

Graduate & Professional Tuition and Aid

In 2009 Penn had over 3,100 PhD students across 9 schools and 52 graduate groups. Almost all of Penn’s PhD students are fully funded for a period of between 3 and 5 years; 3 in those years where it’s typical that a student starts with a master’s degree, 5 in virtually every other program. Full funding includes the remission of tuition and fees, a stipend and health insurance in each of the funded years. There are several schools that pay a higher stipend to cover health insurance, so they don’t pay it directly, but they pay it in the form of a higher stipend. 

A five-year standard funding package using Arts and Sciences and the humanities as an example, for students entering in the fall of 2009, is worth over $250,000 in constant FY10 dollars.

PhD tuition is going to increase by 3.8% in fiscal 2011, the same rate of increase as undergraduate tuition. The research master’s tuition will increase at that same rate, and the professional tuition is set by the schools and will increase anywhere from 0% to about 5%, but it is dependent on each individual program and the market for that program.

PhD funding by school is interesting. Overall, there was over $127 million of funding for those 3,103 PhD students, with Arts and Sciences being by far the largest component, almost $58 million of total funding. 1,482 of those PhD students are in Arts & Sciences, with biomedical programs being the second largest group, with 663 students, then SEAS with 408.

IT at Penn Today

Robin Beck, vice president for Information Systems & Computing, discussed information technology at Penn. She said that IT involves many moving and integrated components within Penn and globally. There is a collaborative environment with ISC and schools and centers. Components associated with labs and classroom computing are the responsibility of the schools. ISC and the schools support mobile users. Centrally, ISC looks at the administrative systems that are produced for use by members of the community. Tying all of this together is Penn’s campus network—wired and wireless—and gateways to the Internet. 

IT today, both at Penn and almost everywhere, involves four key drivers: regulation and compliance; the expectation for 24/7 connectivity to the information we want and the transactions we want to perform, from anyplace, from any device; cost containment; and globalization.

Leveraging the strength of Penn’s distributed IT model, so that we’re sure that we have professional IT resources as close to the individual faculty, student and staff members as possible. Over 60% of the IT staff resides in schools and centers, so that faculty, students and staff can have that direct support and most needs that are unique to a school or center. Sites like Penn InTouch, Advisor InTouch, U@Penn, the Penn Portal, are designed to provide services to students, faculty and staff.

Penn InTouch first went in place in 1996; but got a major refresh this past summer. We leveraged the strengths of the distributed model, and we have to build technologies that are sustainable over the long term. Our core student systems are over 25 years old. Next generation student systems will replace them. Our data warehouse was also implemented in 1996, so we want to look at flexibility for the long term. 

We have already contacted, interviewed and talked to over 200 members of the Penn community, to understand where there are gaps in the systems that our current services provide, and what our vision is, of the next generation student system. Next fiscal year, we will have a recommendation of what we need to replace, the time frames and the resources that we’ll take to do that.

We have already talked a little bit about direct lending, we made the decision as capital markets became tighter, to offer direct lending options for students. We began a project to incorporate that into our student financial services systems and then as regulations changed, we went completely to direct lending. 

As part of the University’s global outreach, we are implementing an international registry. This will be so that we know where Penn community members are, so that if there is a crisis, we know how to contact them. Over time, our intent is to use this to be able to share organizational knowledge, so that as we go into new areas and new countries, we know how to deal with that and can bring information back and share it so that everyone is learning and building on each other’s experiences. 

The research enterprise is key to the University. We’ve already touched a little bit on stimulus reporting, which was and will continue to be one of our major efforts within the research community. One, because Penn is successful at receiving ARRA funds, but also because those funds come with regulations and we need to comply with those regulations and how we report the effect of that act.

PennWorks is another multi-year project. Some of you on the administrative side may have already experienced the first few weeks of Penn Works; this is allowing us better mechanisms to collect salary commitments for faculty and to collect the job, bio and salary data that allows compensation and benefits to occur. It is a front end, basically, to an older payroll HR system, and our hope and intent is that when we finish the PennWorks we will be left with a very generic payroll benefits processing system, that we can then either replace very cost effectively, or perhaps find a third party to provide those services for us. 

Within the IT community, we are very focused on sustainability efforts.  The Green IT website has a great deal of useful information, including a number of projects that further sustainability efforts. The most recent one is the electronic blue pages, the last step in our efforts to eliminate the printed directory, and that means we no longer have to print about 2.9 million pages of data each year. 

The Data Warehouse is a central repository of all of the information about the University. It, too, is an older piece of technology, first implemented in the mid-90s. We have started a multi-year project to refresh the Data Warehouse.

The PennNet phone, under our unified communications, is the general direction of convergence of voice, video and data networks. We are now delivering telecommunications services over the Internet via Voice Over IP protocol. Our intent over the next 3 to 5 years is to replace all phones at Penn, all landlines, with VOIP phones. By the end of this year, we should have approximately 5,000 in place. We run two networks at Penn, a wireless network and a wired network. And again, with the use of mobile devices, we are working continuously to move what is now approximately 70% of the campus to 100% wireless coverage. 

I am very much involved, concerned and worried about the security of our sensitive information and of our networks. The PennKey has served us well, but as we look towards the future, we know we have to add additional levels of security to face what are always ongoing and constantly escalating threats. We have a whole series of projects designed to strengthen the PennKey, the first that you will begin hearing about next year is Two Factor Authentication. Some are already familiar with it on sites like U@Penn if you go in to look at personally sensitive data, you’re asked to provide additional information as well as your PennKey.

Our intent is to move forward with a device of some kind that is a one-time use, in addition to your PennKey for our most sensitive data, and that will be our next level of defense using our PennKey. I expect to begin piloting that in fiscal year 2011 with rollouts starting in fiscal year 2012. 

We have a University data center in 3401 Walnut Street. We have data centers in many of the schools and centers. What we are looking at as the cost of energy increases, as security requirements increase and space becomes more and more valuable, if in fact we can find a solution to have one University data center, meeting all of the needs across the University.  We are in the midst of a feasibility study for such a solution, involving location and what the costs and features would be of such a center.

Mission continuity is an attempt to look at what our risks are, and how the University would continue to operate, in what time periods and what needs we would have, if in fact a disaster did strike.

So those are some of the highlights of the IT initiatives that you will be seeing the rest of this year and fiscal year, 2011 and 2012.