In accordance with the University Council Bylaws, a spring Council meeting includes “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 presentation given on April 18.

Trevor Lewis, Vice President for Budget and Management Analysis

I will be reviewing the FY18 current year budget with you today. The FY19 budget is still being developed and will be presented to the Trustees for approval in June. In addition, I will discuss our undergraduate total charges and student aid for FY19.

We do five-year budget planning and use the Penn Compact as the basis for our planning priorities. Thematically, our priorities are focused on student and academic support, reinvestment and renewal in transformational projects, tuition and student aid, diversifying revenue sources and other priorities which include providing competitive compensation and employee benefits and providing efficient central services.

Our operating budget has $3.65 billion in revenue and $3.68 billion in expense.

There are multiple components of revenue, with the two largest being tuition and fees and sponsored programs. Tuition and fees represent our largest revenue source at $1.31 billion or 36%. This category includes undergraduate, graduate, professional and other tuition. The other primary source of revenue is sponsored programs at $966 million or 26%. The remaining 38% is broken down into five components that include endowment income, operating gifts, other income (mostly sales and services), Health System transfers and support for the Vet School from the Commonwealth of Pennsylvania.

Our expenses total $3.68 billion and fall into four categories: compensation, which includes salaries and employee benefits, represents $1.96 billion or 53% of total. Current expense makes up 25% of our expenses, with capital transactions and student aid both accounting for 11% each. This slide shows how the University spends its money while the next slide shows which parts of the institution are doing that spending.

School spending represents $2.52 billion or 68% of the total. The next largest component is the spending by administrative centers at $492 million or 13%. The latter includes central service and compliance units such as the Division of Public Safety, VPUL, Finance, HR, Information Systems and Computing. The cost of space is $181 million, but more than three quarters of space costs are charged to the Schools. If we showed those costs under the Schools instead, then School spending would account for 72% of the total.   

When you look at only School costs, three Schools represent 74% of the total—the Perelman School accounts for 38%, the School of Arts and Sciences for 19% and Wharton for 17%.

Beyond looking at our expenses by School or Center, our investments in student success are of primary importance. Our operating budget supports student safety and security, student health and wellbeing, student services, activities and facilities, infrastructure and academic programming.

Switching to undergraduate tuition and aid, it is important to recognize that tuition is an important financial driver. Our total charges are $68,600 in FY18 and growth has been relatively stable and under 4% per year since FY10. Our FY18 student aid budget is $224 million, an increase of 4.7%, ensuring that we can provide fully grant-based aid packages to those qualifying for need. You should note that since FY09 our median aid award has increased by 71% while our total charges have increased by 43%, demonstrating our commitment to inclusion and access.

Relative to our peers, Penn’s total charges are in the middle of the pack. In addition, our total charges are within $1,200 of eight peer schools.

For FY19, the Trustees have approved a 3.8% increase to undergraduate total charges, which includes tuition, fees and room and board, to $71,200. Room and board charges are based on the average standard freshman room and the freshman meal plan. Over the past 10 years, Penn’s annual increase in total charges has been below 4% and has been in the middle of the peer group, never the highest or the lowest.

The 3.8% increase in tuition for FY19 generates net incremental revenue of $18.9 million. Net of $5.9 million in financial aid will produce $12.9 million of net tuition revenue to the Schools. The Clinical Fee increase of 7.3% is in support of student health and wellness initiatives.

Returning to the FY18 budget, total financial aid is budgeted at $495 million, or 4.9% higher than FY17, with a 4.7% increase in undergraduate aid, a 4.9% increase in graduate and professional aid and a 5.7% increase in graduate stipends.

Since all grant aid packages were introduced, the number of undergraduate financial aid award recipients has increased substantially. The share of our enrolled students receiving aid peaked in FY14 at 47.4% or 4,650 students, up 8.7% over FY09. In the most recent four years, the share receiving aid has declined slightly to around 46%.   

Over the last four years, our financial aid program has enabled students from families with incomes at or below the U.S. median to receive an average award that exceeds total charges. In addition, over the past 10 years, there has been a 38% increase in the number of enrolled students coming from families with income at or below the U.S. median.

Our undergraduate financial aid budget is supported primarily by two sources—the tuition discount, which accounts for 62%, and endowment income, which accounts for 23%. The remaining portion is covered by grants (including Pell) and other internal funds. The undergraduate aid budget is projected to increase to $237 million for FY19, up 5.25% compared to FY18. Since FY08, the financial aid budget has had an average growth rate of 8%—over twice the growth rate of total charges.

In FY17, the last completed fiscal year, we had over 3,000 PhD students across nine different schools. Almost all of our PhD students are fully funded for four to five years. Full funding includes tuition, fees, health insurance and a stipend. Beginning in FY18, fees provide for access to Penn’s fitness facilities. For an SAS humanities PhD student entering in the fall of 2017, the standard five-year funding package is worth over $350,000 in constant FY18 dollars.

PhD tuition and the research masters tuition are increasing at the same rate as undergraduate tuition. Professional tuition is set by the Schools based on their specific needs and markets.

The distribution of PhD students and expense by school and category for FY17, shows that SAS has the largest number of PhD students, and the largest expenditures, roughly $75 million in FY17.

That concludes my presentation.