On the same day it revealed that the value of its endowment had dropped 19.1 percent from July 1 through the end of 2008, the University approved its smallest percentage tuition increase in more than four decades. In combination, the two announcements demonstrate both the challenging times facing higher education and the depth of Penn’s commitment to increasing access and keeping the University as affordable as possible, according to Penn President Amy Gutmann.
In her latest statement on Penn and the economy, released February 26, Gutmann reemphasized the University’s commitment to need-blind admissions and to its recently enhanced financial-aid programs. (For more, see this issue’s “From College Hall.”) “We can reassure prospective and current students alike that our financial aid packages will continue to meet the full need of every Penn undergraduate,” Gutmann said.
The statement also offered further details on University-wide cost-containment efforts instituted in December in response to the downturn [“Gazetteer,” Jan|Feb]. Those efforts, which will remain in place through June 2010, are expected to save $57.7 million. Penn’s various schools and centers will also be looking for more efficiencies through “administrative belt-tightening.” For example, plans at the School of Medicine call for holding FY10 budgets at FY08 levels, saving as much as $100 million.
“As a result of these and other measures,” Gutmann said, “Penn is continuing to move forward on our highest priorities under the Penn Compact: increasing access by making a Penn education affordable to every student who enrolls here; integrating knowledge by hiring and retaining the finest teacher-scholars across all 12 schools; and furnishing our faculty, students, and staff with the resources needed to engage communities locally and globally.” (Read the full text at pennnews/economy.php.)
While hardly good news, the endowment’s drop was not as steep as that of the overall market, Gutmann noted, and Penn has also managed to avoid the liquidity problems that have complicated some peer institutions’ efforts to respond to the crisis. In addition, the University depends less on endowment income than do some of those same schools, with just 9 percent of its operating budget funded by it rather than tuition or other revenues.
These factors put Penn in a relatively strong position to weather the storm, Gutmann said, “provided that we take all the measures necessary to absorb the substantial impact of these and any other losses that may loom ahead.” She added that the University’s investment team is “thinking strategically about how we can turn this challenge into an opportunity by making smart investments at a time when prices are low.”
Given Penn’s relative dependence on tuition income, “curtailing the tuition increase will intensify budgetary pressures on all of us,” Gutmann added. “But with the mounting financial stress that many of our students and families are experiencing right now, we feel a responsibility to relieve some of their pressure by tightening our own belts further.”
Tuition for the 2009-10 school year will rise 3.75 percent, to $34,868. Total charges—which include fees ($4,102) and average costs for room and board ($11,016)—will go up 3.8 percent, to $49,986. The tuition increase is the smallest in 41 years, while the rise in overall charges was “substantially lower than our original planning,” Gutmann noted.
Starting next year, as scheduled, Penn will substitute grants for loans for all aid-eligible undergraduates. Students from families making less than $40,000 will have room and board as well as tuition covered by grants; those from families making under $90,000 will have their tuition covered. Penn’s undergraduate financial aid budget for 2009-10 will go up 15 percent ($17.6 million), to $137 million.
Gutmann expressed measured optimism about the University’s ongoing Making History campaign. So far, $2.3 billion has been raised—66 percent of the overall $3.5 billion goal—and cash receipts for FY09 are “remarkably ahead of last year’s record-breaking pace,” she said. New gifts are also ahead of schedule for the year, but the pace is likely to slow until there are signs of economic recovery, she added.
“Although the economic crisis is proving a challenge for everyone, our donors remain devoted to Penn and steadfast in their support of our strategic goals,” she said. “This is providing us with critically needed strength to pursue our highest priorities in difficult times.”
In terms of government funding, a proposed 10 percent cut in support from the Commonwealth of Pennsylvania for FY10 will put more pressure on the School of Veterinary Medicine, which relies on state funds for about 35 percent of its revenues, and will also affect the health system, dental school, and Penn Museum, Gutmann said.
On the other hand, the federal economic stimulus package is a potential bright spot for the future. The $789.5 billion American Recovery and Reinvestment Act provides more assistance and tax credits for college students and their families, as well as stepped-up research funding, including $10.4 billion for NIH and $3 billion for NSF over the next two years. “Given our heightened strategic focus and great inter-school strengths in regenerative medicine, cancer, heart disease, nanoscale science and technology, neuroscience, and many other areas,” Gutmann said, “Penn is very well positioned to capture our share of these precious research dollars, which also will serve to stimulate the American economy.”
Penn has managed to avoid across-the-board layoffs or spending cuts, Gutmann said in the statement. Going forward, and with the continued efforts of the University community (“our greatest resource”), she expressed confidence that “our long-term investment and spending strategies will enable us to maintain a stable environment” and that Penn will emerge from this period of unprecedented economic turmoil “an ever stronger University.”
—J.P.
