University funds down 8 percent

The University's endowment decreased by 8 percent over the first quarter of Fiscal Year 2003, but outperformed the benchmark figure, which fell by 8.8 percent over the same three-month period.

This recent loss, reported at yesterday at a session of the Budget and Finance Committee of the University Board of Trustees, which is currently meeting on campus, follows a relatively stable FY 2002, during which the University's endowment rose by 0.1 percent, placing it in the top quartile of performance for schools with endowments exceeding $1 billion, Trustees Chairman James Riepe said.

While the endowment is down, administrators noted that Penn is doing well in comparison to its peer institutions, which have seen more significant losses this quarter. Penn's comparative stability follows a period of poor performance in the late '90s when other schools saw huge rises in their endowments.

"We under-performed in that speculative bubble," Riepe said. "We also knew that once that bubble burst we should do better, and we did do better."

Vice President for Finance and University Treasurer Craig Carnaroli said that the last quarter's decreases reflect a downward trend in the market as a whole.

"Essentially, it was a difficult quarter in the market, and our decline sort of mirrors the market in that the equity markets were down substantially," Carnaroli said. "While the results are sort of consistent with the overall market, our diversified portfolio did show some positive signs."

"It is clear in light of recent performance that we're going to see a slowdown in the rate of growth of income that's available for the operating budget, and that will have an impact on schools because we've seen a large increase over the last five years, and that is really going to start to moderate," Carnaroli added. "To the extent that this trend sort of continues into the indefinite future, then we'll have to take a harder look at operation and make the necessary adjustments.... Our ability to grow operationally may have to be curtailed as well."

The Trustees also reviewed other aspects of Penn's finances. According to Carnaroli, the University's cash flow increased to $109 million this quarter, a rise of about $20 million, but operating costs increased as well. Revenues were also up, primarily because of funds from sponsored programs and tuition.

Operating contributions are down by $3.1 million, but non-operating contributions increased from $9.1 to $32.7 million, Carnaroli said.

Riepe said the committee also heard a "very favorable report on the Health System's finances."

The Health System reported a positive income of $3.2 million from operations, which exceeded budget, Carnaroli said. Its overall cash flow also "continued to show signs of stability."

Also at the Budget and Finance Committee meeting, Vice President for Facilities and Real Estate Services Omar Blaik presented a summary of upcoming proposals, including a plan to renovate a vacant University-owned building on 40th and Pine streets to create student apartments. The project would be a joint venture with Campus Apartments.

At today's stated meeting, the full board is scheduled to approve a series of resolutions, two of which authorize funding for new construction. But according to Riepe, total proposed construction costs are actually down from last year because a number of the University's major facilities projects -- including the $75 million Quadrangle renovation-- have been completed.

Yesterday, University President Judith Rodin noted that future construction projects may focus on College of Arts and Sciences buildings because of increasing student demand.

"There is an escalating drumbeat among the students in the College regarding facilities," Rodin said. "The students in the College are saying, 'What about us?'... we have to confront these issues."

Rodin said the improvements should begin with those buildings "observable in the heart of campus."

Riepe agreed that renovations to College buildings, especially to Bennett Hall, will be a priority in upcoming years.

"It's a priority," Riepe said. "We have to find the funds to do it."

The Student Life Committee also met this afternoon at the Inn at Penn to hear presentations on the University's international and minority student programs.

Executive Director of International Programs Joyce Randolph detailed trends in Penn's international student enrollment, which currently includes about 17 percent of all students and almost 10 percent of undergraduates. She also discussed the implementation of the Student and Exchange Visitor Information System, an Internet-based program that simplifies the exchange of academic data for international students and is designed to ease processing delays.

The second presentation featured talks by four undergraduates who addressed the importance of providing support and funding to groups -- including MAKUU, La Casa Latina and the Pan-Asian American Community House -- that can help ease the transition to Penn for minority students.

"When I got here, I realized that the experience was so much different than I had anticipated," said College senior and PAACH Chairwoman Eugena Oh. It "ended up being really traumatic."

The Facilities and Campus Planning, Audit and Compliance, Neighborhood Initiatives, Academic Policy, External Affairs committees and the Ad Hoc Committee on Diversity also met yesterday. This morning, the full board will attend meet at Houston Hall.

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