Endowment up 4 percent over last year's figures

The University is sitting relatively pretty, according to financial data reviewed yesterday by the University Board of Trustees during its fall meeting.

Total net assets for the consolidated University -- the "academic component" and the health system considered together -- increased by $173.9 million to $5.33 billion, up 3.4 percent from last year.

The University's endowment, excluding the health system, also increased by 4 percent to $2.95 billion, up $114.2 million.

The figures represent unaudited data for fiscal year 2003, which ended June 30.

"We're relatively stable, at a time when a lot of higher education institutions are feeling the pinch, whether it's declines in the endowment or rising costs they can't control," University Treasurer and Vice President for Finance Craig Carnaroli said. "It's a good time to be financially stable."

The University's academic component's total revenue and support managed to outpace its expenses -- revenue and support were up 8.1 percent over fiscal year 2002, totaling $1.74 billion, while expenses rose 7.8 percent over the same period to $1.72 billion.

The revenue and support gains were attributed to "growth in sponsored programs activities and tuitions and fees," according to the University's financial report.

And the Health System, for the third year in a row, did not lose money, with an operating revenue of $1.88 billion topping an operating expense of $1.86 billion.

University-run hospitals have also improved collections, reducing the total amount due from $24.9 million to $7.8 million.

The state's malpractice crisis is also seeing Penn take over services that other hospital systems can no longer afford to offer, such as neurosurgery and OB-GYN.

"Philadelphia's a brutal market" for health care services," Carnaroli said. "OB-GYN is a mixed blessing -- the malpractice costs are so high, but those services have to be offered."

In addition to the University's endowment, heating costs were a hot issue for the Budget and Finance Committee.

Penn expects to pay around $27 million for steam in 2004 -- which is double the amount it cost to heat the campus in 1999. With usage rising as new buildings are added, a few short-term solutions have been employed.

Vice President for Facilities and Real Estate Services Omar Blaik was praised for his team's conservation efforts, which have saved the University between $7 million and $8 million. Plus, having steam supplier Trigen hedge the cost of natural gas saved Penn an additional $800,000 in opportunity costs.

Nevertheless, as Trigen passes increases in the cost of natural gas directly to Penn, a number of trustees emphasized the need for a long-term fix.

Since Penn represents 35 percent of Trigen's customer base -- and both it and its parent company are up for sale and are evidently in need of cash -- there's no shortage of options to explore. Meanwhile, the use of further hedging transactions was authorized.

Building and renovations were also approved -- the School of Design will go ahead with a $1 million renovation to Meyerson Hall, while up to $3.5 million will be spent on a new building for the McNeil Center for Early American Studies.

Designed "to reflect the mission of the center," the Center will be located at the site bounded by Woodland Walk, 34th Street and a future Sansom Walk, and will likely be a 10,000 square-foot structure with two stories and no basement.

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