U. bucks trend, remains on solid financial footing

In contrast to the national trend of declining credit ratings and increasing debt facing private colleges due to the poor economy, Penn's credit ratings have remained stable while showing a decline in debt.

This trend has triggered increases in expenses and decreases in private gifts across the country.

As expenses rise, universities are further competing for students because tuition payments provide the majority of revenue for most private institutions. As reported by the Chronicle of Higher Education, most private schools are dependent on tuition for at least 70 to 80 percent of total revenue.

Penn has managed to avoid the issue of tuition dependence, because only a third of the University's revenue, exclusive of the Health System, comes from tuition and fees, according to Senior Vice President for Finance and Treasurer Craig Carnaroli.

With Congress in talks over establishing price controls in response to rising tuition costs, Penn's high percentage of revenue independent of tuition would help maintain the University's fiscal stability in the face of such caps.

The University has also bucked the national trend of rising debt that faces many private institutions across the country by retiring about $50 million in debt this past year, according to Carnaroli.

In 2002, Penn was reviewed by rating agencies that issue credit ratings on a particular series of bonds, and had its outlook revised from negative to stable, with the change being attributed to the Health System.

The Health System has recently regained stable financial footing under the leadership of CEO Ralph Muller.

Carnaroli attributes Penn's stable credit ratings and decline in debt to the University's generous and consistent donation base.

"While many peer institutions have faced a weakness in giving because of the weak economy, we have actually had the opposite trend. People are still very loyal and generous in giving to Penn and it makes a big difference," he said.

In addition, the University has shown itself to be fairly independent of changes in the economy. "We did a study about two years ago measuring the sensitivity of the University to recession, and very few of our revenues correlated well with changes in" gross domestic product, Carnaroli said. "However, we have seen some pressure on expenses and a greater demand for financial aid because of the weaker economy."

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