Endowment declines 19.4 percent

Penn's endowment dropped 19.4 percent in the first half of the current fiscal year, falling from $6.2 billion to $5 billion from July to December 2008, according to Executive Vice President Craig Carnaroli.

This is a slightly lower decrease than the 22.5 percent decline that colleges and universities across the United States and Canada experienced in the first five months of FY 2009, according to a recent survey by the National Association of College and University Business Officers and the Commonfund Institute.

The drop was mostly due to financial market declines across asset classes, according to Carnaroli. The rate of return on investments, for example, fell 19.1 percent.

Since only 9 percent of Penn's annual operating budget draws from the endowment, the school is actually "relatively well positioned" to absorb the losses, University President Amy Gutmann wrote in an e-mail to the Penn community yesterday. Penn has also worked to maintain liquidity in light of the market by diversifying its investment portfolio into alternative asset classes such as private equity, real estate and natural resources.

In making investment decisions, the school is seeking ways to take advantage of the current low prices, Carnaroli said.

In the e-mail, Gutmann gave an update of the school's financial conditions and fiscal plans for the upcoming year, many of which were finalized at the annual Board of Trustees' Budget and Finance Committee meeting yesterday.

Tuition will increase 3.75 percent for the 2009-2010 academic year, the lowest increase in 41 years, according to a press release. Total student costs - tuition and fees plus room and board - will rise 3.8 percent, significantly lower than the school originally planned.

The increase in tuition will help Penn raise the budget for financial aid by $17.6 million for the coming academic year to implement its no-loans aid policy. The school will also tap into unspent reserve funds to increase the aid budget, according to Carnaroli. The 15 percent increase in budget is in addition to the 43 percent the University has increased its aid budget since 2004.

Through the Capital Campaign, Penn has raised $2.3 billion, or 66 percent, of its $3.5 billion Making History campaign goal. To date, the University has reached 78 percent of its FY 2009 goal for cash receipts, but expects new commitments to slow down until the economy recovers, Gutmann's e-mail said.

Restraining tuition increases and increasing financial aid are expected to intensify budgetary pressures on the highly tuition-dependent University. 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 pressures," Gutmann said in the press release.

She outlined cost-cutting measures in place until June 2010 that are expected to save the University $57.7 million. These include reduced payroll expenses, forgone salary increases for top administrators and a hiring freeze in the School of Arts and Sciences.

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