After large endowment drop, modest budget cuts ahead | Interactive graphic

Although the value of Penn's endowment fell 19.4 percent in the second half of 2008, the impact on individual students is harder to discern.

The way University finances are structured means the school will be able to survive the economic downturn with modest budget cuts.

Overall, 9 percent of Penn's budget is made up of endowment funds. This is relatively small compared to peer schools, which draw an average 20 percent of their budget from endowment, according to Vice President for Budget Bonnie Gibson.

"We complain all the time that we're underendowed for our size and compared to our peers, but right now it's actually better for us because we're not as dependent on endowment income," Gibson said.

She added that lower endowment dependency means the school does not have to make as severe cuts, so students can expect modest reductions in programs and staffing.

The University's budget for the upcoming year also has not yet been finalized, meaning many of the negative effects will not be felt until 2011.

Additionally, since Penn tries to spend its endowment according in a way that smooths fluctuations from year to year, students will feel the economic downturn more at home than at Penn, University President Amy Gutmann said.

She emphasized that Student Financial Services will continue to meet the full demonstrated needs of students.

Of Penn's 12 schools, the School of Medicine receives the most funding from the endowment, but the Annenberg School for Communication draws the largest percentage - 40 percent - of its operating budget from the endowment, followed by the School of Law with 18 percent, said Gibson.

On the undergraduate level, Wharton and the School of Engineering and Applied Sciences are most dependent on endowment, with 9 percent of their budgets from the endowment, followed by the School of Arts and Sciences at 7 percent and the School of Nursing at 3 percent, according to Tony Sorrentino, spokesman for the executive vice president.

In an interview for a previous article, Annenberg Dean Michael Carpini said his school's main focus will be maintaining student education.

Annenberg will be "very careful with any discretionary spending" in areas such as event co-sponsorships, he said, adding that, going forward, reductions will be more systematic and built into budget controls - for example, in fewer events and less technology replacements.

However, he said he expects such changes, at least in the next academic year, to be "invisible to students" and felt more internally. Annenberg will also draw from reserve funds created in the past to protect against situations like the current year, Gibson said.

SAS dean Rebecca Bushnell said the school slowed its hiring last summer before the economic crisis, but that the they are still looking to fill some positions that are urgently needed and a small number of complete searches were already underway.

Bushnell also said that the University has frozen all staff reclassifications.

She said of SAS that "the school's position is relatively solid," though all its programs, including Fox Leadership, are being asked to take a 10 percent cut in non-compensation expenses. The Fox program is largely endowment-dependent, however, and SAS will work with the program to ensure the quality of student services remains the same, she added.

At Wharton, Dean Tom Robertson said in an interview for a previous article, students will see most cuts translate to pullbacks in capital expenditures, such as delayed renovations to Steinberg-Dietrich Hall.

However, he added, the school is still "aggressively hiring" and "stepping up to the plate, hoping that this is actually a good opportunity."

Another challenge for the University lies in raising its endowment per student.

Though Penn's total endowment ranks 12th in higher education, it falls to 65th in endowment per student due its large size, according to Gibson. The institutions it competes with for faculty and other assets rank in the top 10.

*This article was corrected at 11:30 a.m. on 3/6/09 to reflect that there was not a freeze on all new faculty searches in SAS; that the University has frozen all staff reclassifications and that the Fox Leadership Program will not face more significant cuts than other departments and programs funded by SAS. All departments are being asked to cut 10 percent in non-compensation expenses.

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