Penn’s Board of Trustees approved a $300 million debt plan on Thursday, citing concerns over federal funding cuts and a proposed hike in the endowment tax.
The resolution was adopted during the Budget and Finance Committee meeting on May 15 to supplement a $300 million tax-exempt bond issuance from January. During the meeting, Senior Executive Vice President Craig Carnaroli said the debt authorization was meant to “enhance liquidity” as they plan for “federal uncertainties.”
A request for comment was left with a University spokesperson.
The Trustees cited two key threats: an anticipated $250 million reduction in annual federal support and a proposed House bill that would raise the endowment tax from 1.4% to 21%. While the legislation is still under consideration, officials emphasized that the mere possibility of its passage has already influenced endowment strategy and liquidity planning.
“This will increase our short-term flexibility to access cash,” one Board member said during the meeting, calling the resolution an “insurance” policy.
Penn’s total outstanding debt is $4.2 billion as of June 30, 2024, and the University currently holds $2.7 billion in cash and cash equivalents.
Eight other resolutions were also presented at the meeting — including an increase in Penn’s line of credit from $100 million to $600 million and seeking $300 million in “long-term fixed-rate, taxable debt" to shore up liquidity in a tightening economic landscape.
Other resolutions included preparing for Penn Medicine expansions and managing real estate transactions.
RELATED:
Department of Education opens investigation into Penn over ‘inaccurate’ foreign donation disclosures
Penn has been subject to federal funding cuts since the inauguration of 1968 Wharton graduate and President Donald Trump. The White House announced on March 19 that it would freeze more than $175 million in federal funding to Penn, citing the University’s alleged failure to bar transgender athletes from women’s sports. Penn additionally faced a $240 million loss due to a National Institutes of Health funding cut that capped “indirect costs.”
Federal uncertainty has triggered liquidity concerns across the higher education sector. Yale University has listed $6 billion in private equity assets for sale, and Harvard University sold $1 billion worth of private equity fund stakes last month. Penn, which allocates 18.4% of its endowment to private equity — slightly below the 19.5% average for endowments over $5 billion — has opted for balance sheet adjustments rather than asset liquidation so far.
