We are writing to update you on our near-term operational and financial planning in light of potential federal funding cuts and legislation. We recognize the strain that these policies put on our community—and the uncertainties surrounding their timing and impact. In moments like these, we are guided by our core principles: protecting our missions, sustaining our culture, supporting our people, and judiciously managing our resources.
As we communicated previously, changes to federal research funding could significantly reduce our operating budget. These include stop-work orders already issued to Penn, and the proposed NIH cap on indirect costs. Congress is also considering additional proposals that will affect our finances, including reductions in student loan programs and eligibility, and an increase in the excise tax on university endowments. Penn’s endowment provides approximately 20% of our total operating budget, supporting undergraduate and graduate financial aid, faculty salaries, research, and other critical services.
Although the extent and final impact of these policies will not be known for several months, the direction is clear, and we are already experiencing reduced funding. We continue our advocacy effort both communicating the impact to our elected representatives and working closely with industry associations to underscore the critical role federal funding plays in fulfilling our mission and benefitting society.
In consultation with our Schools and Centers, we are acting to protect our institution’s core principles and support existing people and programs. Effective immediately and until further notice, we will implement the following measures:
Review of capital spending for new buildings, renovations, and other capital projects that are not fully funded or deemed essential.
Freeze on staff hiring, except for critical positions, student workers, and those funded by active grants or restricted sources. Requests for exceptions must be reviewed by School and Center leadership and approved by the provost and senior executive vice president.
Freeze on staff salary mid-year adjustments, including nonmerit salary adjustments and position reclassifications that are not already in process. This applies to the mid-year salary adjustment pool for the remainder of the current fiscal year.
Review of faculty hiring, only allowing searches that Schools deem essential to their missions and their highest critical priorities.
Five percent reduction in noncompensation expenses, and Schools and Centers should carefully review budgets and limit nonessential spending. This applies to the remainder of the current fiscal year and for fiscal year 2026.
Review of available restricted funds, ensuring these funds are used for permitted purposes and maximize support of current operations.
The above actions apply both to Schools and Centers and central administrative units. Additional details on the processes supporting these steps will be provided separately to School/Center administrative leadership. We will continue to provide updates and refine these measures as we learn more.
The scope and pace of the possible disruptions we face may make them more severe than those of previous challenges, such as the 2008 financial crisis or the COVID pandemic. With careful financial management, however, Penn is well-positioned to navigate them. Our Schools and Centers are already engaged in thoughtful forecasting and budgeting for the coming academic year, including making difficult decisions regarding graduate admissions. While painful, such planning is a prudent safeguard for the future of our exceptional academic community.
We deeply appreciate all you are doing to uphold our shared commitment to Penn. Together, we will continue to support and sustain our people and our missions.