President's Message - Progress in Tight Economic Times - October 2008

October 2008

Dear Members of Our University Community:

Over the last few weeks the world has seen the American capital and credit markets experience their worst turmoil in three generations.  It is no wonder that the state of the economy is on everyone’s mind, even as we go about our day-to-day work of studying, teaching, conducting research, volunteering in our communities and supporting the mission of this great university.

I would like to take this opportunity to communicate with you about how we at Penn are being affected and how, together, we will weather this challenging time in our nation’s history.

To begin with the good news and the most important fact about Penn today: by every major measure, we are stronger than ever before in our history. We set new records in fundraising in 2008, and by a wide margin. We raised $608 million, including $476 million in cash, and our fundraising for this year-to-date is ahead of target. As important, the many generous donors to Penn have resonated to our highest priorities and therefore have geared their gifts to financial aid, faculty support (including interdisciplinary programs, institutes and centers) and facilities. We completed the acquisition of the postal lands and we laid the groundwork for carrying out the award-winning Penn Connects master plan of our expanded campus.

We initiated a groundbreaking no-loan initiative in undergraduate financial aid. We significantly improved graduate student stipends, which are also now the best in Penn’s history. We remain firmly committed to making a Penn education affordable for students from all economic backgrounds.

In addition to moving ahead on our strategic priorities, the leadership team at Penn also has been working proactively to mitigate financial risk and protect our financial base. For example, over the last year, the University’s Investment and Treasurer’s offices smartly diversified our short-term investments, reducing our investment in the CommonFund (a short term investment fund for nearly 900 colleges and universities) from $250 million to only $100,000 at the time the CommonFund’s trustee placed restrictions on the withdrawal of funds.  Some of our peers were not so fortunate.  With respect to the endowment, over the past year, the University has undertaken several operational enhancements including suspension of its securities lending program in order to protect our cash position.

Our spending rule on endowment reflects the best practice of “smoothing” spending over time, so that when our returns soared in 2007, our spending did not increase at the same rate.  Likewise, our decline in 2008 will not result in a reduction in spendable income in 2010.

We do need to manage our resources all the more prudently and we therefore have redoubled all of our efforts at fiscal discipline and high productivity, two hallmarks of Penn’s operating philosophy. Perhaps more than any other eminent institution of higher education, we at Penn know how to do more with less.  

All this said, however, it also bears emphasizing that we are not immune to the declines in the markets, the rising cost of and declining access to debt and the potential impact on philanthropy, three areas of great importance to us.

The key to Penn’s ongoing success, and essential to maintaining our momentum during this period of uncertainty in the markets, will be maintaining a keen focus on our strategic priorities. Penn’s central administration, schools and resource centers will continue to work together to analyze the impact of an evolving economic situation on our current budget and future budgets. We will adjust budgets prudently and proactively, always with a mind toward protecting our gains and ensuring ongoing pursuit of our highest priorities.  Entering the current budget year, many of our schools and centers had already factored tighter economic conditions into their budgets.

I am asking all members of the Penn community to work closely with colleagues and managers in their areas of responsibility to assess their spending and to manage their resources in protection and pursuit of Penn’s highest priorities.

The premium on prioritizing wisely and judiciously is even greater in times such as these, when we face not only challenges, but opportunities as well. The problems in the financial markets will take time to be resolved.  Volatility in the markets is likely to continue for some time. Penn is very well positioned to weather this uncertainty. We will continue to protect and pursue our highest priorities. We will carry out the responsibilities that have been entrusted to us, and we will thereby sustain our great momentum in moving from excellence to eminence.

If there are specific concerns or questions that I can answer, please email me at   Should the impact of the economic situation on the University change significantly, I will continue to update you.


Amy Gutmann