Carnegie Mellon University

Financial Highlights from Angela Blanton, Vice President for Finance and Chief Financial Officer

It is my pleasure to present the annual financial report for Carnegie Mellon University for fiscal year ended June 30, 2018.

In 1967, two visionary-founded institutions — Carnegie Institute of Technology and Mellon Institute — came together to form Carnegie Mellon University. This year, we celebrated the 50th anniversary of this merger by honoring the vision of Andrew Carnegie and Andrew and Richard Mellon and the joining of their legacies. Following in our founders' footsteps, we are committed to realizing academic excellence, empowering research with impact and building real-world partnerships. 

As a private, global research university, Carnegie Mellon stands among the world's most renowned educational institutions. Our mission is to transform society through continual innovation in education, research, creativity and entrepreneurship. We are privileged to share highlights of these efforts from the past year with you.

Realizing Academic Excellence

Attracting diverse and talented students and researchers is a top priority at CMU. 

This year, we embarked on a multi-year, $20 million classroom and learning spaces renovation project to upgrade central teaching and learning spaces. These renovations, based on Educause metrics and analyzed by a committee, will provide an immediate benefit to students and faculty, as well as position CMU to deliver world-class teaching and learning spaces for the future.

For the first time, women made up the majority of first-year undergraduates at CMUa distinctive milestone among top-ranked universities that award the majority of their undergraduate degrees in science, technology, engineering and mathematics (STEM) fields. At 51 percent of the Class of 2021, the proportion of women is significantly higher than the national average for peer institutions (approximately 20 percent year over year).

As we plan for the future, leadership remains a pivotal part of our ability to deliver an excellent academic experience. After joining the university in 2014, serving as vice president for research, then provost and most recently interim president, Farnam Jahanianwas appointed the 10th president of Carnegie Mellon University in March 2018.  Jahanian is a nationally recognized computer scientist, successful entrepreneur, senior public servant and respected leader in higher education. His experience, perspective and leadership are a true asset to the university at this exciting time in our trajectory. 

Following an international search, Michael Trick, the Harry B. and James H. Higgins Professor of Operations Research at the Tepper School of Business, was appointed dean of Carnegie Mellon in QatarTrick, a Tepper School of Business faculty member since 1989, is an internationally recognized scholar and leader with a deep appreciation for the value of a borderless education to advance human knowledge and the power of collaboration to motivate and inspire others.

Our continued focus on delivering an outstanding academic experience enables CMU to have positive and transformative impacts on the world.

Empowering Research with Impact

As a world leader in the cross-disciplinary exploration of the intersection of technology and humanity, CMU continues to address issues that impact our region and the world.

In January 2018, CMU announced that it will lead a $27.5 million Semiconductor Research Corporation (SRC) initiative to build more intelligence into computer networks at the CONIX Research Center, headquartered at CMU. This collaborative center, hosting researchers from six U.S. universities, will build smarter networks to connect devices to the cloud.

A $10 million gift from Glen de Vries (MCS 1994) supported the appointment of the chair of the dean of the Mellon College of Science (MCS). This gift will allow MCS to invest in fundamental sciences, in interdisciplinary initiatives and in faculty and students. This gift will support promising initiatives, recruiting top students and faculty, as well as with expanding MCS's research and instructional infrastructure.

The DSF Charitable Foundation (DSF) gave $4 million to MCS to support the creation of an innovative block grant program that will fund interdisciplinary research projects in basic science. The grant program encourages researchers to address fundamental scientific questions through the lenses of diverse disciplines, leading to new avenues of scientific research and groundbreaking discoveries in the life sciences and biomedicine.

In February 2018, Keith Block, co-chief executive officer of Salesforce, and his wife, Suzanne Kelley, made the lead $15 million gift to establish the Block Center for Technology and Society. The center, housed in the Heinz College of Information Systems and Public Policy, will employ researchers to develop innovative policy recommendations to help promote widespread access to the benefits of technological change. The research conducted there will ensure that new technologies benefit all members of the global community. 

Each year, CMU produces an estimated $2.7 billion in annual economic impact for the Commonwealth of Pennsylvania, having a particularly quantifiable effect on the local and regional economies. Since fiscal year 2011, 42 CMU-associated startups raised $1.05 billion in venture capital. Nearly 74 percent of this venture capital ($783 million) went to 31 Pennsylvania-based startups.

Building Real-World Partnerships

As part of an agreement between CMU and the nonprofit Regional Industrial Development Corporation, the university announced that it will lease two floors of a new building to be constructed entirely within the skeleton of Mill 19, a historic Pittsburgh steel mill. The facility will house research, development and office space for the Advanced Robotics for Manufacturing Institute (ARM) and for CMU's Manufacturing Futures Initiative (MFI). This new facility will be home to a new, one-of-a-kind advanced manufacturing hub, bringing together large-scale academic research and corporate development under one roof. 

In January 2018, a contingent of CMU faculty, led by President Farnam Jahanian, lent their insights on how big data and artificial intelligence are changing the world at the 2018 World Economic Forum in Davos, Switzerland. This year's theme, Creating a Shared Future in a Fractured World, aimed to rededicate international leaders from across industries and disciplines to develop a shared narrative to improve the world. President Jahanian shared his views on how universities drive innovation and CMU representatives shared their innovations and work focusing on global issues, including cybersecurity, artificial intelligence and machine learning.

As the world observed the catastrophic effects of Hurricane Maria, our very own students changed the lives of evacuees from Puerto Rico. Through crowdfunding, CMU student Rosana Guernica chartered flights to deliver 46,000 pounds of supplies to the ravaged island. Guernica, a Puerto Rican native and student in the Dietrich College of Humanities and Social Sciences, helped to evacuate hundreds of people to the U.S. mainland through her efforts. In drastic times, our students demonstrate a commitment to humanity and to making the world a better place, exhibiting values at the heart of CMU's mission. 

Carnegie Mellon has long been a leader at the intersection of technology, arts and humanity; inspired by one to better the others; harnessing the power of our differences to make a profound impact on our society. 

I now present you with an overview of our financial results, which highlight the performance of the university for the fiscal year ended June 30, 2018.

Overall Results

For fiscal year 2018, the university’s operating revenues exceeded its operating expenses, yielding an operating surplus of $52.3 million. Carnegie Mellon’s net assets increased $296.5 million or 10.2 percent since the fiscal year ended June 30, 2017 to an ending value of $3.2 billion at June 30, 2018. The increase in total net assets is primarily driven by the operating surplus, $185.8 million in increases from favorable investment returns, as well as increases of $26.4 million in temporarily restricted giving. 

Investments

Carnegie Mellon’s total investment portfolio, including $1.87 billion in endowment and amounts held for other purposes, represents 58.5 percent of total assets and was valued at $2.39 billion at June 30, 2018. This represents a $15.2 million reduction (0.6 percent) from June 30, 2017. Increases from realized and unrealized gains were offset by the movement of short-term reserves for working capital into shorter duration cash equivalents to benefit from interest rate increases. The reduction in the investment balance is offset by an increase in cash and cash equivalents. Carnegie Mellon’s investment and endowment strategies and performance are discussed in greater detail in the Highlights from the Chief Investment Officer.

Debt Obligations

On July 1, 2017, Carnegie Mellon entered into a loan agreement with the Allegheny County Higher Education Building Authority (the “Authority”), issuing Carnegie Mellon University Revenue Bonds Series 2017, with a face value of $62.2 million (the “2017 Bonds”). The proceeds of the 2017 Bonds, including an original issue premium of $15.7 million, were used to refund $52.4 million of the Series 2009 Bonds and to retire the outstanding Taxable Commercial Paper. 

On December 1, 2017, the Authority, at the request of Carnegie Mellon, amended its Allegheny County Higher Education Building Authority Carnegie Mellon University Revenue Refunding Bond, Series B of 2012, with a face value of $50.0 million, to extend their maturity date to February 1, 2033.

Operating Revenues and Expenses

Unrestricted operating revenues for fiscal year 2018 were $1.2 billion, an increase of $67.0 million, or 5.7 percent, from fiscal year 2017. Carnegie Mellon’s primary sources of revenue were tuition and sponsored research activities.

Fiscal Year 2018 Unrestricted Operating Revenue (dollars in thousands)

The main driver of the increase in unrestricted Operating Revenue is the increase in tuition and fees. Tuition and other educational fees — net — increased $31.9 million, or 6.3 percent, to $542.4 million when compared to fiscal year 2017. Financial aid, which offset tuition and other educational fees revenues, was approximately 23.6 percent of gross tuition income (undergraduate approximately 29.1 percent and graduate approximately 17.5 percent) versus 23.0 percent in fiscal year 2017. Increases in gross tuition, enrollment, executive education and other educational fees offset increased tuition discounts. 

Sponsored projects revenue, including indirect cost recoveries, increased for fiscal year 2018 by approximately 4.7 percent from fiscal year 2017 to $394.5 million in fiscal year 2018 primarily due to increases in funding to the Software Engineering Institute (SEI), a Federally Funded Research and Development Center (FFRDC).

Fiscal Year 2018 Operating Expenses

Operating expenses through June 30, 2018 totaled $1.2 billion, a 5.5 percent or $61.7 million increase from fiscal year 2017. Personnel costs remained the university’s single largest category of expense (67.1 percent) at $798.0 million in fiscal year 2018, representing an increase of $44.5 million, or 6.0 percent from the prior fiscal period and consist of salaries, wages and employee benefits. All other operating expenses increased at a lower rate of 4.6 percent, slightly below the increase in other operating revenue. The university continues to ensure financial sustainability while investing in the research and educational mission of the institution.

Looking Ahead

Thanks to the trailblazing work of faculty and students, Carnegie Mellon will continue to define and manage the space where technology and humanity intersect. As innovations and new ideas percolate across society, it is clear that students today cannot receive the same kind of education as previous generations. CMU’s innovative approach to education helps students become architects of a constantly evolving future. Carnegie Mellon is pioneering new interdisciplinary programs that meet the demands of society and the interests of today’s students, including the Integrative Design, Arts and Technology (IDeATe) network; new offerings in neuroscience and computational biology; and first-of their-kind programs in behavioral economics and artificial intelligence.  

We will celebrate our past by intrepidly exploring the future and continuing to launch and grow our facilities and programs in the coming year. In September 2018, the David A. Tepper Quadrangle officially opened. This facility is the physical realization of a new model of higher education and interconnects all seven colleges while promoting an enhanced ecosystem of cross-campus collaboration and innovation. ANSYS Hall will become the physical and educational hub of the College of Engineering’s undergraduate program serving as a maker ecosystem and housing a set of integrated resources that will help faculty and students create and develop new ideas, concepts and products across many different disciplines.

There is much to be excited for as we look ahead — new spaces, new opportunities and new endeavors for our local and global communities. Thank you for your continued support of CMU and its initiatives.

Sincerely,

Angela Blanton
Vice President for Finance and Chief Financial Officer
October 15, 2018