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, 2019.
As a leading research university, we offer a distinctive, world-class education in which a new generation is cultivating deep disciplinary knowledge while learning collaboration and leadership. Using the Strategic Plan 2025 as our roadmap, our priorities this year focused on building a diverse and collaborative university community, improving the individual experience and expanding our capacity for positive societal impact.
This year, we grew new partnerships, enhanced the CMU experience and welcomed visionary new leaders. We are privileged to share highlights from the past year with you.
Fostering Research, Creativity, Innovation and Entrepreneurship
CMU developed meaningful partnerships to enable the growth of our research and creativity enterprise as a broad and interconnected network of exploratory activities, including creative endeavors, discoveries and translational innovations.
In March 2019, CMU and the Combat Capabilities Development Command Army Research Laboratory (ARL) announced the award of a new Cooperative Agreement totaling $72 million over five years. Collaborating with ARL, Carnegie Mellon will lead a consortium of universities to accelerate the research and development of advanced algorithms, autonomy and artificial intelligence (A4I) to enhance national security and defense. The cooperative looks to find new ways of understanding the raw input from big data. By understanding the contextual importance of collected information, the cooperative agreement looks to optimize and accelerate the decision-making capabilities of autonomous systems. At the same time, the research will also support the increased integration of autonomy and robotics as part of highly effective human-machine teams.
In June 2019, CMU and Argo AI announced a five-year, $15 million sponsored research partnership. The future Carnegie Mellon University Argo AI Center for Autonomous Vehicle Research will pursue advanced research projects to help self-driving vehicles to operate in a wide variety of real-world conditions, such as during winter weather conditions or navigating through construction zones. President Farnam Jahanian articulated that, "this investment allows our researchers to continue to lead at the nexus of technology and society, and to solve society's most pressing problems."
Trustee and alumnus Lane Bess, and his wife, Letty, made a $10 million gift to endow the dean's chair for the Dietrich College of Humanities and Social Sciences. With this gift, Dean Richard Scheines and his successors can incentivize innovation around the college's strategic initiatives and emerging priorities across its nine departments and programs and in its faculty and students.
As we aim to make CMU an academic destination for those seeking a culture of innovation and entrepreneurship, we continue to develop impactful partnerships and collaborations. Offering opportunities to learn, conceive, collaborate, launch and lead in new endeavors is at the forefront of our efforts to support the mission of the university.
Enhancing the CMU Experience
As the university experience continues to change and evolve, Carnegie Mellon is more committed than ever to providing a world-class education for students in a productive, nurturing environment where all members of our community can thrive. The university’s primary educational goal remains the cultivation of deep expertise within each student’s chosen field. To excel in the 21st century, students must also have the ability to recognize, frame andaddress complex problems; the capacity to combine reflection with appropriate action; the ability to communicate effectively; the skill to work productively with diverse collaborators; the motivation to work within and contribute to professional and social networks; an understanding of the importance of physical and emotional wellness, including a balance between professional and personal activities; and the drive to learn continuously throughout their lives and careers as actively engaged alumni.
In September 2018, CMU opened the doors to the David A. Tepper Quadrangle, the largest building on campus, that reflects a new model of higher education by connecting teaching, learning and innovation. This building now serves as the home of the Tepper School of Business and serves as a hub to promote cross-campus collaboration. More than 1,200 alumni, parents, corporations, foundations and friends of the university contributed gifts to support the Tepper Quad.
In addition, trustee and alumnus David Coulter and his wife, Susan Coulter, made a transformational $10 million gift commitment to support mechanical engineering that will endow the headship for the Department of Mechanical Engineering and support the construction of a new Scaife Hall, which will house the department. The endowment will provide critical funds for emerging priorities in mechanical engineering and is the first endowed headship announced in the college.
Meeting the financial aid needs of current and future undergraduate students is another top priority for the university. In October 2018, alumni Cindy and Tod Johnson pledged to contribute $50 million to an endowment to support scholarships, as well as persistence activities that help students stay on their path to graduation. The Johnson Family Scholarship Endowment will provide significant resources to help meet the financial need of future generations of undergraduate students.
These gifts and new learning environments enable the university to cultivate an active, technology-enhanced, learning environment where each individual can grow and thrive, and thereby enhance the CMU experience for each community member.
Welcoming Visionary Leaders
After his appointment last year, Farnam Jahanian was formally installed as the university's 10th president in October 2018. The university community came together to celebrate this leadership appointment and to hear about its new leader's vision. At his inauguration, President Jahanian outlined two critical areas where CMU must aggressively move forward: enhancing CMU's societal impact through research and creativity; and preparing the next generation through a world-class education. He said each one of us has a role to play in bringing beauty and dignity to our mission, through the impact we make on society, the leaders we develop and the opportunities we create for others.
Following a rigorous, comprehensive and international search, James H. Garrett Jr. was named provost and chief academic officer in January 2019. As the chief academic officer, Garrett oversees academic activities across CMU's campuses and programs around the world and is instrumental in long-range institutional and academic planning and implementation.
CMU named Michael McQuade as its vice president for research to provide leadership for the university's research enterprise and advocate for the role that science, technology and innovation play nationally and globally. Key Nuttall was named the vice president for Marketing and Communications to foster collaboration with CMU's colleges and schools to lead the implementation of a proactive, innovative and comprehensive marketing and communications strategy that highlights the institution's breadth and depth. Stan Waddell was named the associate vice president and chief information officer to provide vision, leadership and management to CMU's entire computing enterprise, including the development and implementation of a university-wide IT strategy.
Our leaders guide our vision and mission as we work to achieve our goals and fulfill our mission to have a transformative impact on society through continual innovation in education, research, creativity and entrepreneurship.
Financial Results
I now present you with an overview of our financial results, which highlight the performance of the university for the fiscal year ending June 30, 2019.
Overall Results
For fiscal year 2019, the university’s operating revenues exceeded its operating expenses, yielding an operating surplus of $56.9 million. Carnegie Mellon’s net assets increased $207.5 million or 6.5 percent since the fiscal year ended June 30, 2018, to an ending value of $3.4 billion at June 30, 2019. The increase in total net assets is primarily driven by the operating surplus and $125.1 million in increases from favorable investment returns, as well as increases in contributions with donor restrictions.
Investments
Carnegie Mellon’s total investment portfolio, including $2.0 billion in endowment, represents 57.1 percent of total assets and was valued at $2.5 billion at June 30, 2019. This represents a $136.4 million increase (5.7 percent) from June 30, 2018. 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 January 1, 2019, Carnegie Mellon entered into loan agreements with the Allegheny County Higher Education Building Authority (the “Authority”), issuing Carnegie Mellon University Revenue Bonds Series A of 2019 (the “2019A Bonds”) and Series B of 2019 (the “2019B Bonds”). The 2019A Bonds were issued at a face value of $49.6 million and include an original issue premium of $10.7 million. The 2019B Bonds were issued at a face value of $60.1 million. Proceeds of the 2019A Bonds and 2019B Bonds were used to refund the outstanding Series 2009 Bonds.
In connection with the refunding, Standard & Poor’s maintained the university’s long-term credit rating of AA, citing Carnegie Mellon’s extremely strong enterprise profile characterized by solid demand and research presence, strong financial profile with positive operating results, and diverse revenue streams.
Operating Revenues and Expenses
Operating revenues without donor restrictions for fiscal year 2019 were $1.3 billion, an increase of $65.2 million, or 5.2 percent, from fiscal year 2018. Carnegie Mellon’s primary sources of revenue were tuition and sponsored research activities.
Fiscal Year 2019 Operating Revenues
The main driver of the increase in operating revenues is a result from the increased enrollment, which results in a higher collection of tuition and fees, and an increase in sponsored project revenue. Tuition and other educational fees, net increased $19.5 million, or 3.6 percent, to $561.8 million when compared to fiscal year 2018. Financial aid, which offset tuition and other educational fees revenues, was approximately 23.9 percent of gross tuition income (undergraduate approximately 30.4 percent and graduate approximately 16.7 percent) versus 23.6 percent in fiscal year 2018. Increases in gross tuition, enrollment, executive education and other educational fees offset increased tuition discounts.
Increased projects within the School of Computer Science, College of Engineering and Mellon College of Science resulted in sponsored projects revenue increasing 7.7 percent from fiscal year 2018 to $424.8 million. This revenue includes indirect cost recoveries and represents 31.2 percent of total operating revenues.
Fiscal Year 2019 Operating Expenses
The university continues to ensure that its strategic initiatives are supported through prudent financial management. Operating expenses through June 30, 2019, totaled $1.3 billion, a 5.1 percent or $60.6 million increase from fiscal year 2018. Personnel costs, consisting of salaries, wages and employee benefits remained the university’s single largest category of expense (66.7 percent) at $834.0 million in fiscal year 2019. The personnel cost increase of $35.9 million, or 4.5 percent from the prior fiscal year, is driven by increased employee headcount and merit increases. All other operating expenses increased at a rate of 6.3 percent. Overall expense increases show the university’s commitment to its core mission of innovative education and research.
Looking Ahead
With a strong foundation beneath us, we are excited to continue our work to innovate, collaborate and evolve. Examples of ongoing projects that align with our mission are listed below:
Carnegie Mellon Acquires Options To Expand Its Presence at Hazelwood Green
NASA Selects Carnegie Mellon, Astrobotic To Build Lunar Robot
$5M Knight Foundation Investment Creates Center To Fight Online Disinformation
Partnership Looks To Transform Brain Aneurysm Treatments
CMU Among First To Pilot New Supercomputer
CMU Launches Undergraduate Program in Film and Visual Media
Sincerely,
Angela Blanton
Vice President for Finance and Chief Financial Officer
October 28, 2019