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

I am pleased to present the annual financial report for Carnegie Mellon University for the fiscal year ended June 30, 2020.

The past year has changed and challenged the world in ways we could never have envisioned. A global pandemic, cultural transformation and widespread economic instability have exposed deep chasms in our society.

But at Carnegie Mellon, in the face of that adversity, we recognized opportunity; an invitation to think boldly and explore boundlessly.

That kind of optimism and ambition has always been at the heart of the Carnegie Mellon experience. We do not just expand research and cultivate creativity; we forge the paths that others follow. We do not just prepare the next generation for the challenges ahead; we imbue in them a responsibility to shape the future. We do not just drive positive societal impact; we are the lodestar.

So it is no mistake that, in this time of great volatility, we have continued to advance innovation, foster opportunity for our students and preserve the possibility of a bright future for a world in need.

It is my great pleasure to share some of those stories of success from the past year with you.

Advancing Innovation

CMU is a destination for researchers who desire a culture of collaboration where they are free to make groundbreaking discoveries and develop translational innovations without barriers or boundaries. This year, the university’s most impactful breakthroughs have focused on the health of our bodies and our planet.  

In July 2019, researchers at CMU’s Institute for Green Science (IGS) published “maybe the most important paper we’ve produced in 20 years,” said IGS Director Terrence J. Collins. The study introduced a method for breaking down stubborn micropollutants in our waterways. The bioinspired approach, which uses oxidation catalysts, is powerful and efficient, which could result in cost savings over current water treatment methods. More importantly for Collins and his team, it is safe for the environment. Funding for the study was provided by the Heinz Endowments, the Heinz Family Foundation, the National Institutes of Health and the National Science Foundation.

Computational biologists at CMU, in collaboration with colleagues at Boston University and the Royal College of Surgeons in Ireland, recently developed a new method for generating lung cells. Unlike previous incarnations, these new cells are easily derived and long lasting, potentially generating an unlimited and stable supply for researchers to study and treat lung disease. The method may also be applied to other tissues and organs.

A more immediate but no less impactful breakthrough occurred in the spring of 2020, in the midst of the novel coronavirus (COVID-19) pandemic. Researchers from CMU and the University of Pittsburgh School of Medicine, using crowdsourced funding, created a low-cost ventilator that could effectively end the shortage exposed by COVID-19. The new device fills the gap between the expensive and sophisticated mechanical ventilators used in intensive care units and the current low-cost, limited-capability alternatives. The Roboventilator, as it’s called, has the potential to benefit resource-depleted health systems around the world.

Our mission to conceive the innovations that result in real-world outcomes and practical benefits is rooted in our ability to confidently confront challenge and eagerly embrace opportunity. It’s a mindset shared by each member of our university community.

Fostering Opportunity

The rapid spread of COVID-19 forced the university to transition to remote learning in March 2020. But thanks to the creativity and resourcefulness of our faculty, staff and students, education never stopped. In fact, in many cases, it flourished in unexpected and inventive ways.

Faculty in the School of Drama used the opportunity to invite alumni and industry professionals into their virtual classrooms to offer advice and inspiration. Among those who answered the call were actor Patrick Wilson, Broadway star Denée Benton and playwright Ike Holter. Some students in the School of Music adopted similar unconventional solutions, turning their parents’ basements into practice spaces and playing live, virtual performances via social media.

That spirit of creativity is at the heart of a CMU education. Although the university’s primary educational mission has always been for each student to seek deep expertise within their chosen field, it has become equally imperative in this rapidly changing world to nurture the ability to reflect, the willingness to communicate and the motivation to find learning opportunities outside of traditional means.

To that end, faculty throughout every college are integrating the arts in order to deepen students’ learning across a variety of subjects. In the Mellon College of Science, molecular biology students craft puzzles and pop-up books to create tangible representations of different molecular pathways. In the Tepper School of Business, musical jam sessions teach empathy and writing poetry builds precision of language. Leanne Meyer, executive director of the Accelerate Leadership Center in the Tepper School of Business, says the intentional interdisciplinary approach helps students to “develop a natural and instinctual reflex to try to understand another person’s point of view,” a necessary skill for navigating the cultural transformations of the past year.

But before our students can begin to embrace that spirit of curiosity and passion, they must first adapt to campus and learn to navigate intricate university systems. The Tartan Scholars Program, made possible by a five-year gift from the Posner Foundation, was designed to do just that, offering mentorship, tools and support to high-achieving students from limited-resource backgrounds. The program not only closes gaps in opportunity, but also builds a sense of community. For many scholars, the program became instrumental in guiding them through the remote learning environment that the pandemic required. “I always hear people say ‘it takes a village,’ and now I really see what that means,” one scholar noted.

Of course, we must provide our students with tangible resources as well as intangible tools to ensure their success. In October 2019, CMU opened ANSYS Hall, a sustainable, 36,000-square-foot maker facility where students, faculty and collaborators can interact with cutting-edge simulation and fabrication tools. The new building, funded by a gift from engineering simulation leader ANSYS, not only expands the university’s maker culture but also inspires creative problem-solving.

These programs and infrastructure enable the university to cultivate a learning environment where each student can grow and thrive.

Preserving Possibility

Our country sits at a cultural crossroads, where the future of health, politics, inclusivity, justice and financial stability are all at stake. The uncertainty of these times has left many citizens feeling unmoored. That is CMU’s cue to step forward, because no university is better positioned to confront these challenges, to conceive the solutions and to capitalize on the opportunities ahead.

Faculty, researchers and students across all disciplines have already begun to help people in a myriad of ways, both big and small.

When COVID-19 forced the closure of K-12 schools, it exposed longstanding inequities in the country’s education system, including uneven access to technology. As many as 60% of some Pittsburgh neighborhoods have no internet access, and Pittsburgh Public Schools do not have enough devices to supply each student in the system. Thanks to support from the Hopper Dean Foundation, CMU’s CS Pathways was able to partner with Pittsburgh-based nonprofit Meta Mesh Wireless Communities to solve the digital dilemma with “a solution that doesn’t go away.” Already, a pilot program in one Pittsburgh school district is providing free Wi-Fi access to households in need.

But technological access alone is not enough to solve our country’s web-based issues. CMU’s newly established Center for Informed Democracy and Social Cybersecurity, with the help of a $5 million investment from the Knight Foundation, has begun investigating the ways disinformation is spread through online channels like social media. This intentional use of bots, trolls, hate speech and information warfare warps societal discourse and threatens our democracy. The hope is that understanding its dissemination will help discover new ways to halt and counter it.

Researchers at CMU also continue to develop methods for understanding COVID-19 and finding ways to combat it. These methods include self-reporting symptoms via social media to forecast virus spread and creating a dashboard to help state leaders make informed decisions based on the best data available.

The impact of these innovations is both meaningful and tangible, preserving possibilities and creating the foundation upon which our bold new future can be built.

Financial Results

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, 2020.

Overall Results 

The university’s operating revenues exceeded its operating expenses, yielding an operating gain of $47.7 million. Total net assets increased $194.5 million or 5.7% since the fiscal year ended June 30, 2019 to an ending value of $3.6 billion at June 30, 2020. The increase in total net assets is driven by the positive results of operations, contributions with donor restrictions and gains on investments.

Investments

Carnegie Mellon’s investment portfolio represents 54.6% of total assets and was valued at $2.6 billion at June 30, 2020. This portfolio increased by $64.0 million or 2.5% from June 30, 2019 and includes endowment assets totaling $2.1 billion.

Debt Obligations

On Feb. 3, 2020, Carnegie Mellon issued three senior notes in the aggregate amount of $70.0 million to a life insurance company. These notes bear interest payable semiannually with principal due on Feb. 1, 2050. Proceeds from the issuance of these notes may be used to finance capital projects.

On Feb. 5, 2020, Carnegie Mellon issued through the Allegheny County Higher Education Building Authority (ACHEBA), Carnegie Mellon University Revenue Bonds, Series A of 2020, with a face value of $45.6 million. The proceeds of the 2020 Bonds, including an original issue premium of $15.2 million, are being used to finance a portion of the costs of the construction of two student dormitories. The bonds mature at $45.6 million on Feb. 1, 2030. In connection with the ACHEBA bond issuance, Standard & Poor’s maintained the university’s long-term credit rating of AA.

Operating Revenues and Expenses

Operating revenues for Fiscal Year 2020 (FY20) were $1.3 billion, an increase of $33.9 million, or 2.6%, from Fiscal Year 2019 (FY19). Operating expenses through June 30, 2020 totaled $1,293.6 million, a 3.4% or $43.0 million increase from FY19.

FY20 Operating Revenues

The increase in unrestricted operating revenues stems primarily from an increase in net tuition revenue and sponsored project revenue. Tuition and other educational fees, net of financial aid, increased $29.2 million, or 5.2%, to $591.1 million when compared to FY19. Financial aid, which offsets tuition and other educational fees revenues, was approximately 23.6% of gross tuition income (undergraduate approximately 29.6% and graduate approximately 16.7%) versus 23.9% for FY19. The slight decrease in financial aid occurred due to refunds of housing and dining fees paid to students in March 2020 when the university transitioned to a remote teaching model. Financial aid awarded to students can include housing and dining fees as a part of the cost of attendance. Without this impact, the overall aid as a percentage of gross tuition would be consistent between fiscal years, with a slight increase in undergraduate aid. The increase in undergraduate and graduate tuition revenues was due to increases in both tuition rates and enrollment. The university saw an increase in summer tuition revenues from FY19. This occurred as the transition to the remote teaching model gave students across the world the opportunity to attend Carnegie Mellon classes.

Sponsored projects revenue for FY20 increased by approximately 5.0% from FY19 to $446 million due to projects in the School of Computer Science, College of Engineering and the university subsidiary Advanced Robotics for Manufacturing Institute.

Auxiliary revenue decreased $14.1 million to $54.1 million in FY20 due to decreases in dining and housing revenues related to the transition to remote learning in March 2020.

FY20 Operating Expenses

Personnel costs, consisting of salaries, wages and employee benefits, remains the university’s single largest category of expense $876.6 million or 67.8% in FY20, representing an increase of $42.7 million, or 5.1%, from the prior fiscal year. These costs increased due to employee headcount stemming from enrollment growth and filling of vacant positions. All other operating expenses in FY20 were consistent with FY19 (an increase of 0.1%) as the university saw reduced spending related to supplies and travel costs as a result of the COVID-19 pandemic.

Looking Ahead

As of June 30, Carnegie Mellon’s endowment reached $2 billion for the first time.

It is an important milestone for the university, as we continue to build an endowment befitting our culture of academic, creative and research excellence. The permanent and consistent source of funding provides the tuition assistance that attracts and retains our exceptional student body and funds our innovative, life-changing research. But the endowment is not the sole financial driver of our future.

We have exceptional support in this mission, thanks to the generosity of our alumni, donors, industry partners and nonprofit foundations. Here are just a few of the ways those partnerships have benefited our students and researchers in the past year.

• In October 2019, Northrop Grumman Systems Corporation entered a new five-year master agreement with CMU to expedite funding of science and engineering research projects.
• The university welcomed the 2022 class of Swartz Center for Entrepreneurship Innovation Scholars. The program, funded by a grant from the McCune Foundation, fosters a culture of innovation and entrepreneurship while seeking to increase the number of successful startups initiated by undergraduate students.
• A combined research team from Carnegie Mellon University and Benaroya Research Institute at Virginia Mason developed a new method for enlarging, exploring and analyzing cell structures using nanoscale imaging technique and virtual reality technology. Funded at $200,000 through Grand Challenges, an initiative of the Bill & Melinda Gates Foundation, the new technique could accelerate researchers' understanding of infectious and autoimmune diseases and enhance their ability to develop diagnostic, preventive and treatment methods.
• The Scientist Magazine has named CMU Chemistry Professor Danith Ly’s Janus bases as one of its Top 10 Innovations of 2019. Ly’s early work on Janus bases, which are being used to create new treatments for genetic diseases and disorders, was made possible through a gift from the DSF Charitable Foundation to Carnegie Mellon's Center for Nucleic Acids Science & Technology.
• The Class of 2020 received a send-off like no other as more than a dozen acclaimed alumni, including award-winning actor Billy Porter, U.S. Rep. Susie Lee and Duolingo CEO Luis von Ahn, surprised graduating Tartans during CMU's first-ever virtual conferral of degrees ceremony in May 2020. It was a reminder of the deep, lifelong ties students develop to the university and of the importance of buoying the next generation, in any capacity.

Sincerely,

Angela Blanton
Vice President for Finance and Chief Financial Officer
October 16, 2020