Measured in financial terms, 1994 was the best year ever for The Johns Hopkins University. For two decades, Hopkins' revenues exceeded expenditures in every year but one, 1977. That is, income from operations, income from endowment, and gifts for current programs were sufficient to:
cover the cost of operations finance acquisition of equipment
and other assets, and add to reserves.
But 1994 set a record for financial performance. Revenues exceeded expenditures by $19 millionÄafter financing $43 million in plant assets out of current funds. Overall operating revenues topped $1.4 billion, assets reached nearly $2.2 billion, and fund balanceÄthe equivalent of "net worth" in a businessÄincreased $36 million. For the first time in a decade, long-term debt declinedÄby $8.6 million. Internally, every academic division of the University did better than budget, and none had to use a significant amount of quasi-endowment to cover costs.
Much of the financial success of 1994 can be attributed to cost- cutting and control measures put in place earlier. A five-year financial plan, tight annual budgets, and insistence that any increase in revenue fall to the bottom line rather than being spent on new initiatives have placed the University on a sound financial footing to face the uncertainties that lie ahead. The principal uncertainties continue to be federal support of research and the changing healthcare marketplace.
Federal and private research funds and healthcare fees represent three-quarters of Hopkins' total revenue. Few other institutions are that dependent on revenue sources that can erode as a result of changes in government policy. For example, future support of defense-related research at the Applied Physics Laboratory is bound to be affected by the redefinition of national security interests following the dissolution of the Soviet Union, although current funding levels at the Laboratory remain high. And, while a broad national consensus exists for support of biomedical research, particular areas of priorityÄsuch as AIDS prevention, women's health, aging, cancer, public health, and basic scienceÄmay rise or fall with the political tides.
To protect against changes in research priorities, Hopkins faculty and administrative staff spend much time and effort analyzing national needs, developing the scientific consensus that guides the research agenda, and adjusting their research initiatives accordingly. With the most creative and diverse research faculty in the country, having invested hundreds of millions of dollars in research facilities, and with strong and efficient administrative support, Hopkins is well positioned to make these adjustments.
Similarly, in healthcare, the University is adapting to change. Hopkins' historic commitment to providing the best care in the world to the medically indigent as well as to the more privileged will continue. Its roots in East Baltimore, and its presence throughout the Washington-Baltimore region, will assure continued access by a diverse population to the services of Hopkins primary care, specialist treatment, and advanced therapies. Cost-cutting measures, careful application of technology, and an emphasis on "first time right" treatment will keep Hopkins Medicine competitive in a rapidly changing marketplace. In the meantime, managed care initiatives, streamlined delivery systems, consolidated practice units, and an integrated network of providers will assure continued flexibility in meeting the redefined healthcare needs of individuals, employers, and third party payers.
Another element in the University's strategy of managing change is to increase endowment support for operations. Many peer institutions derive more than 10 percent of their annual revenue from endowment, a few as much as 20 percent. Hopkins' endowment revenue is less than 3 percent of the total. In an effort to strengthen the endowment underpinning of the University's finances, a major fundraising campaign, The Johns Hopkins Initiative, has been launched in cooperation with the Johns Hopkins Health System. A goal of $900 million has been set, and increasing endowment is the major focus of the campaign. Hopkins may never reach the endowment level of some institutions, but it is moving toward a better balance between income from operations and the fixed, reliable stream of revenue provided by endowment.
Benefactors like Zanvyl Krieger, who has established a $50 million challenge gift for the School of Arts and Sciences, and Debbie and Champ Sheridan, who pledged $20 million to the Milton S. Eisenhower Library, are extraordinary examples of individuals who show their confidence in Hopkins' future by giving of their wealth. Many more, who cannot contribute at the same level, have the same confidence and will give what they are able. Their faith is shared by the University's faculty, students, and staff. Hopkins' past is distinguished academically and sound financially, and its future is secure in both respects.
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