Approval of the Minutes: Minutes of the meeting of December 18, 2003 were approved as distributed with the following change to the second paragraph of item five, endowment payout: The policy adopted by the Trustee Investment Committee in December 2003, reduces the payout by 5% annually, until fiscal 2008 and assumes an annual rate of return of 6.5%. In fiscal year 2008, it tapers off to a 3% reduction. By fiscal year 2009, it increases over fiscal year 2008 by just less than 1%.

Fiscal 2004 Second Quarter Operating Results

The Committee reviewed the University's FY 2004 second quarter financial results, which were generally more favorable compared to budget. The University's surplus through December totaled $186 million compared to a budgeted level of $151 million. Most of this improvement is attributed to research activity at the Applied Physics Laboratory and the receipt of an unbudgeted gift at the Bloomberg School of Public Health. A portion of this surplus, principally at the Applied Physics Laboratory, was used to fund capital projects. The remainder of the operating surplus, $156 million, is added to net assets. This compares to a budgeted $129 million addition to net assets.

Tuition revenue was $1.6 million (0.5%) higher than budget through December and 7.3% higher than last year. Most divisions experienced higher than budgeted enrollment and attained additional tuition revenue. The School of Professional

Studies had decreased enrollment in its business program and thus reported lower tuition revenues.

Organized research was $1.6 million (0.8%) more than budgeted through December and has shown considerable growth, 12.3%, over last year. Most of the research divisions have significantly contributed to this growth.

Other sponsored activity was $5.6 million (7.8%) under budget and 0.6% less than last year, primarily driven by JHPIEGO's loss of a major award in West Africa.

Facilities & Administrative (F&A) cost recoveries were slightly more than budgeted, $2.0 million (1.9%). Year-to-year growth in F&A recoveries was strong, up 10.4% over last year. Dr. Young asked what was driving the 10.4% growth from the prior year. Mr. Puddester replied that both the availability of funds and the mix of research (organized research garners more F&A recoveries) contributed to the growth. Dr. Townsend commented that this type of growth would not continue, to which Dr. McGill replied that the slowing trend would be reflected in the FY2005-FY2009 Budget and Five-Year Plan.

Clinical services revenue was 3.9% higher than budget and up 10.8% compared to last year.

Sources and Uses of Funds: The Committee reviewed the sources and uses of funds. Overall, revenues were $70.8 million (5.0%) more than budget due in large part to conservative budgeting of research activity in the Applied Physics Laboratory and an unbudgeted gift in the Bloomberg School of Public Health. Expenditures were $44.5 million (3.5%) more than budget, driven by research and clinical services expenditures.

The School of Medicine is projecting an operating deficit of over $20 million, which includes approximately $12 million of expenses on the Kimmel and cell engineering gifts received in a prior year. In addition to spending of prior gifts, the School has higher than budget malpractice and performance supplement costs and lower receipts of new gifts. In response to Chairman Hemker's question how increases in malpractice insurance would affect the University and the Health System, Dr. McGill responded that five years ago, malpractice insurance was in the $15 million - $17 million range. Now, it is five times that amount. He also added that the awards that are being awarded is what is driving the insurance rates up so much, not a significant increase in the number of claims.

Benefits Advisory Committee Update

Ms. Hayes addressed the Committee and gave an overview of the purpose of the Benefits Advisory Committee. The University is doing a comprehensive review of the benefits package and addressing how to contain or cut costs while maintaining the competitiveness of the package. The advisory committee is comprised of faculty, senior and support staff. The advisory committee meets once a month and makes recommendations to the Human Resources office.

Mr. Puddester briefed the Committee on what the advisory committee has accomplished thus far. The advisory committee is working with Mercer Consulting to help with the study and to conduct a national and a regional peer study, focusing particularly on faculty benefits. The Mercer Group will also be conducting focus groups with faculty, senior staff, and support staff and with a combined group of these sectors. Additionally, Ms. Hayes and the Principal Consultant from Mercer Consulting will be conducting executive interviews. The advisory committee has also requested feedback from the University community in a survey format. The advisory committee is expected to make a recommendation to Ms. Hayes in May.

Chairman Hemker asked if benefits would be cut as a result of this study. Dr. McGill and Ms. Hayes assured the Committee that they are not looking to cut benefits. The University must contain costs and if possible, would like to cut some costs. The University must remain competitive and continue to offer a competitive benefit package to its current and future employees.

Development Campaign

Mr. Phlegar presented an update on the development campaign, The Johns Hopkins Campaign: Knowledge for the World. The campaign goal is $2 billion, University-wide and is scheduled to end in 2007. To date, the campaign has raised $1.3 billion, with $805 million earmarked for programmatic support, $175 million for capital/facilities and $331 million for endowment.

The Central Development Office is confident that the University will meet its goal. Currently, the campaign is slightly ahead of schedule. Most donors (95%) express an interest and self-select where their contribution goes. The primary focus of this campaign is capital needs on the Homewood and East Baltimore campuses. However, donors lean towards student needs such as student aid, as well.

Dr. Bodnar inquired about the relationship between Central Development and the divisional development offices. Mr. Phlegar replied that Central Development reviews the strategy of the divisional offices and works with them to identify prospects and funds part of their operating budgets. Central Development also provides assistance when needed.

Chairman Hemker asked if the faculty could be doing more to aid the process for their divisions. Mr. Phlegar stated that there is a relatively large group of faculty that has been identified by Development to help achieve the development goals.

Capital Projects

Dr. McGill highlighted a few of the capital projects that are in development. The Homewood South Quad Development is scheduled to begin construction in summer 2005. This project will include a visitor's and admissions center, a computer science building and underground parking.

Another project is the Homewood Book Storage Facility. The Moravia Park storage facility is running out of space. Currently, the University is working on the funding for the Facility.

The Charles Village Development project is awaiting Trustee approval. It will house the University Bookstore and dining and retail space.

Other Items and Future Committee Agenda Items

In his opening comments, Chairman Hemker noted that the faculty salary presentations would be moved to the May 18, 2004 committee meeting. An email will be sent to the Deans to encourage them to work with their school's Faculty Budget Advisory Committee representatives to conduct the review. Dr. Lebo will be working with the divisions on this survey.

Dr. Townsend brought to the attention of the Committee a new student type that he has encountered, a Post-Baccalaureate/Pre-Med student. These students are coming back to school to fulfill their pre-med requirements. He commented that they are generally terrific students who bring maturity to the classroom. Mr. Zeller said he would get more information for Dr. Townsend and the Committee regarding who runs the program, what type of growth is expected, and the affect on resources.

During a discussion about the current year operating results, Dr. Young questioned whether the student body is increasing at a faster rate than the faculty (faculty stretch). Dr. McGill responded that it might be happening in academic areas that can accommodate more students, such as the Humanities department, which are sometimes under-enrolled. Dr. Steinwachs added that the School of Public Health feels the need to grow its educational programs in order to increase their operating surpluses and questioned how other schools are managing it. Dr. Young asked if "faculty stretch" could be measured. Dr. Lebo responded that it could be measured, but it would not be a small undertaking. The Committee agreed that this is an issue they would like to explore. The methodology is to be discussed at the May 18, 2004 meeting with the discussion of the results to be an agenda item in fall 2004.

Agenda items for future meetings were discussed. Topics for future agenda meetings included the FY2005-FY2009 Budget and Five-Year Plan, faculty salary presentations, the discussion of the methodology to measure and report on faculty stretch and the findings of the study on faculty stretch (fall 2004).

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Last updated 22Oct04 by dgips@jhu.edu