The Key — Balancing Act: Growth vs. Financial Restraint
Penn has ten days left to provide feedback on the federal government’s proposed Compact for Academic Excellence. In doing so, the school must decide how to pay for its principles.
Last week, we discussed the ideas behind the agreement, including reform we agree is important (encouraging open discourse, increasing affordability, and ensuring compliance with federal laws). Meanwhile, we cautioned that the university should make these changes on its own, rather than at the hands of the government, to preserve academic freedom.
This morning, MIT President Sally Kornbluth announced that MIT is rejecting the Compact, citing concerns over academic freedom and disagreement with some of the Compact’s proposals. Whether or not Penn signs, it faces inevitable financial tradeoffs. Even with increased federal funding, the Compact would change the school’s financial model, but declining would mean “forego[ing] federal benefits.”
At the September 25th Board of Trustees meeting, EVP Mark Dingfield and Interim VP for Finance Trevor Lewis reported strong FY2025 results. But instead of cutting costs, Penn is focused on containing them. As federal expectations shift, Penn must consider how long limiting cost growth can substitute for reform.
A new financial era
Penn isn’t alone in this dilemma. Even before the Compact, universities were rethinking their finances. The University of Chicago is selling a major research center for $375 million to “support for research and education.” Yale, emerging from a hiring freeze, is setting stricter budget targets and offering one-time early retirement incentives, saying, “each vacancy represents a potential cost-saving opportunity.”
Penn’s leaders, by contrast, are focusing on containing expenses rather than making cuts, even as personnel costs continue to climb. Personnel costs exceeded $2.8 billion for FY 2025, a 5% increase from last year and more than 15 times the size of the student aid budget.
Dingfield and Lewis argued these costs are rising to fuel revenue growth through “different needs of our growing master's programs… and the whole school's mission.” This may be true, but it raises a larger question: does growth still serve the school’s mission, or has it become the mission?
Growth with purpose
Over the last decade, Penn’s endowment grew by $10 billion and revenue grew 5.1% annually (excluding mRNA vaccine revenues). Faculty headcount increased 2.5% annually and staff 2.2%, while student enrollment lagged behind at just 1.3%.
Faculty is the backbone of any university, serving as the root of discovery, dialogue, and innovation. Hiring in pursuit of excellence is an investment, but hiring in pursuit of raw growth alone risks dilution. Penn’s faculty headcount has risen 2.5% each year, outpacing student enrollment, and surging to a 5.3% compound annual growth rate (CAGR) for “Associated Faculty” (lecturers and academic clinicians).
During the board meeting, the administration attributed faculty and staff growth to new student programs, facilities, and technologies, insisting “hiring has been strategic, aligned to the core mission and to roles that enhance our capacity for revenue generation.”
There is no doubt that these changes require support, but should hiring automatically increase with revenue? If we pride ourselves on being home to the best business school, shouldn’t our goal be more revenue, learning, and innovation without significant spending increases, rather than growth for growth’s sake?
The administrative surge
The steeper rise in personnel, though, has come from the administration. Since 2004, Penn’s administrative headcount has jumped 78%, compared to 40% growth in full-time faculty, according to analysis from The Daily Pennsylvanian (DP). From 2015 to 2025, staff headcount expanded nearly 25% based on the 2.2% CAGR reported at the Board of Trustees meeting.
The trend is national: between 1976 and 2018, full-time administrators and other staff at colleges and universities soared 164% and 452% respectively, while student enrollment grew only 78%.
As Professor Jonathan Zimmerman told The DP last year, “We need administrators … but I think we do need a conversation about how much administration we need.” Administrators are vital to a complex institution like Penn, but they cannot become the institution itself.
The philosophy of cost reform
Penn has rightly expanded access and affordability even as sticker prices rise, as we’ve discussed. The Quaker Commitment has made undergraduate tuition free for households making under $200,000. But long-term affordability can’t rest on raising tuition and offsetting the costs to students with aid, especially in the era of the federal Compact.
True sustainability may require cutting, not just containing, costs. Done well, cost cuts can be clarifying, allowing Penn a chance to invest in what matters most: teaching, research, patient care, and pursuit of truth.
If done right, cost cutting isn’t a retreat. For Penn, a critical look at administrative costs could be the first step toward leading American higher education into a leaner, more sustainable future.
The Almanac
PA state representatives circulate proposal to ban Penn from joining federal Compact for Academic Excellence
Two Democrat PA State Reps., Malcolm Kenyatta (North Philadelphia) and Rick Krajewski (West Philadelphia, including Penn’s campus), drafted the Protect Pennsylvania’s Academic Freedom Act.
If passed, the law would bar universities receiving state funding, including Penn, from joining the federal Compact that we discussed last week. The proposal claims to protect universities from federal pressure to “comply with its political agenda.” Similar threats have come from Democratic state lawmakers in California and Virginia.
So what? Penn’s chapter of the American Association of University Professors (AAUP), student groups, and some faculty have denounced the Compact. Although the lawmakers are correct that signing the Compact as-is would impinge on Penn’s academic independence, their proposal is rife with hypocrisy. How can lawmakers claim to “preserve academic freedom” by further limiting universities’ independence? While joining the Compact could limit institutional autonomy, so would this type of state interference.
Elizabeth Klein named first Director of Domestic Policy Programs at Penn Washington
Klein brings deep experience in sustainable energy, having worked in the private legal sector, academia, and in government under the Clinton, Obama, and Biden administrations.
So what? As the federal government increases its engagement with higher education, Penn’s expanded presence in Washington is a strategic move. As the school continues to grow its policy and research work in the capital, it must focus on serving as a model of intellectual rigor rather than political bias. The school must demonstrate the value of its scholarship across the political spectrum.
Lawsuit challenges Trump administration’s new $100,000 H-1B visa fee
A coalition of national groups for healthcare workers, elementary and secondary education workers, and higher education interest groups (including unions and the AAUP) has sued the federal government over its $100,000 fee for each new H-1B visa.
They claim that the change will disproportionately harm research and healthcare institutions, since universities’ previously had an exemption from the annual visa caps (which is also now threatened). For Penn, which received 111 new H-1B visas in 2024, the policy could carry yearly costs of over $10 million.
This week, The New York Times reported a 20% drop in international students entering the U.S. in August, citing slower visa processing, travel restrictions, and tighter screening. For now, Penn’s international undergraduate enrollment remains steady, with 15% of the Classes of 2029 and 2028 holding international addresses. However, Wharton’s MBA class saw a 5% drop, a trend that could spread across the university if post-graduation employment in the U.S. shrinks.
So what? The federal government’s push to prioritize American citizens, through both H-1B restrictions and its proposed 15% cap on international students through the Compact, complicates hiring and enrollment for universities. Overturning the policy could return the previous status quo, helping Penn and its peers staff hospitals and research centers and easing international student concerns about post-graduation employment.
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