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2 WE’RE ON THE SAME SIDE COMMENTS BY JERRY G. BRIDGES CONTROLLER, JOHNS HOPKINS UNIVERSITY

3 JOHNS HOPKINS UNIVERSITY MISSION STATEMENT TO IMPROVE LIFE

4 JHU HIGHLIGHTS FISCAL YEAR, 2003 TOTAL REVENUE $2.538 B TOTAL EMPLOYEES21,644 TOTAL ENROLLMENT17,925

5 PREVIEW OF REMARKS SYNOPSIS OF MAJOR SOURCES AND USES OF FUNDS AT RESEARCH UNIVERSITIES DISCUSSION OF MOST BINDING CONSTRAINTS COMMENTS ON SIMILIARITIES AND DIFFRENCES WITH GOVERNMENT AGENCIES SOME CONCLUSIONS

6 PUBLIC AND PRIVATE INSTITUTIONS PRINCIPAL DIFFERENCE IS IN SOURCES OF FUNDS PUBLIC INSTITUTIONS RECEIVE DIRECT APPROPRIATIONS AND ARE LESS DEPENDENT ON GIFTS AND PRIVATE GRANTS PRIVATE INSTITUTIONS RELY MORE ON FUNDRAISING

7 PRINCIPAL SOURCES OF OPERATING FUNDS (2001 AGGREGATE DATA) PUBLICPRIVATE SOURCEINST’S*INST’S*JHU** GOV’T APPROPRIATIONS 31% % GOV’T GRANTS ETC. 22% 25% 52% PRIVATE GIFTS, ETC. 9% 22% 11% NET TUITION AND FEES 13% 20% 11% AUXILIARY ENTERPRISES 14% 18% 2% ALL OTHER 11% 15% 23% * Council of Government Relations Report, Finances of Research Universities, September 25, 2003 ** Fiscal Year, 2002

8 PRINCIPAL USES OF OPERATING FUNDS (2001 AGGREGATE DATA) PUBLIC PRIVATE USES INST’S* INST’S* JHU** INSTRUCTION 32% 34% 29% RESEARCH 25% 23% 44% AUXILIARIES 18% 18% 3% ACADEMIC SUPPORT 10% 8% 3% INSTITUTIONAL SUPPORT 6% 9% 6% ALL OTHER 9% 8% 15% * Council of Government Relations Report, Finances of Research Universities, September 25, 2003 ** Fiscal Year, 2002

9 PRINCIPAL TYPES OF CONSTRAINTS GOVERNMENT APPROPRIATIONS GOVERNMENT GRANTS AND CONTRACTS PRIVATE GIFTS, GRANTS AND CONTRACTS TUITION AND FEES AUXILIARY ENTERPRISES DEBT

10 CONSTRAINTS GOVERNMENT APPROPRIATIONS – STATE LAWS AND REGULATIONS – UNCERTAINTY OF AMOUNT – LAND GRANT ISSUES

11 CONSTRAINTS (CONTINUED) GOVERNMENT GRANTS AND CONTRACTS – ADMINISTRATIVE COST CAPS – SALARY CAPS – ALLOWABLE EXPENSES – EXCLUSION OF FUND-RAISING COSTS – OTHER COST CONSTRAINTS INFRASTRUCTURE COSTS

12 CONSTRAINTS (CONTINUED) PRIVATE GIFTS, GRANTS AND CONTRACTS – COST CAPS – COST OF MAINTAINING A REPORTING INFRASTRUCTURE – COLLECTION, DEFERRED PAYMENTS AND WRITE-OFFS – RESTRICTED VS UNRESTRICTED GIFTS

13 CONSTRAINTS (CONTINUED) INSTRUCTION: PROVIDING QUALITY INSTRUCTION PROVIDING QUALITY SUPPORT (LIBRARIES, LABS, TECHNOLOGY) PROVIDING FINANCIAL AID PRIVACY LAWS COMPLIANCE TAX LAWS, ESP. FOREIGN STUDENTS

14 CONSTRAINTS (CONTINUED) AUXILIARY ENTERPRISES – QUALITY ROOM AND BOARD – HEALTH AND SAFETY STANDARDS OTHER – DEBT MAINTENANCE OF BOND RATINGS TAXABILITY ISSUES – ROYALTIES – CLINICAL ISSUES

15 COMPARISON WITH GOVERNMENT AGENCIES GOVERNANCE COMPARISON – INDIVIDUAL COMPONENTS (AGENCIES, SCHOOLS) OPERATE INDEPENDENTLY AND HAVE THEIR OWN CONSTITUENCIES – UNIVERSITY RESEARCH IS SUBJECT TO PEER REVIEW FOR BOTH FUNDING PROPOSALS AND RESEARCH RESULTS – BOTH ARE SUBJECT TO A MULTITUDE OF LAWS

16 COMPARISON WITH GOVERNMENT AGENCIES (CONTINUED) ECONOMIC COMPARISON – DEFINED, LIMITED BUDGETS – PENALTIES FOR OVERSPENDING – UNIVERSITY BUDGET CYCLE IS SHORTER AND MORE FLEXIBLE – UNIVERSITIES BORROW ON THE BASIS OF THEIR FINANCIAL STATEMENTS

17 COMPARISON WITH GOVERNMENT AGENCIES (CONTINUED) SOCIETAL COMPARISON – SIMILAR MISSIONS (TO IMPROVE LIFE)

18 CONCLUSIONS RESEARCH UNIVERSITIES AND THE AGENCIES WITH WHICH THEY DEAL HAVE SIMILAR GOALS. THE TRADITIONAL PARTNESHIP BETWEEN RESEARCH UNIVERSITIES AND THEIR GOVERNMENT SPONSORS IS UNDER STRESS. CONSTRAINTS IMPOSED BY THE AGENCIES ARE INCREASING AND ARE FINANCIALLY BURDENSOME. A NEW BUSINESS MODEL NEEDS TO ADDRESS THE IMPACT OF THESE CONSTRAINTS ON THE UNIVERSITIES. THIS PROCESS OFFERS AN OPPORTUNITY TO RE- BALANCE THE PARTNERSHIP FOR THE FUTURE.

19 THE GOLDEN RULE THE ONE WITH THE GOLD MAKES THE RULES.