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Office
of the President Dear alumni, faculty, staff and friends: It’s not often that one can say, “What an unbelievable year we’ve had,” and have it be an understatement. But that definitely describes the last 12 months at Tulane.
As we go into our first post-Katrina academic year, I want to update you on the university’s financial position and priorities. This letter contains a balanced, realistic perspective of our challenges as well as our sources of hope and optimism. In moving past the greatest urban disaster in the nation’s history, it is impossible to escape the awesome sense of history unfolding around us. The challenges are great, the obstacles many, and yet the opportunity for renewal and growth is unprecedented. The largest obstacles we face are financial ones, and just as we have counted on your support in the past, by making a gift online, you can continue to stand by Tulane at this historic time. I hope to count you among the many who have already supported us through this difficult time. THE CHALLENGES AHEAD When all was said and done, Tulane sustained property damage of at least $160 million from Katrina, about $125 million in lost research assets, library and fine arts collections and building contents, and an operating loss totaling about $100 million for the fiscal year that just ended. These figures are in line with our previous projections.
The university had insurance policies at the time of the storm. We have received $105 million in insurance recovery, which we have used to pay the contractors for property repairs. As all of you know, dealing with insurance is a slow and painstaking process, and the amount and timing of additional payments are uncertain. We have funded the remaining operating and property losses with proceeds from the $150 million bond issue arranged last fall as interim financing. Finally, we have received a nominal amount from FEMA—approximately $145,000—and cannot predict the amount and timing of any future payments. We have recovered the full policy limits from two of our property insurers but, unfortunately, are involved in litigation with Allianz, one of our excess property insurers. Be assured, however, that we will continue to aggressively pursue FEMA and insurance recoveries. Tulane University’s pooled endowment has performed well this year, generating a total return of approximately 13.5 percent for the 12 months that ended in June. The university’s total endowment now stands at approximately $888 million, including charitable funds. Our fundraising staff, though small in number and hampered by losing several months to the storm, raised $76.2 million, our second-largest year of the campaign. Research funding also looked strong through June 30 with an estimate of $130 million being awarded to Tulane this year in comparison to $137 million last year. All of these successes are already factored in our projected losses for FY 2006.
As we begin the new fiscal year, we forecast an operating loss of $31 million (approximately 5 percent of our annual operating budget). This projection is $11 million higher than originally forecast last December. The difference primarily results from lower student enrollment, reduced clinical activities and higher costs in areas such as insurance, utilities and contracted services. Operating losses could have been as high as $75 million without the development and implementation of the Renewal Plan that I outlined to you in my last letter. How quickly we are able to bounce back depends on variables that are mostly out of our control, such as the pace of New Orleans’ recovery, the state of area medical care and its effect on our clinical operations, and the perception of New Orleans by our constituents. The latter concern has impacted our fall 2006 class of incoming first-year and transfer students, which we anticipate will number around 1,050. Negative press coverage about the recovery of New Orleans is the single largest factor in our reduced numbers.
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