Hello everyone, and thanks for coming to this year's faculty and staff awards luncheon. The past several months have been arduous and a bit stressful for all of us, I know, and it's a good time for us to get together and talk a bit. From my own perspective, I'm very pleased indeed to be standing before you here today as Chancellor of the University.
As we begin this new era together, I'm happy to report that the University enjoys its strongest condition in decades. Enrollment at the undergraduate level is over budget even though we have become much more selective in admissions. We had nearly 5,200 applications for this fall's class of first year students. First-to-second-year persistence among undergraduates is up to 88%, an all-time high for us, and persistence is up among juniors and seniors as well, surely portending higher graduation rates.
A number of our key graduate programs are continuing to grow, and we are admitting and enrolling substantially more capable students at both the undergraduate and graduate levels, something that I'm certain you've taken note of in the classroom. We are attracting and hiring new faculty members of the first rank, and are very well-positioned to enter a time of faculty growth stimulated by the Marsico Initiative and the success of a number of our graduate programs. Our high visibility programs in athletics and performing arts are thriving, with national championships in hockey and skiing, lacrosse coming on strong with its new stadium, and the Newman Center with events on nearly 200 nights each year. Our financial condition is excellent, with substantial operating margins in each of the past several years, solid amounts of working capital, and the market value of our endowment reaching a new historic high of $195 million. There is little doubt that now is a truly wonderful time to be at DU.
When times are good, though, it's wise to take a look back over our shoulders to make certain that we understand where we've been, to be sure that we know what we're made of, and to take a good look ahead to see where we might go. Some of you may know that last year we began a series of first-year dinners, in which all of the new students have dinner with the Chancellor and senior academic administrators up in the Gottesfeld room of the Ritchie Center, in groups of 60 students each, or so. It's great for the students, and we've continued the program this year. So far, we've done six of these dinners, with eight more to go before the end of the quarter. At each of these events, I talk about the history of Denver and the University.
The point that I try to make is that our roots are tremendously deep in this place, and that for as long as there has been a Denver, there has been a University of Denver. From the very early days in the 1860's when Denver might easily have blown away in a good windstorm, the people that built the city and kept it moving are the same people that built the University and kept it going. From the gold rush town of just 3,500 souls in 1864, largely transients and almost entirely men, to the metropolis of 2.7 million people today, we have endured countless ups and downs, booms and busts.
Throughout it all, the vitality and energy of the city have fed the University, just as the vitality and energy of the University have fueled the progress of the city. Over all those years, we have had to be tough and determined, open minded and flexible, embracing of change and at times optimistic beyond all sense, to the extent that these traits have become deeply imbedded within us, a part of our collective persona.
These are the traits that held us in good stead in the times that were not so good, from the silver crash of the late 1880s to the great depression of the '30s to the very dark days of the mid 1980s, not so long ago. I remember the mid-'80s well, when the Seeley Mudd building was our first new academic structure in many years and the parking lots on the south end of campus were largely dirt. It was an era of precipitous enrollment declines, and we had to be tough and flexible and optimistic beyond all sense if we were going to make it at all. I've always thought that the kinds of things that we had to do to survive that time, many of which were very unlike a traditional University, built the foundation for the good situation we find ourselves in today. Because we had to claw our way out of that abyss 20 years ago, we are today a better managed, financially more sophisticated, and much more creative and agile University than most in America.
These are also the traits that allowed us to blossom into the wonderful DU that we became during the years of Chancellor Dan Ritchie. The 16 years under Dan saw an absolute renaissance of our campus. Visitors to DU are awed by what they see today--a campus of almost unparalleled beauty and functionality. The move to Division I athletics was a tough and very contentious thing to do, but it has clearly been successful, bringing the University tremendous visibility and respect. We may be one of only a handful of Universities in America whose athletics programs are populated by real student athletes, operate with uncompromising integrity, and yet are nationally competitive at the highest levels.
Dan's years saw tremendous growth in the financial stability of the University, based on the coupling of long-term fiscal planning with long term academic planning. The move to decentralize our operations in the mid-'90s and the establishment of the gainshare system correlate well with the evolution of large operating margins and the growth of substantial working capital.
Finally, within the last few years we have begun to focus on the absolute quality of our academic programming. The Marsico Initiative, the Cherrington Global Scholars program, and a host of new programs in our graduate professional schools are testimony to the creative and innovative spirit of the University community. Few other universities in America would even dream of such deep and forward-looking academic change.
So, what now? Has the University reached its zenith? Do we simply try to maintain this good state we find ourselves in? Is this just part of another cycle? I think not. I believe that our best days are yet to come. I believe that those timeless characteristics of the University community that have driven us for the past 141 years can propel us much, much farther. I believe that the winds of change have shifted in our direction, and that we truly have the opportunity to become one of the great universities in America--we are so close. We can be the leader as higher education develops new definitions of excellence appropriate to the needs of the 21st century.
What does that mean, new definitions of excellence? I believe that in this century universities are going be judged by their impact on people--by what they really do, and really accomplish. The old measures of academic excellence, those most universities gauge themselves by today, are largely input parameters or measures of activity. SAT scores, high school GPAs, GMATs and GREs tell us only about the kinds of people we are attracting, not about the kinds of people we are graduating. More to the point, they don't tell us about what our graduates accomplish in their lives. While the size and volume of a university's research enterprise may say something about the levels of faculty activity and competitiveness, they say relatively little about the impact of the research on all of those real people out there. We read often these days of a growing mistrust of traditional higher education, of the efficacy of its processes and programs, of its value and cost, even of its motives. Lots of people are beginning to think that universities are mostly out for their institutional selves.
We have a real chance to be a leader because we have never become that inwardly focused, sluggish and immobile, moribund traditional university of the sort that people mistrust. We have always had that wonderful symbiotic relationship with people of the city and the Rocky Mountain region that I spoke about earlier, building vitality and energy together. The people of Colorado do not mistrust us; rather, they think of us as the new model for higher education, the agent of change, and they are anticipating that something wonderful is going to happen here. We've got to deliver.
To deliver on that promise, in the course of the next several years we will make a long and sweeping turn from investments in places to investments in people. We've spent a good bit of the past decade investing in our campus, in the places where we teach and learn and think and do, and the result has been spectacular. It's been a process that has built tremendous momentum and pride. But if we want to take that next step, we've got to move our energy and resources to a focus on people--our students, our faculty, our alumni, and the people of our region.
First, let's talk about students. Our students, both undergraduate and graduate, are more and more capable every year, more focused on their intellectual lives, more focused on the growth of their personal character. While this has been tremendous, it has come at considerable cost to the University, as more and more students are eligible for merit-based aid, and need-based aid has grown as tuition costs outstrip the growth of family resources. The result has been tremendous pressure on our discount rate, the rate at which we use DU operating resources to fund financial aid. On the average, the financial aid we offer today still meets only about 80% of the typical undergraduate student's need, and that will ultimately limit our ability to attract stronger students and hence our ability to build a deeper intellectual culture. In spite of limits on financial aid, our educational expense per undergraduate student is nearly 40% greater than the net tuition we receive per student, something we can do by shifting revenues from other sources. But the top universities spend many times their net tuition per student on educational expense, something they can do because of large endowments. If we are to become a great university, truly capable of empowering greatness among our students and alumni, we are simply going to have to build a much larger endowment and make certain that a significant part of it is focused on student scholarships and instructional excellence.
The faculty is the lifeblood of the University, and we are blessed with a very creative, capable, and caring faculty. In the course of the next few years we are going to have an amazing opportunity to become still better, as we add new faculty positions for the Marsico Initiative, as we accommodate growth in a number of our graduate and professional schools, and as substantial numbers of our current faculty members retire. It is imperative that we attract the very best people to fill these positions as they open up. It is also imperative that we retain the great faculty members that we have. To do both of these things, we?re going to have to put more resources on the table for faculty salaries, for support of teaching excellence, and for scholarship and research. We've begun this move in a modest way in recent years, with focused salary initiatives and measures like the PROF fund, once again relying on internal resources. The operating budget will not be sufficient, though, to move us up to that leadership position I spoke of. Once again, we must develop new revenue streams, particularly endowments that support chairs and professorships, to accomplish our goals.
Our University has more than 110,000 living alumni, and they should be a very big part of the University community. Although we have good contacts for more than 87,000 of these folks, only 10% or so are really engaged with the University. It is nearly impossible to understate the importance and value of alumni to the University. After all, they are the product of our collective effort, their lives and accomplishments a very real measure of our success or failure. As a group, they should be thoroughly engaged with everything that we do, providing expertise and energy, wisdom and perspective. The University should be a continuing resource for them throughout their lives, an oasis where they are always family, where their roots are as deep as those of the University itself. It is often said that a university's students should ultimately become its stewards. We have a very long way to go in this area, but we have a strategy, and we've begun to implement it. Starting last year, we began making major investments in our alumni office, and in our advancement office in general, to support this effort. It's important to remember, though, that alumni development begins with our current students. We all need to think about helping them to develop that sense of engagement and belonging, from day 1. That's what the first-year dinners are all about.
I believe that in this century, great universities will be those that are strongly connected to communities of real people, and that have effective mechanisms by which their intellectual capital can be employed to directly influence the public good. Here at DU, we're fond of saying that we're a great private university dedicated to the public good. And we are! One might ask, though, what the mechanisms may be by which those words and that noble intention are turned into action and results. All universities, of course, graduate students who contribute to the growth of society and the economy. But do they do so intentionally, instilling an understanding among their students that the privilege of higher education carries with it an obligation for graduates to craft their lives in a manner that will have a positive impact on their communities? We do that here at DU. Most great universities build a scholarship and research enterprise based on the talents of their faculty and students and the good will of funding agencies. But what does the scholarship do? What people make up its audience, and, more to the point, who are its beneficiaries? As we invest in the people of the University, in our students, faculty, and alumni, in our programs for teaching and learning and scholarship and research, let us do so in a manner such that that investment pays dividends multifold for the people of this great city and this great state. Even as we become more of a national university, we must always remember our roots in this place, how Colorado has contributed to our character, and the obligation that implies.
You know, becoming the Chancellor has meant a few adjustments for me. The office generates a fair amount of hoop-la, public attention, and notoriety that are a bit different for an academic. I must say though, that I do like my red vest, even though it sometimes makes me feel like a great huge robin! I'd like you to know, though, that it has been the greatest honor of my life to work at your side for the past 24 years, and that as I begin my work as Chancellor, the thing of which I am most proud is that I am simply one of you. I urge you to remember who we are, to understand where we came from, and to believe in what we can become. If you think that DU is wonderful now, you haven't seen anything yet. The best is yet to come.