Alternatives to Enhance Access and Affordability

Meeting of the Full Board of Visitors November 11, 2016

Attachment

• Background

• Alternatives to Improve Access

• Alternatives to Improve Affordability

• Aggregate Impact of Alternatives

• Ongoing Financial Challenges, FY17 and beyond

o State Funding

o Ongoing Commitments to Excellence

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Background

• This presentation includes a variety of alternatives to address access and affordability

• Each alternative is presented along with the financial impact on the Strategic Investment Fund

• Some alternatives present significant, ongoing financial impact beyond four years that is not sustainable

• The following three slides outline recent enrollment of Virginians

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Enrollment of Virginians

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In alignment with the Top Jobs Act, the University committed to grow enrollment by nearly 1,200 in-state undergraduates from Fall 2011 through Fall

2018

Fall 2016 Enrollment of Virginians

• Virginians offered admission as first-years: 4,213 o 2,461, or 58%, enrolled o 1,752, or 42%, chose not to enroll

• Virginians initially placed on the waitlist and offered

chance to enroll at UVA Wise with guarantee to enroll at UVA for their final two years of college: 851

• Virginians offered admission as transfers: 698 o 552 enrolled

TOTAL 5,762 Admission offer rate for Virginians 45% Admission offer rate for Non-Virginians 24%

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5,762 Virginians were offered the chance to enroll at UVA in 2016

Academic Year 2017-18 Applications

• Significant increase in early action applications, exceeding previous record high in 2015 by 23%

• Received over 20,000 early applications

• Key Statistics of Early Application Pool: Applications are up for every undergraduate school

(Architecture, Arts & Sciences, Education, Engineering and Nursing) over 2015

Racial diversity of early applicants is increased in every category over 2015

Data by residency is not yet available, but it is expected that both in-state and out-of-state have increased over 2015

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Access Alternatives

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Alternatives to Improve Access

Enrollment – increase enrollment of Virginians 1. Phase in-state undergraduate enrollment increase of 400

students over four years beginning in Fall 2017

2. Trade 100 out-of-state students for 100 in-state students for four years beginning in Fall 2017

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• Description: Beginning in Fall 2017, increase in-state undergraduate enrollment using a combination of 1) four-year residential students (admitted as residence hall beds become available), 2) Bachelor of Interdisciplinary Studies (BIS) students at the Northern Virginia Center, 3) London First program students, and 4) transfer students to accomplish growth of the in-state student population by 400 once fully implemented by Fall 2021.

• Financial Impact :

• Key Considerations/Risks: General Fund support for enrollment growth uncertain Unknown impact on student profile Requires development and execution of plan for recruiting additional students, with an

emphasis on enrollment in the School of Engineering Will require additional housing for first-year use (costs not shown above)

1. ENROLLMENT: Increase In-State Undergraduate Enrollment by 400 Students

(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Increase In-State Enrollment by 400 Students

Gross Tuition $0.9 $1.8 $2.1 $2.6 $2.6

AccessUVA Impact (0.2) (0.4) (0.4) (0.4) (0.4)

Operational Cost of Additional Students (1.4) (2.5) (2.7) (3.2) (3.2)

Total Financial Impact ($0.8) ($1.0) ($1.0) ($1.0) ($1.0)

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2. ENROLLMENT: Trade 100 Out-of-State Students for 100 In-State Students

• Description: In Fall 2017, holding overall enrollment level flat, trade 100 out-of-state students for 100 in-state students in entering first-year class. Results in a swap of 400 students once fully implemented in Fall 2021. Assumes no change in financial need profile of current student population.

• Financial Impact:

• Key Considerations/Risks: Potential negative public perception by out-of-state alumni and prospective

applicants General Fund support for in-state enrollment growth uncertain Significant, ongoing financial impact

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Enrollment remains flat, but swap 100 IS for 100 OOS for entering class for four years

Gross Tuition ($3.0) ($6.3) ($9.7) ($13.4) ($14.9)

AccessUVA Impact 0.4 0.8 1.2 1.7 1.9

Total Financial Impact ($2.6) ($5.5) ($8.5) ($11.7) ($13.0)

Affordability Alternatives

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Alternatives to Improve Affordability

Cost of Attendance – lower cost of attendance 3. Award $1,000 cost-of-attendance credit for every in-state undergraduate student in Fall

2017 4. Implement a three-year freeze on future base in-state tuition (FY18, FY19, and FY20) 5. Roll back the first $1,000 tuition step increase 6. Roll back the first and second $1,000 tuition step increases 7. Use Aramark contribution to create special purpose quasi-endowment to support student

dining operations

Financial Aid – provide greater financial assistance to Virginia’s middle-income families 8. Adjust Estimated Family Contribution calculation for in-state families to mitigate cost of

living in high-cost areas in Virginia 9. Reduce loan caps for middle income students with need from $18,000 to $14,000 10. Eliminate loans for in-state students with need with family incomes below $125,000 AccessUVA Endowment – build financial aid endowment with goal to eventually replace tuition-funded AccessUVA grants 11. $100 million Strategic Investment Fund challenge grant to attract matching philanthropy

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3. COST OF ATTENDANCE: Award $1,000 Cost-of-Attendance Credit

• Description: Beginning in Fall 2017, award all in-state undergraduate students a $1,000 cost-of-attendance credit (to be phased out over four years). The credit is 7.7% of current in-state tuition and 3.3% of total cost of in-state attendance.

• Financial Impact:

• Key Considerations/Risks: Clarity of implementation and communication Board could decide to extend cost-of-attendance credit to future classes

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

$1,000 Cost of Attendance Credit

Gross Revenue ($10.6) ($8.2) ($5.7) ($2.8) -

AccessUVA Impact 1.5 1.2 0.7 0.1 -

Total Financial Impact ($9.1) ($7.0) ($5.0) ($2.7) -

4. COST OF ATTENDANCE: Freeze In-State Tuition for Three Years

• Description: Hold in-state tuition at FY17 rate for three years (FY18, FY19 and FY20); resume 3.5% increase thereafter (as specified in multi-year financial plan)

• Financial Impact:

• Key Considerations/Risks: Significant ongoing financial impact

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Keep in-state tuition flat for three years

Gross Tuition ($1.7) ($5.9) ($10.2) ($10.5) ($11.3)

AccessUVA Impact 0.2 0.9 1.5 1.5 1.6

Total Financial Impact ($1.5) ($5.0) ($8.7) ($9.0) ($9.7)

5. COST OF ATTENDANCE: Roll Back the First Tuition Step Increase

• Description: Roll back the first $1,000 tuition step increase implemented in Fall 2014

• Financial Impact:

• Key Considerations/Risks: Significant ongoing financial impact The $1,000 step is being used to fund financial aid for in-state students

(reduced loan caps)

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Rollback first $1,000 step

Gross Tuition ($4.9) ($7.8) ($10.6) ($10.6) ($10.6)

AccessUVA Impact 0.6 1.2 1.7 1.5 1.5

Total Financial Impact ($4.3) (6.6) ($8.9) ($9.1) ($9.1)

6. COST OF ATTENDANCE: Roll Back the First and Second Tuition Step Increases

• Description: Roll back the first and second $1,000 tuition step increases implemented in FY15 and FY16

• Financial Impact:

• Key Considerations/Risks: Significant ongoing financial impact The first and second $1,000 steps are being used to fund financial aid for

in-state students (reduced loan caps)

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Rollback both $1,000 steps

Gross Tuition ($12.7) ($18.4) ($21.2) ($21.2) ($21.2)

AccessUVA Impact 1.7 2.8 3.2 2.9 3.0

Total Financial Impact ($11.0) ($15.6) ($18.0) ($18.3) ($18.2)

7. COST OF ATTENDANCE: Use Aramark Contribution to Create Special Purpose Quasi-Endowment to Support Student Dining

• Description: Establish quasi-endowment using Aramark’s $70 million contribution to

the University (which is held in the pooled balances comprising the Strategic Investment Fund). Use return on these funds to hold annual dining rate increases to no more than 1.5% through 2020.

• Financial Impact to Strategic Investment Fund Distribution:

• Key Considerations/Risks: Permanently removes $70 million from Strategic Investment Fund balances and

approximately $3.5 million from Strategic Investment Fund annual distribution No financial effect on continuing operations

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Creation of Special Purpose Quasi-Endowment to Support Student Dining

Total Financial Impact to SIF Distribution ($3.5) ($3.5) ($3.5) ($3.5) N/A

8. FINANCIAL AID: Adjust Estimated Family Contribution Calculation to Address Cost of Living

• Description: Adjust Estimated Family Contribution (EFC) calculation for in-state families to address the impact of the higher cost of living in certain areas in Virginia. This will reduce EFC. Assumes financial need profile of current student population.

• Financial Impact:

• Key Considerations/Risks: Immediate implementation for in-state undergraduate students in Fall

2017

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Cost of Living Adjustment

Total Financial Impact ($2.2) ($2.2) ($2.2) ($2.2) ($2.2)

9. FINANCIAL AID: Reduce Loan Caps for In-State Middle-Income Students with Need

• Description: Reduce loan caps for non-low income (middle income) students with need from $18,000 to $14,000 upon graduation. Assumes financial need profile of current student population.

• Financial Impact:

• Key Considerations/Risks: Immediate implementation for all students in Fall 2017

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Reduce loans for in-state middle-income students with need

Total Financial Impact ($2.3) ($2.3) ($2.3) ($2.3) ($2.3)

10. FINANCIAL AID: Eliminate Loans for In-State Students with Need with Family Incomes below $125,000

• Description: Eliminate loans as part of the financial aid package for in-state students with need with family incomes below $125,000

• Financial Impact:

• Key Considerations/Risks: Immediate implementation for all in-state students in FY18 Significant, ongoing financial impact

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(in $ millions) FY18 FY19 FY20 FY21 Ongoing

Eliminate loans for in-state students with need (family incomes below $125,000)

Total Financial Impact ($10.4) ($10.4) ($10.4) ($10.4) ($10.4)

11. ACCESS UVA ENDOWMENT: $100 Million Strategic Investment Fund Challenge Grant

• Description: Establish an AccessUVA endowment to be funded with a $100 million distribution from the Strategic Investment Fund as a challenge grant, to be matched by philanthropic support

• Financial Impact:

• Key Considerations/Risks: Ability to fundraise the matching gifts Ultimate goal would be to build an AccessUVA endowment amounting to

$1.2 billion in today’s dollars in order to sufficiently fund AccessUVA grants and alleviate use of tuition revenue. This challenge grant will accelerate the growth of the endowment toward the first $300 million.

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(in $ millions) FY17 FY18 FY19 FY20 FY21

$100 million SIF Contribution to AccessUVA Endowment

Total Financial Impact ($5.0) ($20.0) ($25.0) ($25.0) ($25.0)

Aggregate Financial Impact of Alternatives

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Recommendation Funding Required from SIF (in $ millions) Ongoing

Impact to Operations

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

ACCESS

1. Increase in-state undergraduate enrollment by 400 ($0.2) ($0.8) ($1.0) ($1.0) ($1.0) ($1.0)

2. Trade 400 out-of-state for 400 in-state students - ($2.6) ($5.5) ($8.5) ($11.7) ($13.0)

AFFORDABILITY

3. Award $1,000 in-state cost-of-attendance credit for four years - ($9.1) ($7.0) ($5.0) ($2.7) N/A

4. Freeze future base in-state tuition for three years - ($1.5) ($5.0) ($8.7) ($9.0) ($9.7)

5. Roll back the first $1,000 tuition step increase - ($4.3) ($6.6) ($8.9) ($9.1) ($9.1)

6. Roll back the first and second $1,000 tuition step increases

- ($11.0) ($15.6) ($18.0) ($18.3) ($18.2)

7. Create special purpose quasi-endowment to support student dining operations

- ($3.5) ($3.5) ($3.5) ($3.5) N/A

8. Adjust estimated family contribution calculation to address cost of living

- ($2.2) ($2.2) ($2.2) ($2.2) ($2.2)

9. Reduce loan caps for in-state, middle income students with need

- ($2.3) ($2.3) ($2.3) ($2.3) ($2.3)

10.Eliminate loans for in-state students with need with family incomes below $125,000

- ($10.4) ($10.4) ($10.4) ($10.4) ($10.4)

11.Build AccessUVA endowment with SIF challenge grants

($5.0) ($20.0) ($25.0) ($25.0) ($25.0) TBD

23 Note: Spending distribution of the Strategic Investment Fund is estimated at $100 million per year, dependent upon long-term investment performance. In September 2016, approximately $8 million was awarded in each of FY18, FY19 and FY20.

Ongoing Financial Challenges, FY17 and Beyond

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Financial Challenges, FY17 and Beyond

• Continuing challenges of Virginia economy leading to reductions in higher education funding : NOTE: FY17 and FY18 amounts based on communication from state. Estimated additional base operating reductions of 3% in FY19 and FY20.

• Every 1% in-state tuition increase produces net revenue of $1.0 million • Every 1% in-state and out-of-state tuition increase produces net revenue of $2.6 million

• The multi-year financial plan includes $150 million in aggregate savings by FY22. In FY16,

$16.2 million in savings were realized; in FY17 the savings target is $20.1 million.

• Our ability to address these state reductions is limited as aggressive operational savings goals are already included in the multi-year financial plan and cash reserves have been placed in SIF. Finally, the Academic Division generates very limited cash flow from operations, which is used to fund ongoing commitments (see next slide).

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(in $ millions) FY17 FY18 FY19 FY20 FY21

Projected decrease in General Fund Appropriation (from base year FY16) ($5.0) ($13.9) ($14.5) ($18.2) Uncertain

Ongoing Commitments to Excellence

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(in $ millions) FY17 and Carryforward

FY18 FY19 FY20 FY21

Total Infrastructure $37.5 $28.1 $15.7 $8.1 $4.1

Total Cornerstone 14.3 7.5 7.3 7.1 6.9

Total Research Center & Research Infrastructure 4.0 6.0 6.0 4.0 2.0

Faculty Start-ups and Generational Turnover 21.0 20.5 19.1 8.7 3.2

Capital Items 13.3 - - - -

Other 2.8 2.8 2.8 2.8 2.8

Total Commitments $92.9 $64.9 $50.9 $30.7 $19.0

NOTE: These commitments are funded by cash balances and are not included in base operating budget. Continuation of faculty and staff compensation is important but is addressed in the base operating budget. Infrastructure projects include Ufirst (HR), cybersecurity projects, Managerial Reporting and budget and procurement system tools. Amounts for FY17 were approved by the Board of Visitors with the FY17 operating and capital budget processes and other approvals.