Five-year Fiscal Sustainability Plan

October 2014

The Changed World Around Us• Imperative to educate more people

– 65% of new jobs in the next decade require some post-secondary training

– Preparing students for work, community and responsible citizenship

• Student demographic changes – more variability, less social capital

• Need to respond to hard questions about the value of higher education– $24K debt load

• Convey the value of research• Vastly increased competition

Requires a radically distinctive approach2

UNC is Well-Positioned

• Research university committed to undergraduate access and success

• Experience in serving students who haven’t traditionally considered a research university

• Translational research• Graduate programs meeting the public need• One-stop+ student support

3

New context = new financial management

• Shift from fund accounting to “strategic deployment of resources to support the mission”1

– River of revenue– Building Reserves /Investing Reserves (attachment 1)– Capital

• Align price with value proposition (transformative education)– Institutional financial aid (attachment 2)– ~70% of our funding is from students1. Strategic Financial Analysis for Higher Education, KPMG

4

Multiyear Strategic Financial Management

5

Enrollment and Revenue

Growth FY16- FY19

Investing ReservesFY14 and FY15

Building Reserves

FY09- FY13

Enrollment Growth Drives Fiscal Sustainability

• Respond to increasing demand for graduate programs

• Reassert UNC’s position in the undergraduate market

6

Enrollment and Revenue

Growth FY16- FY19

Strategic Actions

7

Timing of Strategic Actions

8

Business practices

(sustainable cost savings)

Program

enrollment targets

(vacant capacity)

Program marketing(Targeted marketing)

Program enrollment targets

(Add cohorts in Extended Campus programs)

New programs(I@UNC initiatives)

New student markets (International recruiting – China)

Fundraising

priorities Workload and

course enrollment

Undergraduate and graduate admissions processes

New programs, new markets

(I@UNC initiatives)

Student support(Student Success Collaborative)

Business practices (centralizing to gain efficiencies)

Summer Session strategy

Image Marketing(UNC academic image)

Student support(One-Stop+/Campus Commons)

Fa s te rFY ’15 FY ’18

S l o w e r r

9

Campus Commons

• Will increase the number of students who enroll at UNC.

• Will increase the number of students who succeed to graduation.

• Will address critical curricular needs.• Will create a central connecting point for UNC and

the broader community.

9

Radically distinctive approach

Campus Commons Finances

10

• $ 73.6 million building-114,000 sq ft• $40 million state• $10 million donor• $24 million bonds backed by student fee ($160

annual fee)

• Operating effect $2.3 million• $400 thousand revenue• $1.6 million debt• $1.1 million utilities, facilities staff, other operating

cost

Fiscal Sustainability: Key Points

11

State of the University Address1. 15,000 students by Fall 20182. Increase the proportion of

graduate students from 20% to 25%

3. Increase undergraduate persistence by 2 pct points to 83% by Fall 2018

4. Identify $2.4 million in sustainable cost savings

5. Break ground on Campus Commons summer 2016

• Growth strategy• Commitment to

compensation identity• No overall staffing growth• Student affordability:

strategic pricing and discounting• Leverage reserves for timing and flexibility• Stewardship of capital and debt management

Commitment to Compensation Identity

12

• Principles1. To fulfill our promise of transformative education to students, we

must be competitive in the local and national market for talented faculty and staff.

2. We will be forthright with current and prospective employees about where we fit in the market, so they can make informed career decisions.

3. We will address compensation considerations as a central component of the budget process rather than as an afterthought.

• Progress towards 90% of peers (FY13-FY17)o FY13 5% pools; FY14 5% pools; FY15 3% poolo Fall 12 faculty @89.1%; administrators@ 75.4%o Fall 13 Data concerns discussed with Salary Equity

NCHEMS vs Doctoral-All: small sample size NCHEMS Faculty @87.9%; Doctoral-All 83.4%

o Salary Equity distribution model: 50% parity, 40% MOE, 5% compression, 5% discretion

• Next steps: discussion of peers, standardized reporting

No Overall Staffing Growth

13

• 9 Core plans drive decisionso University-wide staffing plan for faculty and staff

Student Affordability

14

Institution

FY 2009-10 Resident Tuition &

Fees (30CR)

FY 2014-15 Resident Tuition &

Fees (30CR)

5 Year $ Increase Tuition &

Fees

5 Year % Increase Tuition &

FeesMetro 3,640$ 6,070$ 2,430$ 66.8%Fort Lewis 4,646$ 7,252$ 2,606$ 56.1%Colorado Mesa 5,396$ 7,625$ 2,229$ 41.3%UNC 5,451$ 7,733$ 2,282$ 41.9%CSU-Pueblo 5,209$ 7,834$ 2,625$ 50.4%Western State 4,064$ 7,874$ 3,810$ 93.8%Adams 4,454$ 8,015$ 3,561$ 80.0%UCCS 6,057$ 8,983$ 2,926$ 48.3%CU-Denver 6,542$ 9,838$ 3,296$ 50.4%CSU 6,318$ 9,897$ 3,579$ 56.6%CU-Boulder 7,932$ 10,789$ 2,857$ 36.0%Mines 12,244$ 16,918$ 4,674$ 38.2%

Leverage Reserves: Attachment 3 Model

15

FY14

Forecast FY14 ActualFY14

Variance FY15 BudgetFY16

ProjectionFY17

ProjectionFY18

ProjectionFY19

Projection

Revenues and ExpendituresRevenue

Net Student Revenue 117,360,148 117,171,422 (188,726) 120,420,000 130,330,000 140,370,000 150,560,000 159,020,000State Funding 33,638,140 33,640,060 1,920 37,360,000 37,360,000 37,360,000 37,360,000 37,360,000All Other Revenue 22,761,800 24,211,233 1,449,433 22,920,000 22,920,000 23,060,000 23,200,000 23,370,000

Total Net Revenue 173,760,088 175,022,715 1,262,627 180,700,000 190,610,000 200,790,000 211,120,000 219,750,000

Personnel Expenses Faculty, Exempt, Classified 84,379,400 83,766,938 612,462 88,900,000 91,500,000 94,930,000 97,860,000 100,800,000TA/GA, Student & Other 10,086,438 10,224,476 (138,038) 10,190,000 10,320,000 10,320,000 10,320,000 10,320,000Fringe Benefits 24,423,265 24,531,574 (108,309) 26,640,000 28,280,000 30,020,000 31,570,000 33,110,000

118,889,103 118,522,988 366,115 125,730,000 130,100,000 135,270,000 139,750,000 144,230,000 Non-Personnel Expense / Debt

All Non-Personnel 42,005,200 41,338,730 666,470 44,740,000 45,580,000 47,010,000 48,260,000 49,750,000Debt Service / Capital Lease 11,018,382 10,443,980 574,402 11,140,000 11,140,000 12,770,000 12,770,000 12,770,000

53,023,582 51,782,710 1,240,872 55,880,000 56,720,000 59,780,000 61,030,000 62,520,000 Strategic Investment & Capital

Strategic Investments 6,600,000 6,072,143 527,857 6,410,000 4,880,000 4,180,000 4,210,000 4,210,000Capital 11,413,085 8,780,028 * 2,633,057 13,770,000 7,000,000 6,200,000 7,800,000 7,800,000

18,013,085 14,852,171 3,160,914 20,180,000 11,880,000 10,380,000 12,010,000 12,010,000

Total Expenditures 189,925,770 185,157,869 4,767,901 201,790,000 198,700,000 205,430,000 212,790,000 218,760,000

($16,165,682) ($10,135,154) 6,030,528 ($21,090,000) ($8,090,000) ($4,640,000) ($1,670,000) $990,000

Operating 26,083,372 23,816,752 25,565,680 1,748,928 20,000,000 20,000,000 20,000,000 19,220,242 20,000,000 Strategic Investments 9,165,522 5,212,272 5,953,716 741,444 1,641,899 1,222,770 1,307,702 1,387,634 1,467,566 Capital Projects 14,793,010 7,994,505 12,470,925 4,476,420 2,000,000 - - - - Capital Reserves 3,313,522 9,456,564 4,536,859 (4,919,705) 9,064,669 4,064,669 5,252,774 4,840,879 4,840,879 University Reserves 23,190,283 14,463,167 17,820,559 3,357,392 7,142,187 6,471,316 558,279 - 130,310 Other Reserves 4,095,000 4,095,000 3,770,000 (325,000) 4,095,000 4,095,000 4,095,000 4,095,000 4,095,000

$80,640,709 $65,038,260 $70,117,739 $5,079,479 (7) $43,943,755 $35,853,755 $31,213,755 $29,543,755 $30,533,755

* $8.8 million capital funded with university revenues +0.3 million debt funded + $1.7 million state funded = $10.8 million FY14 capital expenditures

June 30, 2019 Projection

June 30, 2016 Projection

June 30, 2017 Projection

June 30, 2018 Projection

OUTYEARS FISCAL SUSTAINABILITY MODEL (6/13/2014)

FY14 FORECAST TO ACTUAL

Cash Balances @ June 30

CashJune 30, 2013

ActualJune 30, 2014

ForecastJune 30, 2014

Actual VarianceJune 30, 2015

Projection

Revenue Greater Than/(Less Than) Expenditures

UNC Budget Structure

16

Operating Budget

Annual, river of revenue,

$180M

Strategic Investment

BudgetSpecific

opportunities, multiyear $5M

Capital Budget

SOME state funds,

multiyear $8M

Restricted Grants and

Financial Aid$8M sponsored

programs. $20M fed/state student grants

Approved Budget (June Book) and Quarterly Financial Reports

Summer, Schlrshp Allow, Capitalization,

Debt, Other Adjustments

Annual Report(Audited financial

statements & supplemental information

Capital and Debt

17

• Capital: $716M replacement value, $151M deferred maintenance

• Debt ~$143 million– Moody’s A1; Standard & Poors A– 2014A $52M refunding 3.7%

• Where are we with Campus Commons?• $ 73.6 million building-114,000 sq ft: $40 million state; $10

million donor;$24 million bonds backed by student fee ($160 annual fee)

• CCHE prioritization; CDC December

Multiyear Strategic Financial Management

18

Enrollment and Revenue

Growth FY16- FY19

Investing ReservesFY14 and FY15

Building Reserves

FY09- FY13

Growth Strategy Targets

1. 15,000 students by Fall 20182. Increase the proportion of graduate students

from 20% to 25%3. Increase undergraduate persistence by 2 pct

points to 83% by Fall 20184. Identify $2.4 million in sustainable cost savings5. Break ground on Campus Commons summer

2016

19