Business Practices SeminarCurrent Trends in Higher EducationBusiness Practices SeminarCurrent Trends in Higher Education

M. Dwight Shelton, Jr. April 9, 2015

Overview

State Budget Environment

State Reviews of Higher Education

Cost Containment

Opportunities for Virginia Tech

State Budget Environment

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Virginia Revenue GrowthAs of April 2015

Historically slow4

2015-16 Budget Environment

Revenue Outlook

State Revenue has been improving steadily in FY15 On a YTD basis, total collections through December

rose 6.8%, well above the forecast of 3.1% growth. National economic signals are positive. February revenue reforecast added $474 million to

biennial revenue total.

5

Share of State Budget Allocated to Higher Education

1987 1988 1990 2002 2007 2009 2010 2011 2012 2013 2014 20150.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

16.7%

9.9%

General Fund for Higher Education Operations as a share of total State General Fund

6

State Funding Historical Trend

7

1989

-90

1994

-95

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2007

-08 R

ev.

2008

-09

2008

-09 R

ev.

2009

-10

2009

-10 R

ev.

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

$1,600,000,000

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Total General Fund Budget

Total All University Operations

General Fund Budget as Percentage of Total University Operations

Fiscal Year

Do

llars

Pe

rce

nta

ge

55.0%

24.8%45.0%

75.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

State Share Institutional Share

University Division Instructional Budget Fund Split

8

General Fund Per Resident Student at Virginia Tech

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16*

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$4,336

$9,501

$6,826

General Fund per In-State FTE Inflation Adjusted GF/FTE*Projected

9

Executive and Conference Committee BudgetAs of February 27th, 2015

Incremental General Fund $ in millionsExecutive Conference

University Division E&G (Agency 208)September Budget Reduction $ (6.1) $ (6.1)Faculty Salary Increase - 1.65Enrollment Growth - 1.65Targeted Institutional Research - 0.3Transfer to Agency 229 to Cover a Portion of the Central Fund Shortfall ( 0.1) (0.1)

Subtotal University Division E&G $ (6.2) $ (2.6)

Brain Disorder Research - 1.25

Financial Aid 0.1 0.1

Equipment Trust Fund 1.5 1.5

Total University Division $ (4.6) $ 0.3

2015-16 Budget Process

Totals exclude state share of the staff compensation proposals.10

2015-16 Budget Process

Executive and Conference Committee BudgetAs of February 27th, 2015

Incremental General Fund $ in millionsExecutive Conference

CE/AES Division (Agency 229)

Faculty Salary Increase - $ 0.5

Transfer from Agency 208 to Cover a Portion of the Central Fund Shortfall 0.1 0.1

Additional Funding to Address Shortfall for State Health Care Cost Increases - 0.3

Subtotal CE/AES - $ 0.9

University Total (both agencies) $ (4.5) $ 1.2

Totals exclude state share of the staff compensation proposals.11

Compensation Program SummaryThe General Assembly proposes compensation enhancements for state employees that are contingent upon the state meeting 2014-15 revenue projections.

Executive Conference Committee

T&R Faculty Salaries - • 2%, may be merit based• Up to 2.5% additional through reallocation

A/P Faculty Salaries - 2%, may be merit-based

Staff Salaries Classified (C)

- • 2% across-the-board• $65/ year of service for employees with 5

or more years (max 30). University (U)

- 2%, may be merit-based

Effective Date - 8/10/2015

NGF Resource Requirement: University Division (Agency 208) is expected to share approximately 59% of the cost in E&G programs, and 100% of

the cost in Auxiliary and Sponsored Programs. CE/AES (Agency 229) is expected to share approximately 5% of the cost in E&G programs.

2015-16 Budget Process

12

Capital Projects Funding Summary

Proposed Funding Criteria: Project is planned Qualifies as a renovation; not new space

Executive ConferenceRenew/Renovate Academic Buildings

- $ 30.6

Kentland Farms Phase II - 7.6

Total - $ 38.2

Proposed General Fund Support $ in Millions

2015-16 Budget Process

13

Incremental General Fund per Resident FTE

Though the university received some incremental state support in the 2015 General Assembly, those gains were outweighed by the September 2014 budget reduction.

Combined, Virginia Tech lost $118 in General Fund support per FTE for 2015-16.

InstitutionBudget Reduction

per FTENew E&Gper FTE

Overall Impact

University of Mary Washington $ (162) 306 144

UVA's College at Wise (74) 200 126

Old Dominion University (123) 177 54

Norfolk State University (107) 152 45

VA State University (160) 196 36

Radford University (122) 128 6

George Mason University (218) 224 6

Longwood University (119) 124 5

Christopher Newport University (123) 123 0

James Madison University (215) 180 (35)

VMI (391) 313 (78)

VA Commonwealth University (231) 141 (90)

Virginia Tech (287) 169 (118)

College of William & Mary (467) 265 (202)

University of Virginia (604) 219 (385)

14

State Reviews of Higher Education

JLARC Study: Overview

The 2012 General Assembly directed the Joint Legislative Audit and Review Commission (JLARC) to: conduct a study on cost efficiency of the

Virginia public higher education institutions identify opportunities to reduce the cost of

public higher education in Virginia

16

The resolution identified 14 areas to consider including: academic factors: teaching load and faculty

productivity, impact of faculty research on tuition, incentives created by existing faculty compensation models, etc.

non-academic factors: administrative staffing and costs, operation of enterprise activities, etc.

Study completed in November 2014

17

JLARC Study: Overview

18

Report Issue Date

1. Trends in Higher Education Funding, Enrollment, and Student Costs 

June 10, 2013 (Issued)

 

2. Review of Non-Academic Services and Costs September 9, 2013(Issued)

 

3. Review of Academic Costs and Efficiency  December 9, 2013(Issued)

 4. Review of Support Costs and Staffing October 14, 2014

(Issued) 

5. Addressing the Cost of Public Higher Education in Virginia

November 10, 2014(Issued)

JLARC Study: Reports

JLARC Reports Highlights

Virginia Tech has fared well in multiple arenas in the JLARC reports. Some noted items include: VT is among the lowest spenders on support functions when

compared to its public Carnegie group Tenure and tenure-track faculty are teaching an average of 10%

more student credit hours VT cited for transparency in providing detailed listing of

mandatory fees, including athletic fees, through our website and on student invoices

VT Dining Centers have the highest % of student voluntarily purchasing dining plans compared to other Virginia institutions; average per-meal cost is below statewide average

JLARC identified certain areas for improvement such as organizational structure including narrow spans of control; further standardization of procurement

19

Final Report Summary

Report combines the work conducted in the previous four reports with new research and makes a comprehensive set of recommendations.

Final report has 16 recommendations and 7 options to address the cost of higher education in Virginia: Recommendations made to the General Assembly as

potential action items to address the cost of higher education in Virginia.

Options are potential policy changes with broad range of implications.

20

Basis of Recommendations

Source: JLARC report on Addressing the Cost of Public Higher Education in Virginia21

Key RecommendationsKey RecommendationsSome of the key recommendations made to the General Assembly in the final report include:

Require annual training by SCHEV for the BOV members who serve on finance and facilities subcommittees.

Impose a limit on athletic fees charged to students as a proportion of total tuition and mandatory fees that can be collected for intercollegiate athletics.

Establish caps or limitations on the growth of non-E&G fees other than intercollegiate athletics.

Direct SCHEV to modify its capital prioritization process. Direct SCHEV to identify metrics on capital spending, debt, and

other data of value to the capital review process. Revise formula for State’s maintenance reserve funds

allocation.22

JLARC Recommendations Passed by General Assembly

The approved budget passed by the General Assembly includes language addressing a subset of the 17 recommendations supported by the Council of Presidents and finance officers.

This language requires actions by several groups or entities, including: The Boards of Visitors, State Council of Higher Education of Virginia, Department of Planning and Budget, and The Auditor of Public Accounts.

23

Actions Directed to the Boards of Visitors

Actions Directed to the Boards of Visitors

For items directed to the Boards of Visitors, the language indicates that the Boards shall, to the extent practicable, take actions regarding seven items:

List athletic fees on the university’s website and consider including major components of all mandatory fees. Virginia Tech lists all mandatory fees, including athletic fees on

the university website and on the student tuition bill.

Assess the feasibility of raising revenue through public use of campus recreation and fitness enterprises to reduce reliance on mandatory fees.

24

25

Perform comprehensive review of institution’s organization structure including spans of control and a review of staff activities and workload Require periodic reports on average and median spans of

control Revise human resource policies to set standards on spans

of control

Set and enforce policies to maximize standardization of purchases of commonly purchased goods Consider directing staff to provide an annual report on all

institutional purchases that are exceptions to the standardized purchases

JLARC Recommendations passed by General Assembly

Future ReviewsThe budget passed by the General Assembly included language establishing the Joint Subcommittee on the Future Competitiveness of Higher Education in Virginia.

Goals: Review ways to maintain and improve the state’s quality of higher education

Examine impacts of competitive changes to the system

Identify best practices including shared services and accessible academic pathways

Evaluate the use of online and distance education

Review need-based financial aid programs and alternative models of affordability

Review JLARC recommendations and recommend implementation steps

Study effectiveness and value of transfer students and dual enrollment

Study effectiveness of preparing teachers to enter into the K-12 system

Timeline: Interim report due on November 1, 2016.

Final report due on November 1,2017.

26

Cost Containment

Why Focus on Cost Control?

Response to federal and state governments’ concerns about tuition and fees

The expectations of Boards of Visitors and the business world that the University will control costs and manage in a business-like manner The Board of Visitors has requested a comprehensive

analysis of Virginia Tech’s cost structure, with regular status updates on cost containment efforts

28

Why Focus on Cost Control?

Realization that the annual increases in costs and thus, the pressure to increase tuition and fee rates, cannot be sustained

Resources are needed to support our current operations and continue to improve the quality of our academic programs

Retaining our ability to recruit nonresidents Cost issues raised by undergraduates and their

parents

29

Average Cost of Education History

30

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000

$12,167

$12,906

$13,564

$14,156

$15,458 $15,429

$15,805 $15,866

$16,208

$15,870 $15,955

$16,501

$16,797

Comprehensive Fee History

31

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

1,0811,160

1,2371,303 1,365

1,4911,610

1,6731,752

1,820 1,857

Fiscal Year

Do

llar

Am

ou

nt

History of Tuition Increases:Resident Undergraduate

32

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

0.0% 0.7%

18.3%

17.5%14.6%

9.2%9.3%

6.1%

10.8%

6.6%

9.8%

9.6%

3.9%4.9%4.9%

3.9%

Tuition and Mandatory Fees

Pe

rce

nta

ge

Inc

rea

se

ov

er

Pre

vio

us

Ye

ar

History of Tuition Increases:Nonresident Undergraduate

332000-0

1

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0.0%

3.0%

14.9%

4.4%

10.7%

7.6%6.8%

3.8%

5.3%

5.1%

6.1% 5.4%5.9%

5.0%

3.1%3.5%

Tuition and Mandatory Fees

Pe

rce

nta

ge

Inc

rea

se

ov

er

Pre

vio

us

Ye

ar

History of Tuition Increases:Resident Graduate

342000-0

1

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

0.0%

3.0%

15.6%15.1%

8.2%

6.2%7.1%

5.2%

8.3%

5.1%

6.9%7.1%

6.0%

4.9%4.3%3.9%

Tuition and Mandatory Fees

Pe

rce

nta

ge

Inc

rea

se

ov

er

Pre

vio

us

Ye

ar

History of Tuition Increases:Nonresident Graduate

352000-0

1

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0.0%

3.0%

13.2%

14.5%

10.1%9.9%9.5% 9.2%9.9%

6.3%

11.3%

8.8%

7.1%

5.7%5.3%

4.2%

Tuition and Mandatory Fees

Pe

rce

nta

ge

Inc

rea

se

ov

er

Pre

vio

us

Ye

ar

Revisiting the 21st Century Tuition Trend

36

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$2,828

$10,628

$812

$1,857

TUITION COMP FEE

AVERAGE IN-CREASE IN TUITION:

9.39%

AVERAGE INCREASE IN COMP FEE:

5.73%

Revisiting an Aggressive Tuition Projection

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

2020-21

2021-22

2022-23

2023-24

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$9,1

87

$10,

227

$11,

219

$12,

308

$13,

502

$14,

812

$16,

249

$17,

826

$19,

555

$21,

453

$23,

534

$1,673 $1,778

$1,890 $2,008

$2,134 $2,268

$2,411

$2,562

$2,723

$2,894

$3,076

INCREASES IN TUITION AND COMPREHENSIVE FEE 2012-2023

TUITION COMPREHENSIVE FEE

ASSUMINGAVERAGE

INCREASE IN COMP FEE:

6.28%

ASSUMINGAVERAGE

INCREASE IN TUITION: 10.56%

$9,

703

$10

,197

$10

,628

$1,752 $1,820 $1,857

Revisiting a Moderate Tuition Projection

38

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

2020-21

2021-22

2022-23

2023-24

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$9,1

87

$9,7

13

$10,

198

$10,

708

$11,

243

$11,

806

$12,

396

$13,

016

$13,

666

$14,

350

$15,

067

1,673 1,757 1,844 1,937

2,034 2,135

2,242 2,354

2,472 2,595

2,725

TUITION AND COMPREHENSIVE FEE GROWTH 2012-2023

TUITION COMPREHENSIVE FEE

ASSUMINGAVERAGE

INCREASE IN TUITION:

5%

ASSUMINGAVERAGE

INCREASE IN COMP FEE:

5% $

9,70

3

$10

,197

$10

,628

$1,752 $1,820 $1,857

University Administrative Costs

Virginia Tech maintains a cost conscious culture that is sensitive to administrative costs by: Maintaining a rigorous budget process that carefully

evaluates new administrative spending Focusing resources into academic programs and

strategic initiatives Continually seeking ways to improve business

processes Leveraging technology to provide scalable delivery of

service Periodic assessments of the administrative cost

structure39

Administrative Costs as aPercentage of Core Expenditures

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

21% 19% 19% 14%

79% 81% 81% 86%

FY 2013

Remaining Core Expenditures (In-struction, Research, Public Service, etc.)

Academic & Institu-tional Support

40

Resources Per Student Tuition and General Fund per student combine to generate fewer

resources per student than in 2000-01.

41

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16*

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

GF and T&F per Resident FTEInflation Adjusted to 2000s

Inflation Adjusted GF/FTE Inflation Adjusted T&F

$12,329

$11,086

*Projected

Source: JLARC Addressing the Cost of Public Higher Education in Virginia Report

Largest portion of student charges support instruction at VT compared to other 4-year public institutions in Virginia.

Cost Control & Efficiency

42

Opportunities for Cost Savings and Realignment of Resources

Emphasis on efficiency and effectiveness through: Centralization and shared services Consolidation Improving use of assets New technologies New market outreach Online education Partnerships and collaborations Programmatic reviews Space utilization

43

Opportunitiesfor Virginia Tech

Enrollment Growth

45

Enrollment Growth

46

High-Demand Graduates

Virginia Tech produces 25 percent of the Commonwealth’s four-year public institution STEM degrees.

In 2014, 51.4 percent of Virginia Tech’s graduates earned a STEM degree.47

Enrollment Growth Initiative

The university is experiencing a significant increase in demand for a Virginia Tech education.

Applications reached a new high for fall 2015; this reflects an increase of 7.6% as compared to the previous year.

Demand is broad-based and includes several areas where Virginia Tech is in a strong or unique position to provide additional access to qualified students.

To meet demand for undergraduate enrollment, particularly in the STEM-H disciplines, the university plans to expand Freshman enrollment for 2015-16 by 500 students.

This growth will allow Virginia Tech to better serve the needs of the Commonwealth in the global economy (students, employers).

Additional enrollment supports the commonwealth’s goals of access and high-demand degree offerings.48

Student Financial Aid Issues Facing the State and its Colleges and Universities

In an environment of sensitivity to student loan debt: How can we successfully increase enrollment, while

students seem reluctant to enroll and take on increasing levels of debt?

Can we continue to increase tuition and fees, which is a driver for the increase in student loan

49

Trends in Student Indebtedness

Class of: 2009 2010 2011 2012 2013

VT$ $ 22,070 $ 23,100 $ 24,320 $ 25,579 $26,925

% 52% 52% 52% 54% * 55%

National Average

$ $ 24,000 $ 25,250 $ 26,600 $27,850 $28,400

% 65% 66% 66% 68% 69%

Data from the Project on Student Loan Debt, an aggregator of Common Data Set submissions. www.projectonstudentdebt.org

Percentage of Students Graduating with Debt and Average Debt per Borrower

* In 2012, 54% is 3,004 graduates.

50

Undergraduate Financial AidFunds For the Future

Shelters returning students from tuition increases based upon income. Ensures that students with the most need are not priced out due to tuition

increases. For 2015-16, income levels are expanded, providing coverage for 100% of

tuition increases for low- and middle-income families with income up to $49,999.

Previously, 100% coverage was available to families with income from $0-29,999. Protection for families with $50,000-$99,999 income is also enhanced for 2015-16.

Family Income (AGI)Tuition & Fee

Increase Protection

Example Impact of FFF Protection for Undergraduate Student

Tuition & E&G Fee Increase Net Impact

$0 - $49,999 100% 3.9% 0%

$50,000 - 74,999 50% 3.9% 2.0%

$75,000 - 99,999 25% 3.9% 2.9%51

Undergraduate ScholarshipsInstitutional Support

2014-15

2013-14

2012-13

2011-12

2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

1999-2000

1998-99

1997-98

1996-97

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

52

Current Endowment value: $796.4 million

Dr. Sands: “we must focus on philanthropy to provide access to

students who would not otherwise be able to experience Virginia Tech.”

“…at least double our 800 million dollar endowment by 2022.  Indeed, we should be challenged to realize the bolder goal of two billion dollars by twenty-twenty-two.”   

Growing the Endowment

53

Education Advisory BoardAfternoon Session on Bending the Labor

Cost Curve

Education Advisory BoardAfternoon Session on Bending the Labor

Cost Curve

Questions?