Budget 101 Notes: Nov. 14, 2018

Budget 101 meeting notes
Wednesday, Nov. 14, 2018
10-11:30 a.m.
Speakers: Senior Vice President & Chief Financial Officer Michelle Quinn and President Andy Feinstein

Michelle Quinn:
UNC has a structural deficit of $10 million. This means that revenue brought in through all funding sources is less than UNC’s total expenses. This year, UNC is short $7.5 million and will make up the difference by spending our reserve money. In any given year, UNC can do things that temporarily reduce spending (no faculty raises this year, etc.).

In 2010, 2011 and 2012, UNC built up cash reserves to about $80 million. Graduate and undergrad tuition increased significantly during that time, up to 40-50% increase for some graduate programs. Room and board rates also increased in 2010-2012. No salary increases for salaried/exempt staff, hiring freeze during time of cash buildup. Capital expenditures were low during 2010-2012. Michelle Quinn feels that capital expenditures should be $8-9 million per year.

The structural deficit was caused by UNC’s unfulfilled growth strategy. UNC adopted a growth strategy to recover from state funding deductions. Unrealistic enrollment targets were set and UNC invested in growing its enrollment. Reserves were spent down while working to grow enrollment and revenue. The $80 million reserve was spent down to $40 million from 2013 to present.

In fiscal year 2018, UNC received $39.6 million in state funding. There is a forecast for $42.5 million in state funding in 2019.

High school graduation levels are flattening out across the country. There are decreasing numbers of high school grads in many states. Colorado is growing in high school graduation numbers. Less high school graduates means more competition between colleges for those students. More of those colleges are coming to Colorado to look for college students.

The amount of new undergraduate and graduate students was under target every year from 2013-2018.

Retention rates measure how many new freshmen students are here from one fall to the following fall. Retention rates for freshmen at UNC around 70%. Freshman retention rate dropped to 66% in 2011-12 and 2012-13. At a 71% retention rate, UNC is losing about 500 freshmen per year. UNC needs to look at the way students are on-boarded, advising, and college readiness. The Student Success Task Force should have ideas to improve retention/graduation.

Assessment of revenue shifted from student headcount to total student FTE (Full-time equivalent). Total number of students x course load (30 credits per year). FTE is a better representation of how many students are paying tuition.   

Graduate FTE increased from 1,767 to 2,267 (26% increase in FTE). Goals of growing the graduate student population from 20% to 25% of total student population have been achieved.

While increasing prices and rebuilding undergraduate enrollment, billing was increasing but discounting (institutionally funded scholarships, need based funding, etc.) was also increasing significantly over the past several years. Net revenue was increasing gradually. Net revenue is up in 2018. Need to moderate the level of discounting at UNC.

Discounting for graduate students remains flat. Graduate net revenue tracks gross revenue level better than undergraduate net tuition revenue. Much of UNC’s revenue still comes from undergraduate enrollment.

Student employment full-time equivalent down 5%. Staff FTE up 10%. Faculty FTE up 9%.

Salaries and fringe benefits account for 70% of UNC’s overall budget. There are 65 personnel classified as “administrators” at UNC. Graduate student salaries were included in salary expense. Retirement/Medical/Dental benefits make up 80% of fringe benefit costs.

Utilities. Costs have gone down due to conservation efforts. Natural gas costs are constant and low. 75% of utilities cost is electricity and heating. If natural gas prices increase, utilities increase.

Growth of annual expenditures outpaces net revenue growth: Annualized Expenditures grew 2.6% (2013-2019). Annualized net revenue grew 2.1%

Colorado’s ability to fund UNC is permanently changed.

On a per resident student basis, UNC receives its fair share ($5,297 per resident FTE).

Modest revenue growth opportunities:

• Every 146 new undergrads = $1 million in revenue
• 80 new grad students = $1million in revenue
• $440 per NTR (?) per graduate student

Opportunities are modest for increasing undergrad enrollment (working with Huron consulting).

Next Steps:

• 13 cost-saving options on website
• Identify more decentralized approach to empower divisions/colleges to find further savings
• Will use reserves and temp savings to bridge gap between 2020-2021

How to assess strategies employed: Rely on industry proved strategies (Huron has data how their strategies worked previously).

Potential revenue source: restricted/unrestricted donor giving. UNC will announce at the end of the fiscal year if they were successful in the current $45 million fundraising campaign.

Faculty Benefits question:
Haven’t discussed tuition waiver for dependents yet with President’s Leadership Council. Tuition waiver is a benefit to faculty/staff that is valued. Will be comparing UNC to other institutions in Colorado to see what benefits they are providing to their staff. Looking to remain competitive but to be in line with other institutions. President hopes that staff are looking at staying at UNC for reasons other than a tuition discount.

Audience Comment:
Use tuition waiver as a benefit because UNC has terrible salaries. When will the list of 13 cost saving measures affect administrators directly?
Feinstein: structural deficit was created over time. UNC laid off 50 faculty in the 1980’s. Financial challenge was not created in the past several years. A handful of administrators did not create this financial problem.

Audience Comment:
What impact are the UNC administrators going to take?
Feinstein: Decisions will be much more impactful on faculty/staff members. Options affect everyone. Looking at ways to reduce administration. Looking at athletics. Cuts are not targeting a specific group. 

Audience Comment:
Some cost-savings are targeted specifically at faculty:
Feinstein: hope to go through discussion to find out priorities (e.g. tuition waivers, retirement benefits, high deduct healthcare). Have already eliminated an AVP position and currently reworking strategic enrollment management. President’s Leadership Council is looking to spend time on each option to save. Want to have campus-wide discussion in Spring about what PLC, task forces and Budget 101 discuss. Looking at dollar amounts of cost savings proposed. 

Audience Comment:
When did we last bid out healthcare options?
Quinn: Every year a trust looks at options. Not just by UNC, but by other higher ed institutions.

Audience Comment:
Faculty are troubled that academic programs are being cut in a process that they are participants in. However, there is no similar process to reduce administration. Task force work is getting us towards cutting academic programs, but there is no visible progress for administration cuts.
Feinstein: Concerned with the Academic Portfolio Task Force group. Do we have the right academic programs or should some end? Dickenson (in 1980’s) had model of prioritization recovery. Dickenson’s book talks about how to quantify (through rubrics) justification of academic programs. Academic programs should be looked at with faculty. 

Audience Comment:
Tuition waivers are low in cost, but medical and retirement are high. Any talk of reducing retirement match?
Feinstein: Need discussion of Quality of Life. How all benefits/salary fit together. Healthcare and retirement benefits are key in higher ed. Escalating costs of fringe benefits are out of UNC’s control. 

Audience Comment:
Students are leaving UNC. Need to remove self-imposed barriers on campus (GPA, pre-requisites, auditions, etc.). Students can’t get into the program they want to. Students are getting advertisements from other colleges with good programs that UNC doesn’t offer. UNC doesn’t message our programs well. Need to better communicate what we do well and why students should stay here.
Feinstein: Removing barriers goes back to retention. People are working on it. Will be able to discuss more in January. Still trying to understand who UNC is. Being a research university and a good teaching university (good class size and roots in education). UNC is not serving both of those markets very well. Competition in Colorado from various schools. 

Audience Comment:
In the community, while meeting with donors and potential donors, there is the feeling that there is whiplash. They feel that UNC was doing well a year ago, and now there is a seemingly sudden financial crisis. Donors would like to be assured that the money they give is well used.
Feinstein: Need more trust-building. Budget problem not created in the last five years. Why weren’t we making changes? CFO’s job is to say that we aren’t going to meet targets and how to make changes to adjust. If not hitting targets in two years, there is a need to pivot. People working in the cabinet know what they are doing. Job is to present a financial picture and make recommendations. President’s job is to gather info, listen, and make decisions that move us forward. President guarantees this will be a different (better) university in two years.

Audience Comment:
Do we have strategic plans to work better with the city of Greeley?
Feinstein: Need to ride the wave of success in Greeley. Fastest growing/economic/growth/etc. Working to build stronger community. Need better branding of Greeley as UNC town. 

Audience Comment:
UNC has barely any online classes. Are we looking at increasing online programs?
Feinstein: Need to leverage extended studies program. Also need international student growth. Very few international students at UNC. Great place for international students to be at. 

Audience Comment:
If looking at cutting GA/TA positions, UNC would need to hire adjuncts that costs more. Making professors teach more, there is less research and less research funding.
Feinstein: Budget is 70% payroll. Need to address this to address costs without incurring other expenses. Up for suggestions for GA/TA retention. What are the trade-offs. How to address the need to reduce costs.

Audience Comment:
What can employees of UNC do to help?
Feinstein: Continue to ask tough questions. 

Audience Comment:
Many community members looking at what UNC will do. Taking in comments from community?
Feinstein: Athletics is important part of the discussion. Athletics is beneficial to the campus; reach out to Colorado and beyond with UNC brand. National conversation about athletics and the future of football.