AnalysisofLEOFaculty:RevenueandExpensesin

ContextfortheUniversityofMichiganFinancialSituation

HowardBunsisProfessorofAccounting,EasternMichiganUniversity

PastChair,AAUPCollectiveBargainingCongress

1

2

ImportanceofLEOFacultyinEducatingtheStudentsatUM

ImportanceofLEOFaculty:AnnArbor

3

0%

10%

20%

30%

40%

50%

60%

TenureTrack Lecturers Clinicals GSIs

ShareofUndergradTeachingbyTypeofInstructor,UM-AnnArbor,2016-17

TotalSCHs SCHsinUndergradclasses SCHsin1st&2ndYr.UGclasses

ImportanceofLEOFaculty:DearbornandFlintCombined

4

0%10%20%30%40%50%60%70%80%

TenureTrack Lecturers Clinicals GSIs

ShareofUndergradTeachingbyFacultyType,UM-Dearborn&FlintCombined,2015-16.

TotalSCHs SCHsinUGclasses SCHsin1st&2ndYrUGclasses

RevenueGeneratedbyLEOFaculty

5

0100200300400500600700800900

1,000

TTFaculty Lecturers Clinical GSIs

TuitionRevenuevs.TotalCompensationofUMFaculty($Millions),2016-17.

TuitionRevenue TotalCompensation

DeficitorSurplusofDifferentInstructionGroups

6

($350)

($11)

$75

$377

-$500-$400-$300-$200-$100

$0$100$200$300$400$500

TTFaculty Clinical GSIs Lecturers

NetContributionofTeachingtoUMRevenues,inMillions(TuitionRevenue– TotalCompensation)2016-17

7

LEOSalariesOverTime:ComparisontoOtherEmployeesatUM

LEOMedianSalariesvs.OtherInstructors,2016-17FullTimeRate(Source:FSAReport)

8

$0$20,000$40,000$60,000$80,000$100,000$120,000$140,000$160,000$180,000

AnnArbor Dearborn Flint

MedianFTRSalaries,2016-17,byCampus

TTFaculty ClincialFaculty Lecturers GSIs

PercentageChangesinSalaries,2014to2017

9

6.6%6.1% 6.1%

3.9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Professor/Assoc./Asst. GraduateStudents AllClinicalFaculty LEOFaculty

SalaryPercentageChanges2014to2017,AllCampusesvs.Inflation(4.4%)

Change

Inflation

DollarChangesinSalaries(andvs.Inflation)

10

$8,978 $8,620

$2,275 $1,928

$0

$2,000

$4,000

$6,000

$8,000

$10,000

AllClinicalFaculty Professor/Assoc./Asst. GraduateStudents LEOFaculty

DollarChanges2014to2017

TopAdministrativeSalariesSource:https://hr.umich.edu/sites/default/files/salary-disclosure-2016.pdf

11

Position 2013-14 2014-15 2015-16 2016-17President $750,000 $772,500 $795,675President $703,357Provost $450,000 $460,800 $498,851 $511,322ChiefInvestmentOfficer $600,000 $600,000 $690,000 $690,000CFO $543,250 $556,831InterimCFO $639,849CFO $596,629

UMDearbornChancellor $303,586 $309,657 $348,798 $357,518UMDearbornProvost $272,650 $280,147 $292,755

UMFlintChancellor $273,255 $273,255UMFlintChancellor $300,000 $309,000 $316,725UMFlintProvost $260,000 $265,200UMFlintProvost $219,654

PercentageChangesinSalaries,2014to2017:LEOvs.TopAdministrators

12

13.1% 13.6%15.0%

17.8%15.9%

3.9%

0%2%4%6%8%10%12%14%16%18%20%

UMPresident UMProvost UMCIO UMDearbornChancellor

UMFlintChancellor

All LEOFaculty

2014to2017%Changes

DollarChangesinSalaries,2014to2017:LEOvs.TopAdministrators

13

$92,318

$61,322

$90,000

$53,932

$43,470

$1,928$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

UMPresident UMProvost UMCIO UMDearbornChancellor

UMFlintChancellor

All LEOFaculty

2014to2017$$Changes

14

FinancialSituationoftheUniversityof

Michigan

UMFinancialSituation– BalanceSheetSource:UMAuditedFinancialStatements

15

02,000,0004,000,0006,000,0008,000,00010,000,00012,000,00014,000,00016,000,00018,000,00020,000,000

2008 2016

TotalAssets TotalLiabilities TotalNetAssets

Tuitionvs.StateAppropriation

16

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2005 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

TuitionRevenue StateAppropriation

RevenueDistributionbyCampusSource:IPEDS(IntegratedPostsecondaryEducationDataSystemoftheU.S.Dept.ofEducation)

17

29%

9% 8%

36%

16%

3%

57%

17%

2%15%

2% 7%

56%

16%

4%

13%

4%7%

0%

10%

20%

30%

40%

50%

60%

Tuition StateAppropr. Auxiliaries Grants&Contracts

Gifts/Investment AllOther

RevenueDistributionbyCampus

AnnArbor

Dearborn

Flint

SalaryExpenseDistributionbyCampusperIPEDS

18

39%

25%

4%8%

23%59%

3% 2% 11%25%

56%

1% 4%

13%

26%

0%

10%

20%

30%

40%

50%

60%

70%

Instruction Research Auxiliary InstitutionalSupport

AllOther

SalaryComponentofExpenseDistributionbyCampus

AnnArbor

Dearborn

Flint

UnrestrictedReservesvs.SolidLevel(25%ofExpenses)InmillionsperAuditedFinancialStatements

19

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2010 2011 2012 2013 2014 2015 2016

Unrestricted Reserves

UnrestrictedReserves

SolidLevelofReserves

AnnualExcessCashFlows,inMillionsSource:AuditedFinancialStatements

20

$0

$100

$200

$300

$400

$500

$600

2010 2011 2012 2013 2014 2015 2016

SurplusCashFlows,inMillions

UMBondRating:AAA(Highest)

21

StrengthsperMoody’sReport:• Abilitytotranslateitsinternationalbrandintorevenuegrowth• Excellentstudentdemandandgrowingphilanthropicsupport• Largeanddiversifiedscaleofoperations• Considerablefinancialreserves• Manageabledebtlevelsgivenmultiplesourcesofcapitalfunding• Operatingperformanceshouldremainsound,bolsteredbycontinued

improvementatthehealthsystem• Stronginternalliquidity

ChallengeperMoody’sReport:• Highrelianceonpatientcarerevenuethatissusceptibletoregulatory

andgovernmentpayerchanges

22

5The Financial & Strategic Outlook for Private Colleges

Moody’s Rates Over 500 Universities in the USIncludes vast majority of sector debt

» Nearly 275 private colleges and universities» Over $85 billion of rated debt outstanding» Median rating of A3 by number of institutions» Median rating of Aa2 weighted by rated debt

» Over 230 four-year public universities» Almost $125 billion total rated debt outstanding» Median rating of A1 by number of institutions» Median rating of Aa1 weighted by rated debt

Source: Moody's, ratings as of December 29, 2014. S-T represents those with only a short-term rating

812

4146

69

22 19

82 0 3 1

0

10

20

30

40

50

60

70

80

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 SG S-T

US Public University Ratings

1511

20

25

33

3840

33

26

21

12

00

5

10

15

20

25

30

35

40

45

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 SG S-T

US Private University Ratings

CosttoGetALLLEOFacultyto$70,000inContext

23