m. dwight shelton, jr. february 24, 2012 · 2016. 7. 6. · m. dwight shelton, jr. february 24,...

Business Practices SeminarTrends in Higher Education: Nationally, Statewide, and Locally

Business Practices SeminarTrends in Higher Education: Nationally, Statewide, and LocallyM. Dwight Shelton, Jr. February 24, 2012

Overview Overview

National Trends

Statewide Trends

Trends at Virginia Tech

Future Opportunities – Where do we go from here?

2

National TrendsNational Trends

3

National Trends in Higher EducationNational Trends in Higher Education• Increasing access to higher education

• Increasing diversity• Maintaining affordability

• Recessionary environment• Decline in state funding nationwide• Federal budget deficit

4

5

National Trends in Higher EducationNational Trends in Higher Education

• The rise of large for-profit higher education organizations

• New technologies eliminating geographical boundaries• Distance learning

• Cost savings of enrolling for online courses vs. paying on campus tuition and room & board

• A disruptive technology?

National Trends in Higher EducationNational Trends in Higher Education

• Federal government’s interest in cost containment and control of tuition rates

• Federal actions:• President calling on states to end era of

disinvestment• State budget cuts seen as driving factor of tuition

increases• Health Care and Education Reconciliation Act

6

Making College More AffordableMaking College More Affordable• Plans from the White House’s Health Care and Education

Reconciliation Act include:• Larger Pell Grants• More stable funding for Pell Grants• Investments in community colleges• Increased support for Minority Serving Institutions (MSIs)• Expanded Income Based Repayment (IBR)• Student loans that put students first

7(Source: www.Whitehouse.gov)

President Obama’s Blueprint for Keeping College AffordablePresident Obama’s Blueprint

for Keeping College Affordable• Reforming student aid to promote affordability and

value• Shifting aid away from colleges that fail to keep tuition down

and towards those that do• Advantages: makes higher education more affordable• Disadvantages: stifles university growth and innovation

• Creating a Race to the Top for college affordability and completion• Incentives for states/colleges willing to drive systemic change

in their policies and practices to contain costs8 (Source: www.Whitehouse.gov)

• A first in the world competition to model innovation and quality on college campuses

• Program to help scale-up innovative and effective practices proven to boost productivity and enhance teaching and learning

• Better data for families to choose the right college

• College Scorecard to provide essential information

9

President Obama’s Blueprint for Keeping College Affordable (continued)


(Source: www.Whitehouse.gov)

• Federal support to tackle college costs• Increases to the Pell Grant and shoring up direct loan

and income-based repayment programs• Asking Congress to keep interest rates low, make

American Opportunity Tax Credit permanent, and double work-study jobs over next 5 years

10



(Source: www.Whitehouse.gov)

Statewide TrendsStatewide Trends

11

Higher Education Trends in VirginiaHigher Education Trends in Virginia• Increasing competition for State resources

• Mandatory expenses• Discretionary funding activities

• Declining state support for higher education• E&G fund split• Declining funding for base budget adequacy

12

State Cost DriversState Cost Drivers• Should the state increase support for higher

education?

• Future state budget cost drivers – examples:• Medicaid – health care• Employee compensation and benefits• K-12 education• Transportation• Economic development

13

State Funding Historical TrendState Funding Historical Trend

14

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

$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

Perc

enta

ge

Dol

lars

Fiscal Year

Historical General Fund Support Percentages

Total General Fund Budget

Total All University Operations

General Fund Budget as Percentage of Total University Operations

Declining state support has increased the role of tuition and mandatory fees in providing resources for the educational mission

Declining state support has increased the role of tuition and mandatory fees in providing resources for the educational mission

15

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12*

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

Inflation Adjusted GF/FTE Inflation Adjusted T&Fprojected

16

General fund support is being replaced by nongeneral fund support in the E&G program

General fund support is being replaced by nongeneral fund support in the E&G program

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Perc

enta

ge S

uppo

rt

E&G Fund Split

General Fund Tuition and Fees*Budgeted

17

State funding for Base Budget Adequacy continues to fall well below SCHEV guidelines

State funding for Base Budget Adequacy continues to fall well below SCHEV guidelines

Fall 2011

Available Resources = $525,715,801Shortfall of 8% = ($46,667,105)124%

114%107%

99%96% 94% 94% 94% 92% 92%

88% 88% 87% 87% 85% 79%

0%

20%

40%

60%

80%

100%

120%

Potential Budget Decisions for Higher Education

Potential Budget Decisions for Higher Education

18

Funding Model for Higher EducationFunding Components

Funding Model for Higher EducationFunding Components

19

Initiative FundingStudent

Financial AidPer Student

Funding

Base Operations

Higher Education Funding PrioritiesHigher Education Funding Priorities

• Base Budget Adequacy

• Incentive Funding

• Enrollment Growth Funding

• Initiative Funding

20

Higher Education Trends in VirginiaHigher Education Trends in Virginia

• Support for economic development

• Growing the research program• Revenues and expenses• ROI – the bottom line


• Applying business principles to higher education• Emphasis on efficiency and effectiveness through:

• Cost control• Improving use of assets• New technologies

• Greater involvement in institutions’ strategic planning activities, operational environment, and programs

• Required reallocations within higher education


• Managing the cost of education to students and parents

• Reducing and controlling the rate of increases in tuition and fees

• Assessing the role of student financial aid• Who should pay for financial aid?• The issue of lower-income and middle-income

Governor’s Commission on Government Reform and Restructuring

Governor’s Commission on Government Reform and Restructuring

• Report issued to Governor regarding issues for 2012

• Examples of recommended actions:

• Elimination of agencies, boards, and commissions

• Streamlined purchasing

• Energy and water management

• Central, system-wide strategies

24

Trends at Virginia TechTrends at Virginia Tech

25

Trends at Virginia TechTrends at Virginia Tech• The search for new revenue streams

• Overhead recoveries from research• Private donations

• A focus on cost control• Response to federal and state

governments• Concerns about tuition and fees

Trends at Virginia TechTrends at Virginia Tech• The future of our physical facilities

• What does the university need?• What can we afford?• Can we deal with the significant level of

deferred maintenance occurring on an aging campus?

Trends at Virginia TechTrends at Virginia Tech• Major cost drivers for Virginia Tech

• Federal and state mandates and compliance

• The push for enrollment growth• Energy and other related fixed costs• Compensation – in the future

Emphasis on Cost ContainmentEmphasis on Cost Containment

• State focus on efficiency and productivity

• State and national interest in cost containment and control of tuition rates

• University focus on allocating resources to academic programs

• An emphasis on low administrative costs

29

University Administrative CostsUniversity 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 structure

30

Functional Expense ClassificationFunctional Expense Classification

31

Core Expenditures * Other ExpendituresInstruction Auxiliary Enterprises

Research Hospitals

Public Service Independent Operations

Academic SupportStudent Services

Institutional SupportOperation and Maintenance of Plant

Depreciation

Scholarships and Fellowships

*Core expenditures as defined by the Integrated Postsecondary Education Data System (IPEDS)

• Academic Support – Academic Administration• Support for instruction, research, public service• Academic computing• Deans’ offices• Library & ancillary (data limitation)

• Institutional Support – Central Administration• General administrative services• Executive management• Legal and fiscal operations• Public relations• Other centralized services

32

Administrative ExpensesAdministrative Expenses

33

Administrative Costs as aPercentage of Core Expenditures


22%15% 15% 13%

78%85% 85% 87%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Virginia InstitutionAverage (n=14)

Public ResearchAverage (n=72)

SCHEV PeerAverage (n=25)

Virginia Tech

Perc

enta

ge o

f Cor

e Ex

pend

iture

s

Remaining Core Expenditures(Instruction, Research, PublicService, etc.)Academic & InstitutionalSupport

Fiscal Year 2010

34



35

Administrative Spending per Student FTEAdministrative Spending per Student FTE

$2,037

$3,318 $3,471

$1,819

$2,147

$2,503

$3,172

$1,525

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Virginia InstitutionAverage (n=14)

Public Research Average(n=72)

SCHEV Peer Average(n=25)

Virginia Tech

Adm

inis

trat

ive

Spen

ding

per

stu

dent

FTE

Institutional Support

Academic Support

Virginia Tech spends $3,299 less onacademic and institutional supportcosts per student FTE than theaverage SCHEV peer.

Fiscal Year 2010

36

Administrative Spending per Student FTEAdministrative Spending per Student FTE

37

Administrative Employees per 100 Student FTE

Administrative Employees per 100 Student FTE

38

Administrative Expenses per 100 Student FTE

Administrative Expenses per 100 Student FTE

Future OpportunitiesWhere Do We Go from Here?

Future OpportunitiesWhere Do We Go from Here?

39

Future OpportunitiesFuture Opportunities• Business models for the future:

• Program or incremental budgeting?• Responsibility Center Accounting?• Every tub on its own bottom?

41

General Fund 26.3%

Other6.1%

Out-of-State

Tuition and Fees

31.5%

In-State Tuition and

Fees36.1%

E&G Funding Sources, University Division 2011-12

E&G Funding Sources, University Division 2011-12

(Source: 2011-12 University Authorized Budget Document)

Future Opportunities for Cost Savings and Realignment of Resources

Future Opportunities for Cost Savings and Realignment of Resources

• Emphasis on increased efficiencies and initiatives to reduce costs, allowing resources to be reallocated in support of strategic initiatives

• Examples of efforts underway include:

• Energy management and conservation

• Leveraging technology resources for more efficient administrative processes

42

Benefits & Impact of ResearchBenefits & Impact of Research

43

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

Total Earned Overhead

New Support for Capital OutlayNew Support for Capital Outlay• Virginia Tech approved projects:

• Signature Engineering Building• Davidson Hall Renovation – Phase I• Human and Agricultural Bioscience Building –

Phase I• Chiller Plant Expansion (SW Campus)• Sciences Building Laboratory – Phase I

44

Prospects for New Capital Outlay for 2012-14Prospects for New Capital Outlay for 2012-14

• Leading Virginia Tech projects:• General Assignment Classroom - $50M• Academic Buildings Renovation and

Renewal - $33.7M• Davidson Hall Improvements, Phase II• Sandy Hall Renovation• Liberal Arts Building Renovation

• Limited to Planning Funds45

Debt Capacity IssuesDebt Capacity IssuesState Debt Capacity• 10 year averaging strategy addresses debt

capacity • Total annual capacity constraints = about $300M

Virginia Tech Debt Capacity• At 3.6%, Virginia Tech has room to move to 5%• Current plans will increase debt capacity to 5%

through 201646

Auxiliary EnterprisesAuxiliary Enterprises

47

• Separate self-supporting business units operated for the convenience of faculty, staff, and students

• Revenue Sources• Student fees• Sales and services

• Required to be 100% Self-Supporting:• Direct costs• Indirect costs

• Options exist to:• Increase student programs and activities• Control costs to emphasize instructional program

2011-12 Room and Board Fee2011-12 Room and Board Fee

• Facility maintenance• Improvements to dining system facilities• Improvements to residential housing

facilities• Improvements to security• Increases in fixed costs of operations• Inflationary costs (e.g. food)

2011-12 Room and Board Fee Highlights2011-12 Room and Board Fee Highlights

2011-12 Comprehensive Fee Highlights2011-12 Comprehensive Fee Highlights

• Additional counseling staff for Cook Counseling Center• Facility maintenance• Enhancements to Blacksburg Transit routes• Support equipment and operating costs for Virginia Tech Rescue

Squad • Operating costs associated with opening of McComas Hall expansion• Shared operating costs for arts programming• Replacement of furnishings in Student Centers• Network improvements (backbone and wireless)• Inflationary costs (electricity, heat)• Increased support for Student Budget Board and Intramural Sports

2011-12 Comprehensive Fee Highlights2011-12 Comprehensive Fee Highlights

2010-11 2011-12

Charge Charge Change

Student Activity Fee $373 $411 $38

Health Service Fee 326 346 20

Athletic Fee 257 260 3Bus Fee 104 104 0Recreational Sports Fee 236 258 22

Student Services Fee 195 231 36Total Comprehensive Fee $1,491 $1,610 $119

Comprehensive FeeComprehensive Fee

Mandatory Fees as a Percentage of Mandatory CostsVirginia Public Institutions, 2011-12

Mandatory Fees as a Percentage of Mandatory CostsVirginia Public Institutions, 2011-12

53

Future Tuition and Fee CapacityFuture Tuition and Fee Capacity

54

Prospects for Tuition & Fees for 2012-13Prospects for Tuition & Fees for 2012-13• Tuition and fees went up by 9.9% for Virginia

undergraduates for Fall 2011

• Economic conditions will create need for smaller increases in 2012-14

• University estimates it will need 5% to continue operating in current manner

55

Tuition and Fee IncreasesTuition and Fee Increases

• Limited to amount necessary to meet institutional needs and maintain institutional quality

• Predictable for student financial planning and support of restructuring goals

• Competitive position among peer institutions• Include assessment of student financial need

and increases in financial aid56

Undergraduate ScholarshipsInstitutional Support – Unfunded Scholarships

Undergraduate ScholarshipsInstitutional Support – Unfunded Scholarships

57

Components of Total CostComponents of Total Cost

58

• Tuition

• E&G Fees

• Comprehensive Fee

• Room & BoardTU

ITIO

N &

E&

G

FEES

TUIT

ION

&

MA

ND

ATO

RY F

EES

TOTA

L C

OST

Total Student CostsTotal Student Costs

59

2011-12 Resident

Undergraduate $17,365

Graduate $11,705

Non-residentUndergraduate $31,336Graduate $21,723

• Total costs include Tuition, Mandatory E&G fees, and the Comprehensive fee. Undergraduate total costs also include Room & Board fees.

Opportunity for Continued Improvement and Further Restructuring

Opportunity for Continued Improvement and Further Restructuring

60

• Insure institutional authority and flexibility• Freedom from state mandated systems

• eVA

• Streamline state processes, requirements, and reporting

• Continue statewide engagement on issues:• Envisioned in Higher Education Opportunity Act of 2011

• Higher Education Advisory Committee Agenda

• University is working with other institutions and state officials

Questions?Questions?

61

m. dwight shelton, jr. february 24, 2012 · 2016. 7. 6. · m. dwight shelton, jr. february 24,...

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