Finance Subcommittee Progress Report
October 23, 2014
Discussion Topics
I. Strategic Priorities
–
–
–
–
Cornerstone Plan Cost Analysis
Generational Turnover of Faculty Cost Analysis
Sustained Excellence in Operational Performance
Enhanced Affordability
II. Resourcing Strategic Priorities
III. Status of Finance Subcommittee Work
2
Strategic Priorities:
The Cornerstone
Plan
3
Cornerstone Plan
•
Strategic Plan for the Academic Division (pillars approved by the Board of
Visitors on November 15, 2013)
•
Outlines priorities to lead UVa into its third century
•
Areas of emphasis:
– Leadership development of students, faculty and staff
– Leadership in pedagogy and research
– Leadership in higher education
– Prudent and efficient stewardship of resources
•
Enhance national and international reputation, which benefits both UVa and
the Commonwealth
•
The accompanying cost analysis excludes professional schools (Medicine,
Nursing, Law, Darden) and capital costs (major renovations or buildings)
4
Cornerstone Plan: Cost Analysis
Key Assumptions
General
• Annual budget cycle will continue to be the mechanism to assess pace of funding needs and
commitment of resources
• Every dollar invested supports student experience and research and teaching faculty
• Analysis is focused on range of costs estimated at this time. Expected efficiencies,
reallocations and known sources of philanthropy are shown as funding sources.
Methodology
• All projections are adjusted annually for inflation (2.5%)
• Includes 1.75% of BOV approved 4.75% faculty salary increase (3.0% increase is reflected in
base operating plan)
• Internal Audit reviewed cost analysis
Implementation
• Phased implementation of strategies, based on immediacy of priorities
Funding
• FY15 based on BOV approved FY15 strategic plan investments
• Ongoing net cost after FY22 approximates $23 million
5
Cornerstone Plan Pillars
Pillar
Extend and Strengthen
the University’s
Distinctive Residential
Culture
Strengthen the
University’s Capacity to
Advance Knowledge and
Serve the Commonwealth
of Virginia, the Nation,
and the World through
Research, Scholarship,
Creative Arts and
Innovation
Strategy
Goal
1: Student Leadership
Development
Make the development of ethical leaders a central theme of
the curricular, co-curricular, and extracurricular programs.
2: Total Advising
Pioneer a multidimensional process that combines highquality academic advising, career advising, and coaching, and
capitalizes on relationships with alumni.
3: Lifelong Alumni Engagement
Develop training, teaching, and counseling programs for
alumni that enable the University to serve as their lifelong
university.
4: Strategic Research
Leverage the size and resources of the University by
promoting a discrete set of evolving pan-University research
institutes that focus on cutting-edge, cross disciplinary
opportunities.
5: Research Infrastructure and
Services
Enhance scholarly programs by developing a proactive
research infrastructure designed to support inquiry and
encourage the cross-fertilization of ideas and partnerships.
6
Cornerstone Plan Pillars
Pillar
Provide Educational
Experiences that
Deliver New Levels
of Student
Engagement
Assemble and
Support a
Distinguishing
Faculty
Strategy
Goal
6: High Impact Educational
Experiences
Further students’ cognitive and personal development, and
strengthen their ability to apply knowledge, by delivering a broad
range of high-impact experiences, including meaningful research
with faculty members, community engagement, entrepreneurial
experiences, and internships.
7: Global Experiences
Promote the exchange of ideas and the pursuit of discovery among
nations and peoples by strengthening our global presence and
systematically fostering international knowledge and cross-cultural
understanding among all students.
8: Evidence-Based Teaching
and Learning to Enhance
the Student Experiences
Lead in creating an evidence-based, residential educational
experience that deepens student engagement and learning, while also
capitalizing on world-class research in assessing the relationship
between education experiences and student learning outcomes.
9: Faculty Leadership
Development
Develop a comprehensive program to mentor and invest in the
professional development of faculty members to strengthen the
University, further their careers, and enhance their effectiveness as
teachers, researchers, and leaders.
10: Continuous Active
Recruiting to Secure
Leading Faculty
Integrate strategic recruitment efforts across Grounds to better
identify high-potential faculty, build stronger relationships with
targeted candidates, and close recruitment efforts successfully.
11: Interdisciplinary
Hiring
Build and sustain groups of faculty in well-focused specialty areas
and encourage individual research and scholarship, while asserting
leadership in select interdisciplinary areas by recruiting faculty who
are engaged in collaborative research and teaching.
7
Cornerstone Plan Pillars
Pillar
Steward the
University’s
Resources to Promote
Academic Excellence
and Affordable Access
Strategy
Goal
12: Affordable
Excellence
Maintain affordability for Virginia families and access for an
academically accomplished and diverse student body, regardless of
ability to pay, by developing and implementing a financial model that
generates adequate resources to sustain AccessUVa.
13: Leadership in
Promoting Staff
Excellence
Advance a culture of institutional and individual leadership by
establishing a center for excellence that takes a multifaceted approach
to employee development.
14: Organizational
Excellence
Enhance the University’s organizational capacity through resource
alignment and optimization to enable academic excellence and
affordable access.
15: Philanthropy in
Service to
Strategic
Priorities
Reorganize and revitalize fundraising efforts to more closely align
them with University and school strategic priorities, and restructure
University advancement as a center of excellence to produce greater
effectiveness and efficiency.
8
Cornerstone Plan Net Cost Detail by Strategy
FY15-FY22
(in Millions)
FY15
Pillars
Pillar 1: Extend and Strengthen the
University’s Distinctive Residential
Culture
Pillar 2: Strengthen the University’s
Capacity to Advance Knowledge
and
Serve
the Public
through
Pillar
3: Provide
Educational
Experiences that Deliver New
Levels of Student Engagement
Pillar 4: Assemble and Support a
Distinguished Faculty
Pillar 5: Steward the University’s
Resources to Promote Academic
Excellence and Affordable Access
TOTAL Cornerstone Plan Costs
Strategies
Strategy 1: Student Leadership Development
Strategy 2: Total Advising
Strategy 3: Lifelong Alumni Engagement
Strategy 4: Strategic Research
Strategy 5: Research Infrastructure and Services
Strategy 6: High Impact Educational Experiences
Strategy 7: Global Experiences
Strategy 8: Evidence-Based Teaching and Learning
to Enhance the Student Experience
Strategy 9: Faculty Leadership Development
Strategy 10: Continuous Active Recruiting to
Secure Leading Faculty
Strategy 10a: 1.75% of BOV approved 4.75%
faculty salary increase
Strategy 11: Interdisciplinary Hiring
Strategy 12: Affordable Excellence
Strategy 13: Leadership in Promoting Staff
Excellence
Strategy 14: Organizational Excellence
Strategy 15: Philanthropy in Service to Strategic
Priorities
TOTAL Cornerstone Plan Costs
FY16-FY22
Cumulative
Year One
Cumulative
Approved
Funding
Remaining
Cost
7-yr. Cost
Funding
Level from
to Fund
Total
Total
FY15
0.20 $
$ 0.20 $
1.55 $
0.37 $
1.17
1.60 $
$ 1.60 $
13.89 $
7.27 $
6.62
$
0.05
$ 0.05
$
18.89 $
18.89 $
0.50 $
$ 0.50 $
30.59 $
11.20 $
19.39
4.20 $
$ 4.20 $
23.23 $
6.96 $
16.27
$
0.55
$ 0.56
$
11.00 $
4.89 $
6.11
2.09 $
$ 2.09 $
23.68 $
8.17 $
15.51
$
$
-
$
$
-
$
$
10.57
0.77
$
$
-
$
$
10.57
0.77
$
-
$
-
$
3.61
$
-
$
3.61
$
$
$
3.63 $
$
$
-
3.63
-
$
$
$
82.71
-
$
$
$
-
$
$
$
82.71
-
$
$
1.50 $
4.04 $
1.50
4.04
$
$
11.64
7.64
$
$
11.64
7.64
$
$
-
$
$
$ 18.37 $
18.37
$
$
39.58
279.35
$
$
39.58
116.60
$
$ 162.75
9
Cornerstone Plan: Cost Analysis
Including Existing Funding Sources
(in Millions)
FY 14-15
Approved
$
0.20
$
1.60
$
0.05
$
0.50
$
4.20
$
0.56
$
2.09
FY15-16
Projected
$
0.21
$
1.85
$
0.69
$
5.47
$
5.02
$
1.32
$
2.11
FY16-17
Projected
$
0.21
$
1.88
$
1.32
$
7.18
$
4.62
$
1.53
$
2.70
FY17-18
Projected
$
0.22
$
1.93
$
2.16
$
8.97
$
2.58
$
1.55
$
3.15
FY18-19
Projected
$
0.22
$
1.98
$
3.54
$
4.97
$
2.65
$
1.59
$
3.78
FY19-20
Projected
$
0.23
$
2.03
$
3.63
$
2.83
$
2.72
$
1.63
$
3.88
FY20-21
FY21-22
8-Year
Projected Projected TOTAL
$
0.23 $
0.24 $
1.75
$
2.08 $
2.13 $
15.49
$
3.72 $
3.82 $
18.94
$
0.58 $
0.59 $
31.09
$
2.78 $
2.85 $
27.43
$
1.67 $
1.71 $
11.56
$
3.97 $
4.07 $
25.77
$
$
-
$
$
1.03
0.10
$
$
1.05
0.11
$
$
1.62
0.11
$
$
1.66
0.11
$
$
1.70
0.11
$
$
1.74
0.12
$
$
1.78
0.12
$
$
10.57
0.77
$
-
$
0.26
$
0.53
$
0.54
$
0.55
$
0.57
$
0.58
$
0.59
$
3.61
$
$
$
$
$
3.63
1.50
4.04
$
$
$
$
$
7.55
1.54
1.36
$
$
$
$
$
11.77
1.58
1.40
$
$
$
$
$
12.06
1.62
0.93
$
$
$
$
$
12.36
1.66
0.95
$
$
$
$
$
12.67
1.70
0.98
$
$
$
$
$
12.99
1.74
1.00
$
$
$
$
$
13.31
1.79
1.03
$
$
$
$
$
86.34
13.14
11.68
$
-
$
2.99
$
5.22
$
5.99
$
6.11
$
6.26
$
6.42
$
6.58
$
39.58
$
18.37
$
31.50
$ 41.09
$
43.43
$
42.14
$
40.93
$
39.63
$
40.62
$
297.72
$
17.47
$
12.89
$
15.14
$
15.88
$
15.56
$
15.95
$
16.35
$
16.76
$
125.99
Committed Philanthropy
Total Funding Sources
$
$
0.90
18.37
$
$
1.24 $
14.13 $
1.07
16.21
$
1.10
$ 16.98
$
1.13
$ 16.69
$
$
1.15
17.10
$
$
1.18 $
17.53 $
1.21
17.97
$
$
8.99
134.97
Cornerstone Plan Costs (Remaining to Fund)
$
0.00
$
17.37
24.88
$
$
$
23.83
$
22.10
22.65
$
162.75
Strategies
Strategy 1: Student Leadership Development
Strategy 2: Total Advising
Strategy 3: Lifelong Alumni Engagement
Strategy 4: Strategic Research
Strategy 5: Research Infrastructure and Services
Strategy 6: High Impact Educational Experiences
Strategy 7: Global Experiences
Strategy 8: Evidence-Based Teaching and Learning to
Enhance the Student Experience
Strategy 9: Faculty Leadership Development
Strategy 10: Continuous Active Recruiting to Secure
Leading Faculty
Strategy 10a: 1.75% of BOV approved 4.75% faculty
salary increase
Strategy 11: Interdisciplinary Hiring
Strategy 12: Affordable Excellence
Strategy 13: Leadership in Promoting Staff Excellence
Strategy 14: Organizational Excellence
Strategy 15: Philanthropy in Service to Strategic Priorities
Cornerstone Plan Costs (Total)
Funding Sources
Expected Efficiences & Reallocations
% of Academic Division Operating Budget (FY14-15)
1.25%
2.15%
$
2.80%
26.45
2.96%
25.45
2.87%
2.79%
2.70%
$
2.77%
“$ - “ = Cost is either phased in or to be determined.
10
Strategic Priorities:
Building the Next
Generation of
Faculty
11
Generational Turnover of Faculty
• National issue across higher education
• Strategic imperative for UVa
– Facing a more than 60% increase in the projected number of
resignation/tenure denial/retirements
• FY 03-13 Average:
• FY15-21 Average:
38 resignation/tenure denial/retirements
61 resignation/tenure denial/retirements
• Academic excellence necessitates a strong faculty with competitive
compensation packages
• New faculty are hired strategically based on Cornerstone Plan priorities
• Create a balance between assistant professorships (75%) and
associate/full professorships (25%)
12
Generational Turnover of Faculty: Cost Analysis
Faculty Hiring Assumptions
• New tenure track hires (undergraduate schools only)
–
Estimated retirements and resignations from FY15-22: 467 faculty
–
Enrollment growth from FY 15-19 requires 105 net new faculty
–
Average salary figures based on recent market experience
–
Strategic and collaborative hiring across schools e.g. Data Science Institute, Biomedical
Engineering
–
Assumes 3.0% salary increases once hired
• Start-up packages
–
Investment in research
–
1/3 of faculty (STEM fields) receive start up packages
($1.0 million assistant; $4.0 million associate/full)
–
Amortized over 3 years (year 1=50%, year 2=35%, year 3=15%)
–
Estimated total start-up: $322.4 million over 7 years, depending on pace of turnover
• Ongoing net cost after FY22 of approximately $39 million will be
incorporated into base budget
13
Generational Turnover of Faculty: Cost Analysis
(in Millions)
FY 14-15
FY15-16
FY16-17
FY17-18
FY18-19
FY19-20
FY20-21
FY21-22
7-Year
FTE Projected FTE Projected FTE Projected FTE Projected FTE Projected FTE Projected FTE Projected FTE Projected TOTAL*
Projected Total New Faculty:
Salaries - Avg. Full & Assoc.: $127,697; Avg. Asst.: $93,398
Fringe
Projected Total New Faculty Compensation
$
$
82 $
Anticipated Resignations/Tenure Denial/ Retirements:
Salaries - Average (All Faculty) Salary $91,532
$
Fringe
$
Anticipated Total Resignations/Tenure Denial/ Retirements 61 $
Compensation
Projected Net New Faculty Compensation
21 $
Subtotal: Projected Net New Faculty Compensation (cum.) 21 $
8.36
$
2.32
$
10.68 82 $
8.61
$
2.39
$
11.00 82 $
8.87
$
2.47
$
11.34 82 $
9.14
$
2.49
$
11.63 82 $
9.41
$
2.63
$
12.04 61 $
7.21
$
2.01
$
9.22 61 $
7.43
$
2.07
$
9.50 40 $
(5.58)
$
(1.55)
$
(7.13) 61 $
(5.75)
$
(1.59)
$
(7.34) 61 $
(5.92)
$
(1.65)
$
(7.57) 61 $
(6.10)
$
(1.67)
$
(7.77) 61 $
(6.28)
$
(1.75)
$
(8.04) 61 $
(6.32)
$
(1.76)
$
(8.08) 61 $
(6.48)
$
(1.81)
$
(8.28) 40 $
3.55 21
3.65 21
$
3.55 42 $
% of Total Projected Undergraduate Faculty Compensation
$
3.77 21
$
3.86 21
$
4.00
0
$
1.14
0
$
1.22 0
$
5.02 $
1.40 $
6.42 $
55.69
15.46
71.14
(4.35) $ (41.20)
(1.21) $ (11.44)
(5.57) $ (52.65)
0.85 $
18.50
7.20 63 $
10.97 84 $
14.83 105 $
18.83 105 $
19.98 105 $
21.19 105 $
22.04 $ 115.05
3.42%
5.00%
6.57%
8.05%
8.39%
8.75%
8.94%
Annual (One-Time) Start Up Costs 3-Year Amortization
FY15 Faculty Hires
FY16 Faculty Hires
FY17 Faculty Hires
FY18 Faculty Hires
FY19 Faculty Hires
FY20 Faculty Hires
FY21 Faculty Hires
FY22 Faculty Hires
Subtotal: Projected Net New Faculty Start Up Costs
$
$
$
$
$
$
$
$
$
24.26
24.26
$
$
$
$
$
$
$
$
$
16.98
24.86
41.84
$
$
$
$
$
$
$
$
$
Projected Net New Faculty Compensation and Start Up Costs
Less: Existing and Projected Sources (SEAS, A&S)
Total: Projected Net New Faculty Costs
$
$
$
27.80
(6.14)
21.67
$
$
$
49.04
(8.15)
40.89
$ 61.13
$ (13.21)
$ 47.92
7.28
17.40
25.48
50.16
$
$
$
$
$
$
$
$
$
7.46
17.84
26.12
51.42
$ 66.25
$ (17.12)
$ 49.13
$
$
$
$
$
$
$
$
$
7.64
18.28
26.77
52.70
$ 71.54
$ (19.62)
$ 51.91
$
$
$
$
$
$
$
$
$
7.84
18.74
20.72
47.30
$ 67.28
$ (16.97)
$ 50.30
$
$
$
$
$
$
$
$
$
8.03
14.51
21.24
43.78
$ 64.97
$ (17.40)
$ 47.58
$
$
$
$
$
$
$
$
$
6.22
14.87
14.12
35.21
$ 24.26
$ 49.72
$ 50.97
$ 52.24
$ 53.55
$ 41.44
$ 36.11
$ 14.12
$ 322.40
$ 57.25 $ 437.46
$ (17.83) $ (110.31)
$ 39.42 $ 327.15
* FY14-15 not included in 7-Year Total
14
Total Net Required Investment in Cornerstone Plan &
Generational Turnover of Faculty
(in millions)
Fiscal
Year
15-16
16-17
17-18
18-19
19-20
20-21
21-22
TOTAL
Cornerstone
Plan
$
$
$
$
$
$
$
$
17.37
24.88
26.45
25.45
23.83
22.10
22.65
162.75
Generational
Turnover of
Faculty
$
$
$
$
$
$
$
$
40.89
47.92
49.13
51.91
50.30
47.58
39.42
327.15
7-Year Total:
Cornerstone Plan &
Generational
Turnover of Faculty
$
58.26
$
72.80
$
75.58
$
77.37
$
74.13
$
69.68
$
62.07
$
489.89
15
Strategic Priorities:
Sustained
Excellence in
Operational
Performance
16
Sustained Excellence in Operational
Performance
• Key factors that must be considered in developing
multi-year financial plan:
–
–
–
–
–
Providing competitive faculty and staff compensation
Planning for state support in times of uncertainty
Competing for federal research dollars
Managing inflation
Mitigating risks of market volatility, interest rate
fluctuations and economic downturn
17
Strategic
Priorities:
Enhanced
Affordability
18
Enhanced Affordability
70% of Virginia’s families make less than $100,000.
Currently, roughly one-third of UVa students demonstrate financial need
Providing financial aid mostly as loans increases student indebtedness and
results in some families committing a significant amount of available
income to college costs
Goal is to identify resources to reduce or replace loans in financial aid
packages for low- and middle-income students
Current
Maximum
Loan Levels:
$3,500 per year (or $14,000 by graduation) for low-income Virginians
$7,000 per year (or $28,000 by graduation) for all other students
19
Resourcing
Strategic
Priorities
20
Several Potential Opportunities for Funding the
Cornerstone Plan and Generational Faculty Turnover
Being Assessed by the Finance Subcommittee
These may include:
• Increasing the endowment spending distribution
• Optimizing performance of balance sheet
• Generating interest savings through better optimization of the debt
portfolio
• Executing a robust philanthropic campaign to support the Cornerstone
Plan and faculty excellence
• Continuing to identify and achieve operational efficiencies while
developing new academic revenues
• Developing a tuition/aid model which enhances affordability and
predictability for students and their parents
21
Endowment Spending Distribution
Increasing the
endowment
spending
distribution
Based on sensitivity analyses conducted by
UVIMCO and reviewed with the Finance
Subcommittee, the endowment distribution
could be increased up to 25 basis points and
still be within the upper distribution limit of
6% (as specified in BOV policy). The
endowment spending distribution would
continue to be assessed annually, based on
market conditions.
• Annual Opportunity: up to $4.5 million
in unrestricted resources
22
Balance Sheet
Optimizing
performance of
balance sheet
Rating agencies have consistently rated UVa “AAA”
due to its strong balance sheet and operating
performance. The University’s strong rating gives us
access to bank lines of credit, which can be utilized to
diversify our sources of liquidity, as needed. Coupled
with our strong cash management and UVIMCO’s
exceptional returns over the past 24 months, there
may be a strategic opportunity to allocate some
investment earnings to address non-recurring costs
associated with the Cornerstone Plan and the
generational turnover of faculty.
•
Potential Opportunity: $10-$50 million depending
on continued performance of UVIMCO long-term
pool, reserve requirements and access to bank
lines of credit.
23
Better Optimizing Debt Portfolio
Generating interest
savings by better
optimization of the
debt portfolio
The University has maintained a conservative
debt portfolio that has sought to reduce interest
rate volatility through a higher concentration of
fixed rate investments. The strength of the
University balance sheet, coupled with our AAArating in the context of a historically low interest
rate environment, allows us the opportunity to
better optimize the mix of fixed to variable rate
debt and reduce interest expense.
•
•
•
Current Portfolio: 14% variable rate
debt/86% fixed rate debt
Restructured Portfolio: 20% variable rate
debt/80% fixed rate debt
Annual Opportunity: $2.7 million (based on
current market rates)
24
Strategic Philanthropy
Strategic fundraising efforts will directly support the
Cornerstone Plan and faculty excellence.
Executing a robust
philanthropic
campaign
The bridge campaign focuses on faculty recruitment and
retention, as well as funding for faculty research, scholarship
and curricular enhancement. The Faculty Excellence
fundraising target is $250 million.
Strategic fundraising is also augmenting the AccessUVa
Endowment, proceeds of which support student financial aid
packages. The initial fundraising goal to be concluded by
2019, is to raise $200 million, bringing the AccessUVa
endowment to $360 million. An AccessUVa endowment of $1
billion would be needed to generate sufficient revenue to fund
the current annual level of institutional investment.
•
Annual Opportunity: any strategy that grows endowment
will have modest short-term impact, but offers long-term
stability as fundraising goals are accomplished.
25
Organizational Excellence
Continuing to
identify and achieve
operational
efficiencies and
developing new
academic revenues
Through its Organizational Excellence
effort, the University will achieve
operational efficiencies and increased
productivity as well as identify new sources
of academic revenue. This will be driven
across and between departments and
functions, with initiatives ranging from
strategic sourcing to facilities management.
• FY15 Cost Target: $11.5 million
• Potential Opportunity: $125 million over
7 years (FY16-22)
26
Tuition/Aid Model
The Finance Subcommittee is studying various
approaches to a tuition/aid model to enhance
affordability and predictability for Virginians by:
Developing a
tuition/aid model
•
Improving net price for low- and middleincome Virginians through increased tuition
grants and lower student indebtedness.
•
Providing a higher degree of predictability
around tuition and fee rates during a student’s
entire four-year undergraduate experience.
•
Potential Opportunity: TBD
27
Next Steps
Continue to monitor developing state
budget conditions
Further develop funding strategies for
resourcing strategic priorities
Finalize multi-year financial plan
Present completed Affordable
Excellence model to Board of Visitors
28