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Strategic Issues Achieving Financial Equilibrium

March, 2010. Strategic Issues Achieving Financial Equilibrium. Why we’re here. All three major sources of revenue are down and under continued downward pressure Investment market decline means we won’t have the endowment income we once expected or the debt capacity we once had

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Strategic Issues Achieving Financial Equilibrium

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  1. March, 2010 Strategic IssuesAchieving Financial Equilibrium

  2. Why we’re here • All three major sources of revenue are down and under continued downward pressure • Investment market decline means we won’t have the endowment income we once expected or the debt capacity we once had • Gift revenue being impacted by that same economic environment • Economic environment resulting in serious pressure to keep comprehensive fee increases small • With these declines, we are facing a $5M shortfall every year for at least four years

  3. Why we’re here – a picture Endowment support to the operating budget is down & volatile

  4. Financial Plan Seeks Equilibrium • Balancing the operating budgets for the next 5 years • Making principle payments on our debt • Funding sufficient deferred maintenance • Building sufficient reserves in our financial planning to be able to withstand volatility

  5. Preliminary Financial Plan • Initialwork incorporated into a variety of assumptions into projections • Final actions will be recommended to the Board of Trustees for their approval at the May meeting

  6. Major Assumptions-Revenues • Comprehensive Fee Increase - 3.7%/year • Discount Rate - 36% every year • Incoming class - 600 every year • Endowment Investment Return - 8%/year • Continue to spend 5.5%/year • Gift Revenue updated by Advancement • Annual fund up 6% per year • One-time unrestricted giving down

  7. Major Assumptions-Costs • Projection assumes salaries are frozen for one year except promotions • Incr. in FY12 and out: 2%, 2%, 3%, 3% • RRPTG recommendations confirmed and incorporated • Non-compensation costs flat for one year • Except cost of contracts/agreements • Utilities up only $300,000 based on conservation & forward contracts • Non-compensation costs increase 2% FY12 and beyond

  8. RRPTG recommendations – 1st year • President & Sr. Staff Salary Reductions $ 57,603 • Salary Freeze excl. promotions $800,000 • Facilities $442,000 • Dining Services $380,000 • Athletics $150,000 • Student Life $301,000 • IT $146,442 • Academic Affairs $480,000 • Singles in POMCO Health plan contribute 10% $144,000 • Communication $ 62,000 $2,963,045

  9. The University’s ‘Checkbook’

  10. Workforce Assessment Process • Why? • Chronic Annual Cash Shortfall of $1.8 million after RRPTG • 57% of Annual Budget from Salaries, Wages, and Benefits • 30% growth in employees from 96-97 to today (from 647 to 840) • 107% increase in Salaries Wages and Benefits since 96-97 ($30 million to $63 million)

  11. Critical Balance of Costs, Revenue Generation, and University Mission University Mission University Revenue Generation University Expenditure

  12. Assessment Process (President’s Memo) • Assessing positions and functions, not individuals. • Consider original purpose and current function of each department [position] • Define the skills and capabilities needed for those functions. • Imagine ways to gain efficiencies… • Collaboration • Technology • Eliminating unnecessary functions

  13. Workforce Assessment (Budgetary Instructions) • Relate department, (positions) to University Mission • Delineate positions and skills necessary • Expected personnel changes - attrition opportunities • Anticipated new skills, competencies in coming decade • Define key department interactions and improvement possibilities

  14. Workforce Assessment (Budgetary Instructions) • Department Strengths? – Measures of success • Obstacles to success – resources needed for more efficiency • Metrics, benchmarks to assess workload and efficiency • Prioritize the possible need to eliminate positions and/or activities if necessary? What would be the negative effects?

  15. Next Steps • Phase I • Work Force Assessments due April 1 • April and May: Analyze Assessments from each division, compare suggestions, determine University-wide implications—The Big Picture • June: Implement any necessary changes • Phase II • Plan campaign completion strategy • Informed by the results of Market Study • Design process and evaluate optimal academic and administrative organizational size and structure • Develop new enrollment marketing plan • Consider new initiatives to add revenues

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