Board of Trustees Finance and Audit Committee Meeting April 29, 2010

1. Board of Trustees Finance and Audit Committee Meeting April 29, 2010

2. March 2010 State Forecast • Beginning a slow recovery • FY 2009-10 • $6.5 -$6.7 billion revenue projections • No further reductions • FY 2010-11 • $7.1 billion revenue projection • One-time budget balancing: $212.2-$320.6 million • FY 2011-12 Legislative Council estimate of cliff, without caseload adjustments, $580 million

3. Governor Ritter 2/18/2010:Tough Choices • 97% of the FY 2010-11 General Fund request is devoted to just five areas of service: • 43.0%, K-12 Education is the largest component of the General Fund budget and was off limits when balancing in FY 2009-10 due to a required 5% General Fund increase. • 19.9%, Health Care Policy and Financing provides services that are mostly entitlement programs that have a counter-cyclical relationship with the economy. • When the economy goes down, Medicaid enrollments go up. • 9.2%, Human Services are provided to the state’s most vulnerable and highest risk populations such as those with developmental disabilities or mental illness, juvenile delinquents, and children who are the victims of abuse and neglect. • 15.5%, Corrections, Public Safety and Judicial provide public safety services and staffing levels that were reduced during the last recession have still not been restored. Judicial staffing was increased pursuant to HB 07-1054. • 9.4%, Higher Education is one of the last remaining areas of the budget where there continues to be budgetary flexibility and where funding has been temporarily maintained with federal stimulus funds. Source: Governor's Office of State Planning

4. Colorado DHE: Higher Education Funding Total Higher Education Funding in Millions

5. Colorado DHE: UNC Funding Federal Funds ? State Funds UNC Funding in Millions

6. UNC University Revenues $170 M (millions)

7. University Revenues $170 M (millions)

8. UNC Student Revenue $109.5 M (millions)

9. University Revenue Uses University Revenue Sources State Students: Tuition, Fees, Room & BoardMiscellaneous Capital Appropriations Operating Budget • Regular Operating Expenses • Debt Service (Bonds & Capital Leases) • Transfer to reserves • Transfer to capital projects • Prior year roll-forward retained by units • Centrally allocated one-time expenses • Contingency Innovation Budget • One-time investments and incentives CapitalBudget

10. 3-Year Financial What If? • Revenue • On-campus enrollment grows (12% UG/17% GR) and tuition rates increase 9% annually • Extended Studies revenue grows by $3 million • Room & Board revenue grows by 11% • The state funding cliff is $23 million (FY10 state funding remains constant with no more federal funds) • Discounting • 25% of new UG and GR tuition is used for increases in institutional discounting • 16% of new Room & Board revenue is used for increased discounting

11. FY 2013 Revenue What If?

12. 3-Year Financial What If? • Expenses • Salaries increase 0% in FY11 and 3% in FY12 & FY13 • Fringe benefits increase 10% annually • We invest an additional $3 million in faculty/adjunct costs for on-campus and Extended Studies • Cost of sales increases 3% annually • Utilities increase $0.5 million • We make $1 million investment in incentives and growth • Debt service increases $1 million • OCE/Travel/Capital remains the same

13. FY 2013 Expense What If?

14. FY 2013 Gap What If?

15. UNC’s Reserve Status One-Time Reserves CLIFF Reserve Target $8M Target $5M Target $14M • Uncommitted • Revenue • Expense Reductions • Capital • Operating • Mandatory • Risk Management • Special • Contingency FY11 Target $6.6M Actual $8M Actual $5M $13M “Savings account” “Annuity” 15

16. Budget Timetable (March-May)

17. Budget Timetable (May-Fall 2010)

18. Perspectives on Pricing and Discounting Pricing Strategy

19. Net Revenue/Admit Maximum X Net Price List Price Applications of Strategic Pricing:Maximize Net Revenue To maximize discounted net tuition revenue at any given list price Goal: Pricing Strategy: • Discount list price just to the level required to maximize net revenue per student

20. The Question… How do we determine the net price at which an admitted applicant is likely to matriculate? Price Too High Price Too Low Some admits would enroll at a lower price Some matriculates would pay a higher price

21. Applications of Econometric Modeling With econometric modeling, UNC can: • Determine the effect of changes in net price on the matriculation probability of admitted applicants • Predict the effect of a change in net price on enrollments, net revenue, and class profile • Simulate the effects of alternative discounting strategies and scenarios

22. What Do We Know? • FAFSA’s Received year to date 2009-10 = 8,309. Year to Date 2010-11 = 9,333. This represents an increase of 1,024 FAFSA Filers or a 12.32% overall increase. • Students Packaged year to date 2009-10 = 5,266. Year to Date 2010-11 = 6,199. This represents an increase of students packaged by 933 or a 17.72% overall increase. Pell Recipients demonstrates how our most “needy” students are managing during the “Great Recession” and how UNC has responded to the fiscal needs of these students. #/Students      Amount   Year         2,233                       $9,764,416           10-11(early packages only as of 4/12/10) 2,530                       $9,377,912           09-10 1,872                       $5,836,253           08-09 1,956                       $5,262,441           07-08 TOTAL Pell $ amount increases from 07-08 to current 1011 in the most “needy” aid categories has risen by $4,501,975 or 85.55%.

23. Total Financial Aid Awards $96 M (millions)

24. UNC Financial Aid Mix • Federal & State Aid • Institutional & Private Aid • Loans a Total $95 Million Financial Aid Budget $58 Million Applied to Students’ Bills $38 Million Distributed to Students UNC Student Revenue $109.5 Million

25. UNC Student Revenue $109.5 M (millions)

26. Undergraduate Tuition/Discounting

27. Graduate Tuition/Discounting

28. The Strategic Financial Aid Matrix • Fall 2009 ADMITTED CLASS & YIELD • INSTATE only (N=4520 admits) Slide Representation: Illustrate the composition of the Fall 09 Instate admit pool by financial neediness and academic preparation. This slide can alternatively be understood as the “possible or potential composition of our entering (instate) freshmen class” because it illustrates the cross-tabulation (or counts) of students who have been admitted to UNC by neediness and academic preparation. Data Note: Each cell provides the % yield (or % of admits who enrolled )and parentheses contain the total number of admitted students within the cross tabulation of need and index score ranges

29. The Strategic Financial Aid Matrix • Fall 2009 ENROLLED INSTATE only-Average Est. Net Tuition Revenue Slide Representation: Illustrates actual numbers of students we enrolled within each cell (see parentheses) Coloring indicates avg net tuition revenue for all students within that cell (red is lowest net tuition revenue, yellow is moderate and green is strongest net tuition revenue0. Note: Each cell contains the average estimated average net tuition revenue for all ENROLLED students within the cell. NTR = (Instate First Time Freshmen budgeted tuition & fees - Total need or merit based grant)

30. The Strategic Financial Aid Matrix Fall 2008 Fall to Fall Retention Retention Rates by Scholarship Level (Achievement) and Ability to Pay (EFC) INSTATE only Note: Each cell provides the total number of new first time freshmen in Fall 08 and the % of that total who persisted into Fall 09 within the cross tabulation of need and index score ranges. Note2: ** = cell count is 10 or below; * = cell count is 20 or below; NA = no cases

31. Take Away Message • There are different consequences for different enrollment management goals • Some segments of the entering class are more costly to recruit and retain • Some segments have higher yield rates • Focusing on a single enrollment goal such as continued growth or maximizing net revenue jeopardizes other goals • A desired goal is to identify an optimal mix of students that is fiscally sustainable

32. Fiscal Year 2010-11 Rate Proposals • Undergraduate Resident & Non-Resident 9% increase • Graduate Resident & Non-Resident 15% increase • Academic Fees • Course Fees, Participation, Supervision Various • Library Fees Graduate/Undergraduate 2% increase • Technology Fees Graduate/Undergraduate 3% increase • Program Fees • Nursing $17 per Credit Hour • Dance, Music,Theatre $6 per Credit Hour • Room Rate Average 7% increase • Board Rate Average 7% increase

33. Fiscal Year 2010-11 Undergraduate Rate Proposals *Annual rate is for 12-16 credits per semester

34. Undergraduate On-Campus Headcount Enrollment

35. Fiscal Year 2010-11 Graduate Rate Proposals *Annual rate is for 9 credits per semester

36. Fiscal Year 2010-11 Academic Fees Proposal

37. Fiscal Year 2010-11Program Fee Proposal

38. Fiscal Year 2010-11 Room and Board Rate Proposals

39. Fiscal Year 2010-11Proposed Cost of Attendance • 1) 9% Tuition increase • 2) 3.9% CPI increase and Quality of Life Fees $120.00 for Student Activity Fees Technology Fee increase of 3% Library Fee increase of 2% Student Success Fee remains the same. • 3) Room increase of 6.0% and Board increase of 7.06%

40. Next Steps • Possible early May phone meeting for rate approval • Communication to students on rates • May 21st Board of Trustees meeting • June 11th Board of Trustees meeting