Financial Report to the Faculty Committee on Administrative & Financial Policy (FAP) Professor Allen Hoffman, Chair Provost ad interim John Orr Vice President & CFO Jeffrey Solomon March 22, 2007

2 Agenda 1. Overview of FAP Activities Professor Hoffman 2. Benchmarking of Faculty Salaries Provost ad interim Orr 3. Financial Update for FY07 & FY08 Vice President Solomon 4. Questions

3 FAP Membership Allen Hoffman, Chair James Hanlan, Chair FBC Suzanne Weekes, Secretary Jeffrey Solomon, VP Finance & CFO Judith Trainor, Budget, Planning & IR

4 FAP’s Charge  To inform the Faculty on administrative and financial policies affecting the Faculty and the academic affairs of WPI  To ascertain the interests and views of the Faculty concerning such policies and represent these interests and views to the Administration

5 Major FAP Activities  Staff Opinion Survey  Faculty Phased Retirement Program  Faculty Salary Benchmarking  Fringe Benefit Issues  Budget Status & Development

6 Report on Faculty  Investment in New Faculty for FY08  Benchmarking of Faculty Salaries –Determination of Peer Group –Data Comparison by Rank –Development of Compensation Philosophy

7 Investment in Faculty 19 searches authorized for FY2008 –To replace faculty who retired in FY2005 –To build areas of strategic importance –To support enrollment growth –To establish new robotics program

8 The WPI Faculty-Fall 2006 Instructional Faculty205 Tenured159(78%) Assistant Professors 44 (22%) Associate Professors 74 (36%) Full Professors 87 (42%)

9 The WPI Faculty-Changes Fall 2002Fall 2006 Instructional Faculty Percent Tenured73%78% Assistant Professors5444 Associate Professors7274 Full Professors8987

10 New Approach for Salary Analysis Identification of broader peer group Benchmarking based on AAUP data Development of salary philosophy & plan

11 Sources of Faculty Salary Data Association of Independent Technological Universities Fall 2006 AITU data now available Limited group of 20 schools Includes RPI, CMU, MIT, RIT Reported by faculty rank and by discipline American Association of University Professors Fall 2006 AAUP data not yet available Covers most institutions Not segregated by discipline

12 Reminder of 2006 Report: Engineering and CS Salaries, Fall Professors High WPI Low

13 Engineering and CS Salaries - Professors Max WPI Min

14 Peer Group Characteristics Number of Institutions34 Doctoral I 27 (80%) AITU Schools15 (44%) Public Institutions11 (33%) New England 9 (27%) Average Enrollment14,500

15 Peer Group Boston College Boston University Brandeis University Brown University California Institute of Technology Carnegie Mellon University Case Western Reserve University Clarkson University Cornell University-Public Cornell University-Endowed Drexel University Embry-Riddle Aeronautical University Georgia Tech Harvey Mudd College Kettering University Lehigh University Michigan Tech Milwaukee School of Engineering Massachusetts Institute of Technology New Jersey Institute of Technology Northeastern University Penn State University Park Polytechnic University Purdue University-West Lafayette Rensselaer Polytechnic Institute Rochester Institute of Technology Rose-Hulman Institute of Technology Stevens Institute of Technology Tufts University University of Connecticut University of Illinois at Urbana-Champaign University of Maryland at College Park University of Massachusetts-Amherst Virginia Tech

16 Average Salaries-Assistant Professors

17 Average Salaries-Associate Professors

18 Average Salaries-Full Professors

19 CFO Report  FY07 Financial Status  FY08 Approved Budget Parameters  The Structural Deficit  New Debt Structure  Endowment Update  New Building at Gateway Park  Other Major Capital Projects  Green Campus

20 The Budget: Status of FY07  Projected surplus of $1M at  Projected total revenue to equal budget –Undergraduate net tuition at budget –Shortfall in graduate tuition –Increase in Corporate Education –Increase in short-term investment income  Projected total expense to be below budget –Vacancy savings –Utilities savings –New building at Gateway Park to open in April

21 The FY08 Budget: Themes & Objectives  Prudently continue growth of net revenues  Provide faculty support by authorizing searches for 19 tenure/tenure-track faculty  Provide adequate salary increases and affordable health insurance for faculty and staff  Fully integrate Gateway Park life sciences building into operating budget  Constrain the rate of tuition increases

22 The FY08 Budget: Approved Parameters FY07 BudgetFY08 Budget Tuition increase5.9%4% - 5% Freshman class size760 (777 actual) Undergraduate FTE2,7592,873-2,893 Tuition discount-freshmen40.1% (42.5% projected)41.0% Tuition discount-all students38.6% (38.5% projected)39.1% Merit pool3.5%4.0% Equity/promotion pool1.0% TT faculty searches13 (10 filled)19 Utilities$5.6 M New Gateway building$1.4M net expense$2.9M net expense Health insurance contribution$3.3M (4% increase) $4.2M (25% increase)

23 The FY08 Budget: Sources of Revenue Net undergraduate tuition & fees $67.3M 59% Net graduate tuition 8.7M 8% Summer session tuition 2.8M 2% Subtotal net tuition & fees $78.8M 69% Auxiliary operations 13.1 M 12% Endowment/investment income 10.2 M 9% Corporate/professional education 4.6 M 4% Indirect cost recovery 3.4 M 3% Unrestricted gifts 2.5 M 2% Other revenue 1.6 M 1% Total revenue$114.2 M 100%

24 The FY08 Budget: Uses of Funds Salaries $52.6M 46% Health insurance 4.2M 4% Other benefits 10.2M 9% Subtotal compensation $67.0M 59% Other operating expenses 25.8M 22% Debt service/depreciation 11.9M 10% Utilities 5.6M 5% New building at Gateway Park 2.9M 3% Contingency 1.0M 1% Total $114.2M 100%

25 The Structural Deficit In a “balanced” budget, the structural deficit refers to items that are not being fully provided for or the use of resources to a greater extent than what might be ultimately sustainable. Examples: –Inadequate deferred maintenance funding –Too high endowment spending rule –Not funding faculty salaries to adequate levels –Insufficient financial aid to meet tuition increases for upper class students Develop plan to address structural deficit over time

26 Debt Structure  Restructuring of existing debt –More strategic debt structure –Extend average life –Create level debt service –Create additional debt capacity  New debt for residence hall ($40M) –To be issued June 2007 –Rates locked in at 4.7% for 40 years  Total debt at approximately $145M –Overall annual debt service cost not increased significantly  Public Credit Ratings –Standard and Poor’s A+ (Outlook upgraded to stable) –Moody’s Investors Service A1

27 Endowment-Market Value History $381M as of Feb 28, 2007

28 Endowment-Market Value Comparison 51Tufts$1,215,413,000 71BU$916,017,000 90RPI$682,894,000 99Northeastern$595,859, RIT$568,945, WPI$353,720,000 Values as of June 30, 2006 per NACUBO For private institutions to which the greatest number of WPI students apply for admittance

29 Endowment-Performance History

30 Endowment-Asset Allocation Public Equity 40% Public Equity 50.3% Hedge Funds 25% Real Assets 18% Fixed Income 12% Private Equity 5% Hedge Funds 27.4% Fixed Income 10.6% Real Assets 4.6% Private Equity 7.1%

31 Life Sciences Building at Gateway  Scheduled to open April 2007  31 faculty to have labs in new facility  Operations committee determined initial level of required support  11 new staff to be hired in FY2008  Transportation to be provided  Corporate & professional education  Café

32 Major Capital Projects-FY07 & FY08 New residence hall & garage Alumni Field renovation Salisbury & Goddard Hall renovations Founders Hall restaurant/pub & convenience store Alden Hall air conditioning Recreation center planning to continue

33 The Green Campus  Why Go Green?  Trends in Higher Education  Cost/Benefit Analysis of Going Green  Green Buildings at WPI –Bartlett Center –New Residence Hall  Policy Adopted by WPI Board

34 Questions This presentation is available on the Office of Faculty Governance web page