1. Business Practices Seminar Evolving Higher Education Business Environment M. Dwight Shelton, Jr. October 26, 2015

2. Overview  University Budget  Source of University Funds  Trends and Challenges  Growing Demand for A Virginia Tech Education  Enrollment Growth Planning  Prioritizing Resources and Containing Costs  Tuition, Fees & Athletics  JLARC Reviews and Recommendations  Addressing the Challenge  Bending the Curve and Thinking Creatively

3. University Budget

4. Resourcing the Institution Trends and Challenges  Mandatory costs are driving government spending, limiting opportunity for new investment in higher education.  Health care  Retirement  K-12 education  Nationally, declines in enrollment and traditional funding sources are challenging many institutions.  In Virginia: Sweet Briar and NSU

5. Primary Source of Funding has Shifted from State to Student

6. General Fund (GF) Support 2015-16 Budget ($ in Millions)

7. General Fund Support Over Time

8. Trends and Challenges National pressure on higher education to:  Expand access and affordability  Limit increases to tuition and fees through cost containment JLARC study of higher education in Virginia found:  Virginia’s institutions are high quality but high cost with the 5 th highest average net cost nationwide.  Average in-state tuition and fees have gone up more than 100% over the last ten years.  Auxiliaries were the primary driver of higher spending per student over that same 10 year period. Resourcing the Institution

9. o Tuition o E&G Fees o Comprehensive Fee o Room & Board TUITION & E&G FEES TUITION & MANDATORY FEES TOTAL COST Components of a Student’s Total Cost

10. 2014-15ApprovedIncrease Charge2015-16$% Tuition$10,088$10,496$4084.0% E&G Fees1091322321.1% Tuition & E&G Fees10,19710,6284314.2% Comprehensive Fee1,8201,857372.0% Tuition & Mandatory Fees12,01712,4854683.9% Room and Board7,9248,2263023.8% Total Cost$19,941$20,711$7703.9% Summary of Resident Undergraduate Charges

11. Higher Education Costs Virginia Tech has increased Tuition and E&G fees at a similar pace as other Virginia public institutions over the past 10 years.

12. Higher Education Costs Virginia Tech has increased mandatory Auxiliary Fees at a similar pace to other Virginia public institutions over the past 10 years.

13. Higher Education Costs Incremental Auxiliary budgets continue to increase over time.

14. The historical trend of annual increases is not sustainable into the future. Pressure to Contain Tuition 10-year average Tuition Increase: 7.25 % 10-year average Comprehensive Fee Increase: 5.58% If 10 year trend were continued:

15.  How do we continue to deliver the public mission of the university with declining state support?  How do we manage increases in mandatory costs and new strategic initiatives without relying upon annual tuition increases?  How will this impact our student services? Our Challenge

16. Growing Demand for a Virginia Tech Education

17.  We are experiencing a significant increase in demand, and undergraduate applications reached a new high for Fall 2015 admission.  Demand is broad-based and includes several areas where Virginia Tech is in a unique position to provide additional access to qualified students. Growing Demand for a Virginia Tech Education

18. Why increase enrollment?  Responds to existing demand for the VT experience  Serves a primary mission of the university  Provides access for Virginia residents  Increases diversity of student body for campus enrichment  Generates resources to not only sustain but also improve quality of Virginia Tech Growing Demand for a Virginia Tech Education

19. Undergraduate Growth Scenarios  Plan to expand freshman class by 500 additional students in Fall 2015  Actual growth exceeded this plan  Planned net growth of about 2,000 over 4 years  Possible growth beyond 2,000 over an 8 year period to approximately 29,000 undergraduates by Fall 2022 Growing Demand for a Virginia Tech Education

20. An Opportunity and a Challenge  Enrollment growth is impacting every corner of campus.  Growth is a source of incremental resources, and also a new cost driver.  New resources are largely needed to address rising fixed costs and university strategic priorities.  How will we maintain a high level of service with limited new resources? Growing Demand for a Virginia Tech Education

21. Prioritizing Resources and Containing Costs

22. Higher Education Costs Statewide Review of Higher Education by JLARC Report Findings:  Higher education should be more accessible and affordable.  Additional significant state funding in future is unlikely.  Academic mission should be prioritized. Recommendations:  Establish caps on the growth of non-E&G fees  Review and modify capital process  Review organizational structure, spans of control, staff workload  Standardize purchasing process  Assess feasibility of raising revenue through alternative sources:  Consider public use of campus recreation facilities

23. Higher Education Costs Virginia Tech has fared well in the reviews:  Held as an example of transparency in providing detailed listing of mandatory fees, including athletic fees, on website and invoices  VT has grown research expenditures significantly faster than square feet of research space, generating efficiencies.  Highest percentage of students voluntarily purchasing dining plans in the state; and average meal cost is below state average What to Expect Moving Forward  Spotlight on cost containment  Scrutiny of student services not critical to the instructional mission  Limitation on creation of incremental revenue from students

24. Cost control and realignment of resources will be necessary to remain competitive and achieve strategic objectives. Why focus on Cost Control?  Annual increases in tuition and fees cannot be sustained  Rising cost of current operations and improvements to academic programs  Board has requested a comprehensive analysis of Virginia Tech’s cost structure, with regular status updates on cost containment efforts Emphasis on efficiency, effectiveness and cost containment through:  Programmatic review: aligning new initiatives with the university strategic plan  Improving use of assets and existing spaces  Consolidation and shared services  Consideration of outside-the-box ideas and approaches to doing business Addressing the Challenge

25. Across higher education, institutions are focusing on controlling costs and generating revenue from non-traditional sources. Examples include: Efficiency and Cost Management  “Green Labs” at University of Washington  Managerial Reporting Project at UVA to boost data-driven decision-making  Business Process Improvement at institutions across the country Revenue Generating Opportunities  Privatization of dorm and dining at the University of Kentucky  Georgia Universities consider privatizing dorms and parking  Georgia State University proposes public gym memberships  Mixed-used commercial and public space (North End Center) Creative Resourcing of Campus

26. Moving Forward Thanks to your efforts, Virginia Tech is well positioned for success. Only university above the 90 th percentile in all value-added measures Happiest Students, Best Campus Food, Students Love these Colleges Among the lowest spenders on support functions as compared to peers Alumni social, financial, physical, purpose, and physical well-being all above average-students are doing well once they leave the university Ranked 26 th nationally A “Best Value” for 10 years running

27. How will enrollment growth impact your service area? Are there regulations or policies that could be more flexible and enhance your operating environment? How can you support the university’s strategic vision? What can the university do to support you? Moving Forward

28. Thank you for your contribution to Virginia Tech’s success! -Dwight