Five-year Fiscal Sustainability Plan October 2014

The Changed World Around Us Imperative to educate more people – 65% of new jobs in the next decade require some post-secondary training – Preparing students for work, community and responsible citizenship Student demographic changes – more variability, less social capital Need to respond to hard questions about the value of higher education – $24K debt load Convey the value of research Vastly increased competition Requires a radically distinctive approach 2

UNC is Well-Positioned Research university committed to undergraduate access and success Experience in serving students who haven’t traditionally considered a research university Translational research Graduate programs meeting the public need One-stop+ student support 3

New context = new financial management Shift from fund accounting to “strategic deployment of resources to support the mission” 1 – River of revenue – Building Reserves /Investing Reserves (attachment 1) – Capital Align price with value proposition (transformative education) – Institutional financial aid (attachment 2) – ~70% of our funding is from students 1. Strategic Financial Analysis for Higher Education, KPMG 4

Multiyear Strategic Financial Management 5 Enrollment and Revenue Growth FY16- FY19 Investing Reserves FY14 and FY15 Investing Reserves FY14 and FY15 Building Reserves FY09- FY13

Enrollment Growth Drives Fiscal Sustainability Respond to increasing demand for graduate programs Reassert UNC’s position in the undergraduate market 6 Enrollment and Revenue Growth FY16- FY19

Strategic Actions 7

Timing of Strategic Actions 8  Business practices (sustainable cost savings)  Program enrollment targets (vacant capacity)  Program marketing (Targeted marketing)  Program enrollment targets (Add cohorts in Extended Campus programs)  New programs initiatives)  New student markets (International recruiting – China)  Fundraising priorities  Workload and course enrollment  Undergraduate and graduate admissions processes  New programs, new markets initiatives)  Student support (Student Success Collaborative)  Business practices (centralizing to gain efficiencies)  Summer Session strategy  Image Marketing (UNC academic image)  Student support (One-Stop+/Campus Commons) Faster FY ’15 FY ’18 Slower r

9 Campus Commons Will increase the number of students who enroll at UNC. Will increase the number of students who succeed to graduation. Will address critical curricular needs. Will create a central connecting point for UNC and the broader community. 9 Radically distinctive approach

Campus Commons Finances 10 $ 73.6 million building-114,000 sq ft $40 million state $10 million donor $24 million bonds backed by student fee ($160 annual fee) Operating effect $2.3 million $400 thousand revenue $1.6 million debt $1.1 million utilities, facilities staff, other operating cost

Fiscal Sustainability: Key Points 11 State of the University Address 1.15,000 students by Fall Increase the proportion of graduate students from 20% to 25% 3.Increase undergraduate persistence by 2 pct points to 83% by Fall Identify $2.4 million in sustainable cost savings 5.Break ground on Campus Commons summer 2016 Growth strategy Commitment to compensation identity No overall staffing growth Student affordability: strategic pricing and discounting Leverage reserves for timing and flexibility Stewardship of capital and debt management

Commitment to Compensation Identity 12 Principles 1.To fulfill our promise of transformative education to students, we must be competitive in the local and national market for talented faculty and staff. 2.We will be forthright with current and prospective employees about where we fit in the market, so they can make informed career decisions. 3.We will address compensation considerations as a central component of the budget process rather than as an afterthought. Progress towards 90% of peers (FY13-FY17) o FY13 5% pools; FY14 5% pools; FY15 3% pool o Fall % o Fall 13 Data concerns discussed with Salary Equity  NCHEMS vs Doctoral-All: small sample size  NCHEMS Doctoral-All 83.4% o Salary Equity distribution model: 50% parity, 40% MOE, 5% compression, 5% discretion Next steps: discussion of peers, standardized reporting

No Overall Staffing Growth 13 9 Core plans drive decisions o University-wide staffing plan for faculty and staff

Student Affordability 14

Leverage Reserves: Attachment 3 Model 15

UNC Budget Structure 16 Operating Budget Annual, river of revenue, $180M Operating Budget Annual, river of revenue, $180M Strategic Investment Budget Specific opportunities, multiyear $5M Strategic Investment Budget Specific opportunities, multiyear $5M Capital Budget SOME state funds, multiyear $8M Capital Budget SOME state funds, multiyear $8M Restricted Grants and Financial Aid $8M sponsored programs. $20M fed/state student grants Restricted Grants and Financial Aid $8M sponsored programs. $20M fed/state student grants Approved Budget (June Book) and Quarterly Financial Reports Summer, Schlrshp Allow, Capitalization, Debt, Other Adjustments Summer, Schlrshp Allow, Capitalization, Debt, Other Adjustments Annual Report (Audited financial statements & supplemental information

Capital and Debt 17 Capital: $716M replacement value, $151M deferred maintenance Debt ~$143 million – Moody’s A1; Standard & Poors A – 2014A $52M refunding 3.7% Where are we with Campus Commons? $ 73.6 million building-114,000 sq ft: $40 million state; $10 million donor;$24 million bonds backed by student fee ($160 annual fee) CCHE prioritization; CDC December

Multiyear Strategic Financial Management 18 Enrollment and Revenue Growth FY16- FY19 Investing Reserves FY14 and FY15 Investing Reserves FY14 and FY15 Building Reserves FY09- FY13

Growth Strategy Targets 1.15,000 students by Fall Increase the proportion of graduate students from 20% to 25% 3.Increase undergraduate persistence by 2 pct points to 83% by Fall Identify $2.4 million in sustainable cost savings 5.Break ground on Campus Commons summer