2. 2 Paul Jenny Vice Provost, Planning & Budgeting March 28, 2012

3. 3 I.National Trends II.Snapshot of Washington State and UW III.Trends and Challenges for the UW IV.Our Responses V.A New Way? HIGHER EDUCATION: THE UW IN CONTEXT

4. 4 NATIONAL TRENDS: DECADES OF GROWTH  Huge growth in institutions, enrollment, and participation since World War II  Increasingly skilled workforce and demand for educated workers = growing college wage premium

5. 5 NATIONAL TRENDS: FIVE EMERGING CHALLENGES  Demand for educated workers outpacing supply  Stalled completion rates  Changing demographics  Increasing international competitiveness  Declining public funding leads to increasing price

6. 6 NATIONAL TRENDS: COST OF ATTENDANCE  College costs often increase higher than inflation: Higher education is a service industry, and prices behave similarly to other personal services offered by highly educated providers (e.g. dentists, lawyers)

7. 7 SNAPSHOT: WASHINGTON STATE  Public Institutions provide 2/3 of BA degrees in WA: 2 doctoral research, with 5 branch campuses 4 comprehensive undergraduate Plus community and technical colleges FALL 2010 UNDERGRADUATE ENROLLMENT, WASHINGTON STATE 2 YEAR PUBLIC61% 4 YEAR PUBLIC28% 4 YEAR NOT FOR PROFIT9% 4 YEAR FOR PROFIT2%  In WA, 46% of state higher education appropriations go to all 4-year institutions and 54% to 2-years (the most unbalanced state higher education funding distribution)

8. 8 SNAPSHOT: WASHINGTON STATE

9. 9

10. 10 SNAPSHOT: WASHINGTON STATE

11. 11 SNAPSHOT UW: WORKHORSE & SHOWHORSE  UW provides 30% of all BA degrees in WA (40% of public BA degrees) and 39% of graduate and professional degrees (72% of public degrees) 50k students plus 41K outreach students Produced 14K degrees last year alone Over half of BA students graduate with no debt Oversees four hospitals provide 1/3 rd of state’s charity care Ranked in the top ten public research universities in the country by US News & World Report Top five in the country for federal research funding

12. SNAPSHOT UW: FY11 OPERATING BUDGET = $5.5B  State support dominates our conversations because when combined with tuition it forms our core foundation of educational support. While state support has fallen significantly, it still represents 31% of our core education budget. Some units produce significantly less tuition than others and rely disproportionately on state funding. 12

13. 13 TRENDS & CHALLENGES FOR THE UW  Changing Sources of Revenue Effect on Tuition Effect on Financial Aid  Other Funding Considerations The changing role of capital, federal and philanthropic funding

14. 14 SHIFTING SOURCES OF EDUCATIONAL REVENUE

15. TUITION RATES COMPARED TO PEERS 15 YEARPEER GROUP RESIDENT UNDERGRAD TUITION & FEES NON-RESIDENT UNDERGRAD TUITION & FEES 2010-11 STATUTORY PEER GROUP$10,887$30,790 UNIVERSITY OF WASHINGTON$8,701$25,329 2011-12 STATUTORY PEER GROUP$11,700$33,100 UNIVERSITY OF WASHINGTON$10,571$28,055

16. 16 EFFECT OF INCREASING TUITION ON AID  As undergraduate tuition has increased, the amount of institutional aid represents an increasing proportion of revenue from undergraduate residents

17. 17 COMPETITION FOR ADMISSION  Over five years, freshman applications have grown 37%

18. 18 DEMAND FOR ENROLLMENT  Over five years, undergraduate enrollment and total enrollment have grown by 13%

19. OTHER FUNDING CONSIDERATIONS: CAPITAL 19  State capital funding extremely limited Declining new and renovated building funding Deferred maintenance needs underfunded

20. OTHER FUNDING CONSIDERATIONS: FEDERAL 20  The UW’s exposure to several streams of federal funding is high ($1.6b annually) 83% of total research revenue ($1.1b) Medicare and Medicaid payments represent 36%- 38% of total clinical revenues ($485m) $40m in PELL grants Provision of student loans/work study funding  Cost of research skyrocketing due to sophistication of science & tech yet funding is plateauing

21. OTHER FUNDING CONSIDERATIONS: PHILANTHROPIC 21  Increasingly key funding source but currently restricted and focused on new initiatives VALUE OF CONSOLIDATED ENDOWMENT FUND 1992-2011 (DOLLARS IN MILLIONS)

22. UW RESPONSES: EFFICIENCIES 22 ADMINISTRATIVE  Laid off or eliminated over 1,000 positions and reduced use of overtime  Centralized, streamlined, and automated core services (including procurement) across units ACADEMIC  Accelerating change in composition of our academic workforce  Increasing class size  Increase in nonresident admissions  Degree, emphasis, and minor eliminations and halted admissions

23. UW CONSEQUENCES: CLASS SIZE 23  Course reductions concentrated in the lower levels: Mostly constant average class size (ACS) for 200, 400, and 500+ level courses Increase in ACS for 100 level courses from 48 to 61 Increase in ACS for 300 level courses from 37 to 42

24. UW CONSEQUENCES: ACADEMIC WORKFORCE 24  UW attracts top students, but costs keep cadre of top, tenure-track/tenured professors from growing to match demand: 42% of undergraduate courses taught by tenured/tenure-track faculty in 2001 vs. 34% today 65% of graduate and professional courses taught by tenured/tenure-track faculty vs. 46% today With retirement delayed and hiring constrained, tenured/tenure-track faculty at the UW are graying: AGE20012011 <4530%29% 46-6462%54% >6020%33% >657%17% >702%6%

25. UW RESPONSES: A NEW BUDGET MODEL 25  Activity Based Budgeting (ABB) is a model that directly allocates revenues to the unit that generates them Increased local control More transparent More efficient  ABB was partially implemented in FY11 and 12, and will be fully implemented in FY13

26. 26 CENTRAL PUZZLE REMAINS How should Washington State increase degree production at all levels in the face of waning public resources and limited student resources, without compromising educational quality or research and service outputs?

27. 27  Already doing more with less  Additional efficiencies plus student growth threaten quality and quantity of education, research and service  Non fungible sources are growing while educational funding sources decline  Public investment in unrestricted form unlikely to return  Tuition revenue can only be raised so much before the public mission is compromised A TIPPING POINT AT THE UW?

28. 28 A NEW WAY? First, we must accept that funding public higher education has undergone a paradigm shift. Then, we must ask ourselves: What do we do best and how do we preserve it while simultaneously expanding its reach? Finally, we must transcend financial constraints to define a new UW.

29. 29 The conception of education as a social process and function has no definite meaning until we define the kind of society we have in mind. – John Dewey, Democracy & Education (1916)