1. Tennessee Higher Education Commission 2016-17 Funding Recommendations Tennessee Higher Education Commission November 18, 2015

2. Tennessee Higher Education Commission Longitudinal Finance Trends Affordability Trends & Tuition Recommendation Operating Recommendation Capital Recommendation 2 Overview

3. Tennessee Higher Education Commission Longitudinal Finance Trends

4. Tennessee Higher Education Commission Cost Effectiveness 4

5. Tennessee Higher Education Commission 5 Cost Effectiveness

6. Tennessee Higher Education Commission 6 Appropriations and Fees

7. Tennessee Higher Education Commission 7 Appropriations and Fees

8. Tennessee Higher Education Commission Affordability & Tuition

9. Tennessee Higher Education Commission 9 Financial Aid Average Debt Levels Default Rates Tuition Recommendation Affordability & Tuition

10. Tennessee Higher Education Commission 10 Merit-based lottery scholarship program = $304M Need-based grant (TSAA) = $74.6M State grant aid = $1,460/UG FTE (3 rd in US) Average debt = $25,515 (15 th lowest in US) 2012 Cohort default rate = 11.9% (nation = 11.8%) Sources: TN data, NASSGAP, Project on Student Debt, US Dept. of Education TN Financial Aid Profile

11. Tennessee Higher Education Commission 11 Sources: THEC, TSAC, US Department of Education Of the 260,000 students in public higher education, nearly 110,000 received a Pell grant and over 88,000 benefited from the lottery program. Student Financial Aid: Total Recipients

12. Tennessee Higher Education Commission 12 *University Tuition Revenue is an estimate of undergraduate students only. Sources: THEC, TSAC, US Department of Education In 2013-14, public higher education collected $1.36 billion in gross tuition revenue, which was offset by $679.1 million in federal and state grants. Student Financial Aid: Total Grant Aid

13. Tennessee Higher Education Commission 13 Cohort default rate (CDR) is defined as the percentage of a school's borrowers who enter loan repayment during a fiscal year and default within the next three years. CDR = Borrowers who default Borrowers who enter repayment Student Default Rates

14. Tennessee Higher Education Commission TN Sector Default Rates Public Univ: 9.3% Public CC: 19.1% Private Univ: 7.2% Proprietary: 16.3% 14

15. Tennessee Higher Education Commission 15 10,117 Defaulters in 2015 across all sectors (2012 Cohort); Down slightly from 10,156 in 2014 (2011 Cohort); Research suggests high percentage of defaulters are non-completers with relatively low debt levels. TN specific data. Student Default Rates

16. Tennessee Higher Education Commission 16 Average Annual Increase over 5 years: – University = 6% – CC = 5% – TCATs = 5% State Funding Change = 3.6% Tuition and Mandatory Fees

17. Tennessee Higher Education Commission 17 Annual tuition and fee rate for full time attendance: – Average University = $8,690 – Average CC = $4,121 – TCATs = $3,554 Tuition and Mandatory Fees

18. Tennessee Higher Education Commission 18 Summary of Fees Compared to Peers, FY 2015-16 ResidentFeesPeer Fees+/-TNPeer Undergrad2015-16 %RankMaxMin APSU$7,801$7,889-1.1%6$9,337$5,775 ETSU$8,332$7,43712.0%4$9,768$5,775 MTSU$8,404$8,1662.9%6$10,952$5,151 TSU$7,417$8,105-8.5%9$10,686$5,775 TTU$8,353$7,52811.0%4$9,973$5,775 UM$9,269$9,889-6.3%10$12,772$6,384 UTC$8,356$7,22015.7%2$8,633$5,775 UTK$11,948$10,19317.2%3$14,476$6,310 UTM$8,326$8,518-2.3%6$14,536$6,691 CCs$4,121$3,9544.2%6$6,830$2,520 Tuition and Fees Comparisons

19. Tennessee Higher Education Commission 19 Undergraduate maintenance fee only. 0%-3% (all sectors). Accompanies $40.9M operating increase. Tuition model guidance has macro inflation factor of 2.2% that includes salary COLA. 2016-17 Tuition Recommendations

20. Tennessee Higher Education Commission Outcomes-Based Formula & Operating Appropriations

21. Tennessee Higher Education Commission 21 $40.9M to fund outcomes formula units and TCATs: – coupled with 0% - 3% tuition rec – 4.7% increase over 2015-16 – improve affordability for students $28.6M for TSAA financial aid. $800K outcome improvement fund. $15.7M for non-formula units. 2016-17 Operating State Appropriations

22. Tennessee Higher Education Commission Overall Percent Funded 22

23. Tennessee Higher Education Commission The 2015-20 FRC met once a month from February to June, proposing and reviewing changes to the 2010-15 model. The Statutory Formula Review Committee convened in late June. Tennessee Higher Education Commission approved basic framework of proposed model on July 23. 23 Formula Review Committee 2015-2020

24. Tennessee Higher Education Commission Overall structure of the outcomes-based funding formula is the same. Incremental changes include: – Operational definition refinements – Removal/Replacement of Outcomes – Subpopulation Alterations – Updated Mission Weights Share of total is key to recommendation 24 Overview of Changes

25. Tennessee Higher Education Commission 25 $37.5M for outcomes formula units. Largest state appropriation increases: – Dyersburg State Community College 7.6% increase – Northeast State Community College 7.6% increase – University of TN at Chattanooga 7.5% increase $3.4M for TN Colleges of Applied Tech 2016-17 Operating State Appropriations

26. Tennessee Higher Education Commission 26 Breakdown of Component Parts

27. Tennessee Higher Education Commission 27 Breakdown of Component Parts

28. Tennessee Higher Education Commission 28 Community College Outcome Changes

29. Tennessee Higher Education Commission 29 University Outcome Changes

30. Tennessee Higher Education Commission 30 Share of Outcomes-Based Formula

31. Tennessee Higher Education Commission 31 Cumulative Change in Appropriations at Universities Due to the Formula

32. Tennessee Higher Education Commission 32 Cumulative Change in Appropriations at Community Colleges Due to the Formula

33. Tennessee Higher Education Commission 2016-17 Institutional Outcomes Improvement Fund $800K in non-recurring funds Competitively awarded grants – ranging from $50,000 to $150,000 – available to institutions that are lagging in outcome production – must identify goals for increasing these outcomes and provide metrics for success 33

34. Tennessee Higher Education Commission 2016-17 Non-Formula Strategic Initiatives $6.2M requested for NF Strategic Initiatives: –ETSU College of Medicine: Pediatric and Children’s Services, $583,600 –TSU Institute of Ag & Environmental Research: Required Federal Match, $1,039,000 –UT System: Business Intelligence System, $500,000 –UTIA and UT College of Veterinary Medicine: Governor’s Rural Challenge — Advancing the Agricultural Economy, $3,853,500 –TBR System: Workforce Development Program Coordination, $200,000 34

35. Tennessee Higher Education Commission Capital Projects

36. Tennessee Higher Education Commission 36 62.8 million gross square feet of space. 40.4 million square feet of E&G space. 2,348 buildings Average year of construction: 1971 Higher Education Infrastructure

37. Tennessee Higher Education Commission 2015 Governor’s Capital Task Force on Higher Education Infrastructure and Capacity 37 Tasked with developing long-term strategies to address higher education capital and facilities issues Themes that emerged: –Improve the communication around and process of requesting funding for capital projects –Identify strategies to address the deferred maintenance backlog –Revise the capital outlay match program –Develop Drive to 55 program capacity projects

38. Tennessee Higher Education Commission 38 Projects initiated by the institution. UT and TBR establish system priorities. THEC merges those priorities into a unified list: – Respect priority order within system – Renovations over new space – CCTA/D55 links Capital Outlay Projects Background

39. Tennessee Higher Education Commission 39 $10M Drive to 55 Program Capacity Fund $369.4M for 8 projects – 4 TBR Projects ($144.0M) – 4 UT Projects ($225.4M) Each system project has a matching component: – Match began in 2012-13; – 5-25% match depending on sector; – Private gifts, grants and other resources. Capital Outlay Recommendation

40. Tennessee Higher Education Commission 40 Capital Outlay Life Cycle The 2016-17 Capital Outlay recommended projects were generally first identified by the respective system years ago. The first funding year the project emerged as a UT or TBR priority was…

41. Tennessee Higher Education Commission 41 $153.8M for 99 projects; $95.5M at TBR for 87 projects; $58.3M at UT for 12 projects; – This 60%/40% split mirrors the TBR/UT infrastructure footprints. Capital Maintenance Out Years – 2017-2018 through 2020-2021 – $460.8M across higher education enterprise Capital Maintenance Recommendation

42. Tennessee Higher Education Commission 42 State funding to improve affordability for students; Low to no tuition growth; Capital and strategic initiative requests to expand institutional program capacity Final Observations

43. Tennessee Higher Education Commission 2016-17 Funding Recommendations Tennessee Higher Education Commission November 18, 2015