Board of Visitors Finance Committee Meeting June 2016
Finance Committee Agenda Consent Agenda: 1. Virginia Blood Services Contract 2. Defined Contribution Retirement Plan 3. Revised In-State Undergraduate Tuition, 2016-17 4. Delegation of Authority for Future Property Acquisitions Action Items: • 2016-2017 Operating Budget Reports: 1. Financial Report Executive Vice President‟s Remarks 2.
CONSENT AGENDA ITEMS
Virginia Blood Services Contract • We are asking the Board to authorize the EVP for Health Affairs to execute a two-year contract extension with current vendor for blood services and products. • This contract extension will: • assure clinical continuity while Clinical Labs team completes Epic Beaker implementation • allow Blood Bank and VCU to explore possibility of entering into joint contract in 2018 • Total estimated annual value will exceed $5 million 4
University Oversight of 403(b) Retirement Plan The University provides two primary defined contribution retirement plans: • The Optional Retirement Program (“ORP”) (funded with employer contributions) • A 403(b) retirement program (funded with employee contributions) The University actively administers the ORP but does not provide the same level of oversight to the 403(b) 5
University Oversight of 403(b) Retirement Plan With oversight from the Finance Committee, the Retirement Administrative Committee (“RAC”) performs the following functions: • Establishing and maintaining investment procedures • Reviewing fund investment performance • Communicating with plan participants and plan providers • Contracting with necessary professionals 6
University Oversight of 403(b) Retirement Plan • Evolving best practices are resulting in more peer institutions adopting oversight of 403(b) programs • Providing oversight of both programs would benefit participants by: • Aligning the goals of both plans • Reducing and linking fund platforms • Establishing consistent messaging • Reducing participant confusion • Mitigating risk from disparate funds 7
Implementation Timeline 1. Communication package mailed to homes – August 2016 2. On-Grounds presentations – Fall 2016 3. Targeted meetings with key faculty/staff groups – Fall 2016 4. Increased vendor presence for participants – Fall 206 5. New fund menu available – September 2016 6. Transition of assets and funds – Spring 2017 8
University Oversight of 403(b) Retirement Plan • We are asking the Board of Visitors to: • adopt equal oversight responsibility for the University-provided defined contribution retirement plans • delegate oversight responsibility for both plans to the Finance Committee 9
Revised 2016-2017 In-State Undergraduate Tuition We are asking the Board of Visitors to ratify a change in the 2016-2017 in-state, undergraduate tuition rate, decreased from a 3.0% increase to a 1.5% increase. Tuition Class Year $ Increase % Increase 2016-2017 First Year $13,060 n/a n/a Guaranteed Tuition (Entering Fall 2016) $14,378 n/a n/a Second Year $12,060 $168 1.4% Guaranteed Tuition (Entered Fall 2015) $12,950 n/a n/a Third Year $11,060 $168 1.5% Fourth Year $11,060 $168 1.5% 10
Tuition + E&G Fees: In-State Returning Undergraduate Students Academic Year 2016-17 % increase Virginia Military Institute 4.0% UVa – Wise 3.1% Christopher Newport 3.0% James Madison 3.0% Mary Washington 3.0% Norfolk State 3.0% Radford 3.0% Virginia State 3.0% George Mason 2.9% Virginia Tech 2.9% Longwood 2.5% Old Dominion 2.5% Virginia Commonwealth 2.5% 11 University of Virginia 1.4% William & Mary 0.0%
Delegation of Authority for Future Property Acquisitions • We are asking the Board of Visitors to re-enact a previously delegated authority to the Executive Vice President and Chief Operating Officer to acquire real property on behalf of the University • In areas adjacent to or in vicinity of the University • In consultation with Rector • Subject to approval of Chair of Finance Committee • Permitted by University‟s Management Agreement with the Commonwealth 12
2016-2017 OPERATING BUDGET
Total University of Virginia 2016-2017 Operating Budget (in millions) The proposed 2016-2017 budget is consistent with multi-year operational plan projections. 2015-16 2016-17 Increase Increase Annual Annual $ % Budget Budget Academic Division $ 1,474.9 $ 1,636.3 $ 161.4 10.9% Medical Center 1,424.7 1,521.9 97.2 6.8% UVa-Wise 41.3 43.7 2.4 5.8% Total $ 2,940.9 $ 3,201.9 $ 261.0 8.9% 14
SECTION TITLE ACADEMIC SECTION DIVISION TITLE
Academic Division Operating Budget Key Highlights • FY 2015-16 results are on budget • FY 2016-17 operating budget is consistent with the Multi-Year Financial Plan • Key drivers in the FY 2016-17 operating budget: – New State General Funds – Research and philanthropy growing – Planned compensation increases – Organizational Excellence savings – Short-term infrastructure investments driving significant future period savings 16
Key Budget Elements Previously Approved by/ General Assembly Budget Element Reviewed with BOV Action Total state appropriations of $152.8 million Classified staff salary increases of 3% * University Staff salary increases of 3% * Faculty salary increases of 4.75% * Tuition, fees, housing, and dining rates * Endowment distribution rate set at 4.60% * Enrollment levels * Organizational Excellence Savings of $20.1 million * Sponsored research growth of 1% (based on known awards) * Sales and services increase of 2.5% * Gift growth of 2.5%; new gifts to endowment of $25 million * OTPS increase of 2.0% *Consistent with Multi-Year Financial Plan 17
FY 2016-17 Operating Sources (in thousands) 2015-16 2016-17 Increase vs. Forecast 2015-16 Annual Annual Forecast $ % Budget Budget Sources Tuition & Fees $ 505,129 $ 505,129 $ 531,941 $ 26,812 5.3% State Appropriations 144,737 144,737 152,750 8,013 5.5% Externally Sponsored Research 281,156 281,156 306,471 25,315 9.0% Endowment Distribution 173,122 182,850 190,016 7,166 3.9% Expendable Gifts 129,480 139,480 140,142 662 0.5% Sales & Services and Other 244,751 244,751 318,386 73,635 26.8% * Total $1,478,375 $1,498,103 $1,639,706 $ 141,603 9.5% * Reflects adjustment in how Medical Center support is recognized in the School of Medicine (previously recognized by the University Physicians Group (UPG). 18 18
FY 2016-17 Operating Uses (in thousands) 2015-16 2016-17 Increase vs. Forecast 2015-16 Annual Annual Forecast $ % Budget Budget Uses Instruction $ 415,635 $ 420,635 $ 447,611 $ 26,976 6.4% * Research & Public Service 295,656 300,656 365,277 64,621 21.5% Academic Support 149,100 149,100 158,992 9,892 6.6% Student Services 46,208 46,208 49,447 3,239 7.0% General Administration 95,433 100,161 101,016 855 0.8% O&M of Physical Plant 110,653 110,653 113,278 2,625 2.4% Financial Aid 106,335 111,335 123,344 12,009 10.8% Auxiliaries 172,383 172,383 184,259 11,876 6.9% Internal Debt Service/Transfers 83,475 83,475 93,062 9,587 11.5% Total $1,474,878 $1,494,606 $1,636,286 $141,680 9.5% * Reflects adjustment in how Medical Center support is recognized in the School of Medicine (previously recognized by the University Physicians Group (UPG). 19
Operating Budget Roll Forward FY 2015-16 to FY 2016-17 (in millions) FY 2015-16 Forecast (Uses) $ 1,494.6 SOM investments (new faculty, IT, Med Ctr support of 58.2 research (new methodology) ) Instructional Costs 23.8 Faculty & Staff Compensation Increases (4.75%, 3%) 21.0 Title IX, Clery Act, Safety & Security, and Other 14.7 Auxiliary Services Activity 11.4 Externally-Funded Research Activity 6.4 Scholarships and Fellowships 6.2 FY 2016-17 Budget (Uses) $ 1,636.3 20
FY 2015-16 Organizational Excellence (OE) Results Savings Target: $16.2 million in FY 2015-16 • OE Initiatives: Strategic Sourcing, ResearchUVA, Gift Processing • Early Retirement Incentive Plan (ERIP) • University Financial Model promotes a cost-knowledgeable environment of accountability FY 2015-16 Results: • $1.1 million strategic sourcing savings • $5 million research administration time savings with new IT tool • $11 million ERIP salary and fringe savings • Over $2 million individual local school and unit improvements • Streamlined gift administration by 50% 21
FY 2016-17 Organizational Excellence (OE) Planned Initiatives Savings Target: $20.1M in FY 2016-17 • OE Initiatives: e.g.,TravelUVA, ResearchUVA, HR Transformation • Early Retirement Incentive Plan • University Financial Model promotes a cost-knowledgeable environment FY 2016-17 Planned Results: • $6.1M: Central services to achieve 1-3% savings • $12.1M: Reduction in operating supplement to schools due to cost reductions and self-funding capabilities • $1.9M: Other institutional savings 22
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