Financial Report to the Faculty

Committee on Administrative & Financial Policy (FAP)Professor Allen Hoffman, Chair

Provost ad interim John OrrVice President & CFO Jeffrey Solomon

March 22, 2007March 22, 2007

2

AgendaAgenda

1. Overview of FAP Activities 2006-07Professor Hoffman

2. Benchmarking of Faculty SalariesProvost ad interim Orr

3. Financial Update for FY07 & FY08

Vice President Solomon

4. Questions

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FAP Membership 2006-2007FAP Membership 2006-2007

Allen Hoffman, Chair

James Hanlan, Chair FBC

Suzanne Weekes, Secretary

Jeffrey Solomon, VP Finance & CFO

Judith Trainor, Budget, Planning & IR

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FAP’s ChargeFAP’s Charge

To inform the Faculty on administrative and financial policies affecting the Faculty and the academic affairs of WPI

To ascertain the interests and views of the Faculty concerning such policies and represent these interests and views to the Administration

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Major FAP Activities 2006-07Major FAP Activities 2006-07

Staff Opinion Survey Faculty Phased Retirement Program Faculty Salary Benchmarking Fringe Benefit Issues Budget Status & Development

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Report on FacultyReport on Faculty

Investment in New Faculty for FY08

Benchmarking of Faculty Salaries– Determination of Peer Group– Data Comparison by Rank– Development of Compensation Philosophy

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Investment in FacultyInvestment in Faculty

19 searches authorized for FY2008

– To replace faculty who retired in FY2005– To build areas of strategic importance– To support enrollment growth– To establish new robotics program

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The WPI Faculty-Fall 2006The WPI Faculty-Fall 2006

Instructional Faculty 205

Tenured 159 (78%)

Assistant Professors 44 (22%)

Associate Professors 74 (36%)

Full Professors 87 (42%)

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The WPI Faculty-ChangesThe WPI Faculty-Changes

Fall 2002 Fall 2006

Instructional Faculty 215 205

Percent Tenured 73% 78%

Assistant Professors 54 44

Associate Professors 72 74

Full Professors 89 87

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New Approach for Salary AnalysisNew Approach for Salary Analysis

Identification of broader peer group

Benchmarking based on AAUP data

Development of salary philosophy & plan

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Sources of Faculty Salary DataSources of Faculty Salary Data

Association of Independent Technological UniversitiesFall 2006 AITU data now availableLimited group of 20 schoolsIncludes RPI, CMU, MIT, RITReported by faculty rank and by discipline

American Association of University ProfessorsFall 2006 AAUP data not yet availableCovers most institutions Not segregated by discipline

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Reminder of 2006 Report:Engineering and CS Salaries, Fall 2005 - ProfessorsReminder of 2006 Report:Engineering and CS Salaries, Fall 2005 - Professors

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

Milw aukee School of Engineering Kettering University Embry-Riddle Aeronautical UniversityThe Cooper Union Franklin W. Olin College of Engineering Clarkson UniversityRose-Hulman Institute of Technology Polytechnic University Worcester Polytechnic InstituteIllinois Institute of Technology Rochester Institute of Technology Case Western Reserve UniversityRensselaer Polytechnic Institute Harvey Mudd College Carnegie Mellon UniversityMassachusetts Institute of Technology

WPI

Median

$106,354

CWRCLK R-H PLY IIT CMURIT RPI HM MIT

1155824 1026 20321 673723 42

Number of Professors

OCETCU

ERA

KU

MSE

23 33 14 8 2

FALL 2000 - FALL 2005

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

Fall 2000 Fall 2001 Fall 2002 Fall 2003 Fall 2004 Fall 2005

Median

High

WPI

Low

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Engineering and CS Salaries - Professors Engineering and CS Salaries - Professors

FALL 2000 - FALL 2005

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

Fall 2000 Fall 2001 Fall 2002 Fall 2003 Fall 2004 Fall 2005

Median

Max

WPI

Min

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Peer Group CharacteristicsPeer Group Characteristics

Number of Institutions 34

Doctoral I 27 (80%)

AITU Schools 15 (44%)

Public Institutions 11 (33%)

New England 9 (27%)

Average Enrollment 14,500

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Peer GroupPeer Group

Boston CollegeBoston UniversityBrandeis UniversityBrown UniversityCalifornia Institute of TechnologyCarnegie Mellon UniversityCase Western Reserve UniversityClarkson UniversityCornell University-PublicCornell University-EndowedDrexel UniversityEmbry-Riddle Aeronautical UniversityGeorgia TechHarvey Mudd CollegeKettering UniversityLehigh UniversityMichigan Tech

Milwaukee School of EngineeringMassachusetts Institute of TechnologyNew Jersey Institute of TechnologyNortheastern UniversityPenn State University Park Polytechnic UniversityPurdue University-West LafayetteRensselaer Polytechnic InstituteRochester Institute of TechnologyRose-Hulman Institute of TechnologyStevens Institute of TechnologyTufts UniversityUniversity of ConnecticutUniversity of Illinois at Urbana-ChampaignUniversity of Maryland at College ParkUniversity of Massachusetts-AmherstVirginia Tech

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Average Salaries-Assistant ProfessorsAverage Salaries-Assistant Professors

$60

$65

$70

$75

$80

2001-02 2002-03 2003-04 2004-05 2005-06

In T

hous

ands

WPI Peer Group

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Average Salaries-Associate ProfessorsAverage Salaries-Associate Professors

$65

$70

$75

$80

$85

2001-02 2002-03 2003-04 2004-05 2005-06

In T

ho

usa

nd

s

WPI Peer Group

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Average Salaries-Full ProfessorsAverage Salaries-Full Professors

$90

$95

$100

$105

$110

$115

2001-02 2002-03 2003-04 2004-05 2005-06

In T

ho

usa

nd

s

WPI Peer Group

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CFO ReportCFO Report

FY07 Financial Status FY08 Approved Budget Parameters The Structural Deficit New Debt Structure Endowment Update New Building at Gateway Park Other Major Capital Projects Green Campus

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The Budget: Status of FY07The Budget: Status of FY07 Projected surplus of $1M at 6-30-07

Projected total revenue to equal budget– Undergraduate net tuition at budget– Shortfall in graduate tuition– Increase in Corporate Education– Increase in short-term investment income

Projected total expense to be below budget– Vacancy savings– Utilities savings– New building at Gateway Park to open in April

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The FY08 Budget: Themes & ObjectivesThe FY08 Budget: Themes & Objectives

Prudently continue growth of net revenues

Provide faculty support by authorizing searches for 19 tenure/tenure-track faculty

Provide adequate salary increases and affordable health insurance for faculty and staff

Fully integrate Gateway Park life sciences building into operating budget

Constrain the rate of tuition increases

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The FY08 Budget: Approved ParametersThe FY08 Budget: Approved Parameters

FY07 Budget FY08 Budget

Tuition increase 5.9% 4% - 5%

Freshman class size 760 (777 actual) 780 - 800

Undergraduate FTE 2,759 2,873-2,893

Tuition discount-freshmen 40.1% (42.5% projected) 41.0%

Tuition discount-all students 38.6% (38.5% projected) 39.1%

Merit pool 3.5% 4.0%

Equity/promotion pool 1.0% 1.0%

TT faculty searches 13 (10 filled) 19

Utilities $5.6 M $5.6M

New Gateway building $1.4M net expense $2.9M net expense

Health insurance contribution $3.3M (4% increase) $4.2M (25% increase)

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The FY08 Budget: Sources of RevenueThe FY08 Budget: Sources of Revenue

Net undergraduate tuition & fees $67.3M 59%Net graduate tuition 8.7M 8%Summer session tuition 2.8M 2% Subtotal net tuition & fees $78.8M 69%

Auxiliary operations 13.1 M 12%Endowment/investment income 10.2 M 9% Corporate/professional education 4.6 M 4%Indirect cost recovery 3.4 M 3% Unrestricted gifts 2.5 M 2%Other revenue 1.6 M 1% Total revenue $114.2 M 100%

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The FY08 Budget: Uses of FundsThe FY08 Budget: Uses of Funds

Salaries $52.6M 46%

Health insurance 4.2M 4%

Other benefits 10.2M 9%

Subtotal compensation $67.0M 59%

Other operating expenses 25.8M 22%

Debt service/depreciation 11.9M 10%

Utilities 5.6M 5%

New building at Gateway Park 2.9M 3%

Contingency 1.0M 1%

Total $114.2M 100%

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The Structural DeficitThe Structural Deficit

In a “balanced” budget, the structural deficit refers to items that are not being fully provided for or the use of resources to a greater extent than what might be ultimately sustainable.

Examples:– Inadequate deferred maintenance funding– Too high endowment spending rule– Not funding faculty salaries to adequate levels– Insufficient financial aid to meet tuition increases for

upper class students

Develop plan to address structural deficit over time

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Debt StructureDebt Structure Restructuring of existing debt

– More strategic debt structure– Extend average life– Create level debt service– Create additional debt capacity

New debt for residence hall ($40M)– To be issued June 2007– Rates locked in at 4.7% for 40 years

Total debt at approximately $145M– Overall annual debt service cost not increased significantly

Public Credit Ratings– Standard and Poor’s A+ (Outlook upgraded to stable)

– Moody’s Investors Service A1

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Endowment-Market Value HistoryEndowment-Market Value History

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000$381M as of Feb 28, 2007

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Endowment-Market Value ComparisonEndowment-Market Value Comparison

51 Tufts $1,215,413,000

71 BU $916,017,000

90 RPI $682,894,000

99 Northeastern $595,859,000

109 RIT $568,945,000

157 WPI $353,720,000

Values as of June 30, 2006 per NACUBO

For private institutions to which the greatest number of WPI students apply for admittance

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Endowment-Performance HistoryEndowment-Performance History

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

WPI Average for all colleges

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Endowment-Asset AllocationEndowment-Asset Allocation

Actual Allocation 2/28/07Approved Allocation Policy

Public Equity 40%

Public Equity 50.3%

Hedge Funds 25%

Real Assets 18%

Fixed Income

12%

Private Equity

5%

Hedge Funds 27.4%

Fixed Income 10.6%

Real Assets 4.6%

Private Equity 7.1%

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Life Sciences Building at GatewayLife Sciences Building at Gateway

Scheduled to open April 2007 31 faculty to have labs in new facility Operations committee determined

initial level of required support 11 new staff to be hired in FY2008 Transportation to be provided Corporate & professional education Café

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Major Capital Projects-FY07 & FY08Major Capital Projects-FY07 & FY08

New residence hall & garage

Alumni Field renovation

Salisbury & Goddard Hall renovations

Founders Hallrestaurant/pub & convenience store

Alden Hall air conditioning

Recreation center planning to continue

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The Green CampusThe Green Campus

Why Go Green? Trends in Higher Education Cost/Benefit Analysis of Going Green Green Buildings at WPI

– Bartlett Center– New Residence Hall

Policy Adopted by WPI Board

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Questions

This presentation is available on theOffice of Faculty Governance web page

http://www.wpi.edu/Campus/Faculty/