President's Fiscal Year End Budget Memo
Details the university's financial overview for fiscal year 2011.
As we begin the new academic year, I want to continue my practice of reporting to the community on the state of the Institute as regards the fiscal year just ended (FY 2011) and the current one which began on July 1, 2011 (FY 2012).
The overall summary is that we have just welcomed the largest, best qualified, and most diverse freshman class in WPI’s history; that we are in very sound fiscal condition; that our academic leadership and productivity is strong; and that major advances to the physical plant, both in overcoming deferred maintenance and in new facilities development, are proceeding well. All of this is due to the hard and excellent work of our faculty and staff, to whom the trustees and I are deeply grateful for our most impressive strength and progress.
I will be briefer in this memorandum than in years past, leaving much of the detail to presentations and discussions in the various faculty governance committees and in the upcoming fall Town Meeting. As always, the senior staff and I will be available in person, via e-mail, and in various meetings to answer questions and engage in discussion of any of these or related matters.
Seventeen (17) searches for new tenure-track (TT) faculty were undertaken in FY 2011; ten (10) were completed and six (6) will continue in FY 2012. Sixteen (16) additional TT searches have been authorized for FY 2012, for a total of twenty-two (22) searches this year. The number of appointments of fulltime, non-tenure-track (NTT) faculty and part-time adjunct faculty has also increased significantly. Provost Overström will be reporting in detail on the complete utilization of TT and NTT faculty.
Four new classrooms have been created through the conversion and renovation of spaces previously used for other purposes. The conversion of the former access grid in the “wedge” area has resulted in a particularly attractive and spacious classroom. And a multi-function laboratory, plus additional faculty and grad student offices, have been created for the Mathematics Department in the lower level of Stratton Hall in space freed up by the relocation of the facilities shops to the former Lee Street School building.
Our three new academic deans (Oates in Arts and Sciences, Rice in Business, and Güceri in Engineering) are now settled in and making good progress developing and promoting their leadership agendas. They have fully delegated authority from the provost for the leadership and management of their respective areas, and I believe they will bring important and strategic support to faculty productivity and initiatives in FY 2012.
As mentioned above, the Class of 2015 is the largest, best qualified, and most diverse freshman class in WPI’s history. Anticipating the enrollment of 875 freshmen, per our budget assumptions, the Admissions Office reduced the admit rate for the record-high number of applications. An unanticipated increase in the yield on offers of admissions brought some 1,023 paid deposits as of this writing, which we believe will result in a freshman class of slightly more than 1,000 students once the dust settles. Of this group of 1,023:
- 31% are female (currently 310, slightly ahead of last year’s 304, a record high);
- 12% are domestic students of color (126 vs. 96 last year, a record high);
- 14% are international students (up from 12% last year, another record high) with many coming with prestigious scholarship funding such as the Thai and Saudi Scholars;
- The average SAT composite score (2 tests) is 1297, up from 1294 last year and 1278 in 2009, another record high;
- The average GPI remains at 3.8, with 453 students graduating from high school with perfect 4.0 GPA’s (WAY up from last year’s 381);
- 99 are valedictorians or salutatorians (vs. 88 last year);
- 13% have a legacy connection to WPI (136 vs. 118 last year, with 11 having had both parents attend WPI);
- 24% come from outside New England (248 vs. 213 last year), not counting the international students-- otherwise the percentage would be 28%; and
- They represent 38 states and 35 foreign countries.
Clearly, our admissions and financial aid staff have produced another outstanding, even record-setting, freshman class, based on the rising reputation of WPI and the value of its degrees. Similarly, enrollment of graduate students has increased significantly, with actual data to be reported once registration and accounting are complete.
The capacity of our residential facilities to house this exceptionally large entering class was increased during the summer, as it was a year ago, by further renovations and refurnishing of the remaining large double rooms into triples, which the students who moved into them over the past weekend found to be quite satisfactory. I want to express special thanks to the staffs and leadership of the Office of Residential Services and the Facilities Division for the excellent, nearly heroic, efforts that were required to accomplish these conversions in a short period of time.
Our current freshman discount rate on tuition stands at 42%, roughly on par with last year’s, and will likely drop by a half point as the dust settles on the freshman class. Financial need levels for incoming students continue to be high, in keeping with economic trends. WPI’s average grant to incoming students was $17,484 this year, compared with $16,781 at this time last year. Endowed scholarship support (including recently announced campaign gifts) will help offset the pressures placed on our financial aid budget to fund these talented students. As a counterpoint to the increased need levels, we have seen a significant increase in the number of no-need students enrolling: 260 incoming freshmen enrolled with full external funding, compared with 212 last year and 202 in FY 2010. Given the persistent instability in the financial markets and the overarching uncertainty worldwide, this is a remarkably stable performance for our discount factor, and thus for net tuition revenues.
Financial Performance for FY 2011
The administration is pleased to report that the preliminary calculation of the FY 2011 operating surplus, subject to confirmation by our external auditors, stands at $14.7 million. This is $3 million higher than the previous year’s result, and continues an upward trend from $1.5 million in FY 2007, to $3.6 million in FY 2008; to $7.9 million in FY 2009, to $ 11.7 million in FY 2010.
The operating surplus is again primarily due to enrollment growth through increased numbers of entering students and greater retention and graduation rates; conservative budgeting; and prudent management of expenses. Areas of increased net revenue included: undergraduate tuition ($4 million); graduate tuition ($3.5 million); Corporate and Professional Education ($1.2 million); indirect cost recovery on research grants and other sponsored programs ($900 thousand); and auxiliary operations ($1.2 million). Utility costs came in $1.5 million under budget, and only $600 thousand of the $3 million contingency fund was actually utilized.
It is my intention again to return fifteen percent (15%) of the operating surplus, net of the budgeted contingency fund, to the academic leadership for support of faculty initiatives, with the particular allocations yet to be determined. The bulk of the surplus will likely be transferred to plant to fund current and upcoming capital projects, as has been our recent practice.
The FY 2012 Operating and Capital Budgets, and Beyond
The operating budget for the new fiscal year assumed a freshman enrollment of 875 with a tuition discount rate of 41%. As previously noted, we have exceeded the enrollment projection, although the discount rate is slightly higher due to the persisting economic weakness. Nevertheless, we will be carrying a significant operating surplus throughout the year, after having added approximately $1.8 million in expense due to the larger number of students being taught and housed. This budget continues the downward adjustment in the endowment spending rate, now at 5.3%, as it is being reduced by 0.1% per year to the (current) target rate of 5%. In addition to funding for the new faculty appointments, including start-up packages, an additional $950,000 has been added to the Division of Academic Affairs budget for the support of additional teaching assistants, adjunct faculty, and other costs of the growth in enrollment. All faculty and staff benefits continue at current levels, with the anticipation of a 12% increase in the costs of health insurance. The budget is well in balance, and good progress continues in bringing the funding for academic support and development, maintenance and operation of the physical plant, and new academic program development to fully competitive levels.
The capital budget provides for major construction projects, renovations to existing facilities, the addressing of deferred maintenance, information technology equipment and network, start-up funding for new faculty, and capital equipment. The current budget provides for: completion of the sports and recreation center ($53.2M); Improvement of the existing locker room facilities in Harrington ($1.2M); relocation of Army ROTC to Daniels Hall ($1.4M); fitting-out of space in the new Gateway II building for the Department of Fire Protection Engineering and the Business School ($3.2M); fitting-out the space for the new Bio-manufacturing Education and Training Center (BETC) at Gateway II ($2.95M, funded by Mass Life Sciences Center grant); creation of Mathematics Department’s multi-purpose lab and office space in Stratton Hall ($600K); restoration of the cupola and roof on Washburn Shops (final $700K of $1.6M project); renovation of the power house stack ($370K); exterior repointing of Alden Memorial (final $250K of $1.5M project); replacement of the chiller in Fuller Labs ($500K); and start-up funding for new faculty ($1.5M).
The Institute’s long-term debt stands at approximately $202.7M, down from $204.5M a year ago. Our credit ratings remain stable at a strong A1/A+ by Moody’s and S&P, respectively. The Institute has no near term intention to issue additional debt.
The endowment’s market value ended the fiscal year at approximately $374.4M, an increase of approximately $66.7M or 21.7% from a year ago. Total return for the FY 2011 year was 23.6% placing WPI’s performance in the top quartile of a broad group of endowments and foundations comprising our benchmark.
Construction and Renovations
The sports and recreation (and robotics!) center construction is proceeding on schedule, and we hope to be able to open the facility for inspection by the campus community before classes end in D term. We also hope to be able to have a grand opening combined with the public launch of our “If . . .” campaign in late spring or early summer, possibly in conjunction with Reunion Weekend.
In December 2010 WPI entered into a ground lease and development agreement with O’Connell Development Group of Holyoke, MA, to construct, own, and manage the next building at Gateway Park, currently referred to as “Gateway II.” Construction is underway, with steel rising as I write this report. The building will be a 4-story, 95,000 square foot, LEED certified, mixed-use facility for both academic and commercial activities. WPI will be a significant tenant, providing space and facilities for the Fire Protection Engineering Department, the Business School, and the BETC of the Corporate and Professional Education Division. Other tenants include Blue Sky Biotech, moving out of our “Gateway I” and Salisbury Labs, and the Massachusetts Biomedical Initiative (MBI), expanding beyond the space it currently occupies in Gateway I.
Most of the other construction and renovation projects have been mentioned earlier in this report. It is important to note the very high degree of this activity over the course of the summer, and the excellent work that has been done on it by our Department of Facilities. We are grateful for these impressive achievements.
Looking ahead it is clear that we need to develop additional student residential capacity. And as construction enters its final phase on the sports and recreation center the questions of the completion of the master plan for athletics, i.e., construction of the parking facility with playing fields on top, and the repurposing of Alumni Gym for academic use, all require attention and resolution.
Faculty and Staff Salaries
Again this spring we implemented a salary review under the model of awarding base merit, exceptional merit, promotion, and equity adjustments to both faculty and staff. The overall amount budgeted for the combined total of all categories was three percent (3%) of budgeted salaries, within which the amount fixed for base merit awards was 2% of each individual’s salary.
Overall, increases for faculty and staff both averaged 3.1%. The HR Department reports that, with this round of increases, the salary averages for all faculty ranks, including full professors, have surpassed the 60th percentiles (P60) in our comparison group. Faculty increases by percentile were as follows: P50=2.0%; P75=3.0%; P85=4.0%; P90=5.0%; and P95=8.1%.
“If . . . The Campaign for WPI,” our $200M campaign, is entering its fifth year of the “leadership” or “quiet” phase, developing the momentum for its public launch. Near the end of the FY 2011 year we crossed the $100M mark, aided by a record-high annual giving total of $2.26M, and plan to make the public launch in spring, 2012, as part of the grand opening of the sports and recreation center. Of the $100M raised to date, progress toward the three major campaign goals stands as follows:
- Faculty and Academic Support--$20M of the $50M goal (40%);
- Student Financial Aid--$39M of $74M goal (52%);
- Campus Life and Academic Facilities--$27.5M of $55M goal (50%); and
The campaign is being led by its four co-chairs: Steve Rubin ’74, Bob Beckett ’57, Mike Dolan ’75, and Steve Halstedt ’68. We expect the campaign to conclude in 2015, as part of WPI’s sesquicentennial celebration.
FY 2011 was a very good year for WPI in matters related to budget, finance, and facilities development; I expect that FY 2012 will prove to be another. While the matters discussed in a financial report are not the most important factors in the quality of an academic institution, they concern conditions necessary for a great institution truly to thrive and prosper. I am pleased that WPI enjoys this stature, and that we can, through collegial and collaborative efforts, address the happy work of putting our resources to best use in the education of our students, the advance of our research and scholarship, the performances of our artistic and creative genius, and the celebration of what is best about the idea of a university.
I wish to express my gratitude and full appreciation for the outstanding work performed day in and day out by our dedicated and effective faculty, staff, trustees, student employees and leaders, and alumni. This is truly a story of your achievements.
August 30, 2011