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2016-17 Funding RecommendationsTennessee Higher Education Commission

November 18, 2015Tennessee Higher Education Commission1Longitudinal Finance TrendsAffordability Trends & Tuition Recommendation Operating RecommendationCapital Recommendation2OverviewTennessee Higher Education Commission2Longitudinal Finance Trends

Tennessee Higher Education Commission3Cost Effectiveness4Tennessee Higher Education Commission45Cost EffectivenessTennessee Higher Education Commission56Appropriations and FeesTennessee Higher Education Commission67Appropriations and FeesTennessee Higher Education Commission7Affordability & Tuition

Tennessee Higher Education Commission89Financial AidAverage Debt LevelsDefault RatesTuition RecommendationAffordability & TuitionTennessee Higher Education Commission910Merit-based lottery scholarship program = $304MNeed-based grant (TSAA) = $74.6MState grant aid = $1,460/UG FTE (3rd in US)Average debt = $25,515 (15th lowest in US)2012 Cohort default rate = 11.9% (nation = 11.8%)

Sources: TN data, NASSGAP, Project on Student Debt, US Dept. of EducationTN Financial Aid ProfileTennessee Higher Education Commission1011Sources: THEC, TSAC, US Department of EducationOf 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

Tennessee Higher Education Commission1112 *University Tuition Revenue is an estimate of undergraduate students only.Sources: THEC, TSAC, US Department of EducationIn 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

Tennessee Higher Education Commission1213Cohort 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 defaultBorrowers who enter repayment Student Default RatesTennessee Higher Education Commission13TN Sector Default RatesPublic Univ: 9.3%Public CC: 19.1%Private Univ: 7.2%Proprietary: 16.3%14Tennessee Higher Education Commission141510,117 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 RatesTennessee Higher Education Commission1516Average Annual Increase over 5 years: University = 6% CC = 5% TCATs = 5%State Funding Change = 3.6%Tuition and Mandatory FeesTennessee Higher Education Commission1617Annual tuition and fee rate for full time attendance: Average University = $8,690 Average CC = $4,121 TCATs = $3,554Tuition and Mandatory FeesTennessee Higher Education Commission1718Summary of Fees Compared to Peers, FY 2015-16ResidentFeesPeer Fees+/-TNPeerPeerUndergrad2015-162015-16%RankMaxMinAPSU$7,801$7,889-1.1%6$9,337$5,775ETSU$8,332$7,43712.0%4$9,768$5,775MTSU$8,404$8,1662.9%6$10,952$5,151TSU$7,417$8,105-8.5%9$10,686$5,775TTU$8,353$7,52811.0%4$9,973$5,775UM$9,269$9,889-6.3%10$12,772$6,384UTC$8,356$7,22015.7%2$8,633$5,775UTK$11,948$10,19317.2%3$14,476$6,310UTM$8,326$8,518-2.3%6$14,536$6,691CCs$4,121$3,9544.2%6$6,830$2,520Tuition and Fees ComparisonsTennessee Higher Education Commission1819Undergraduate 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 RecommendationsTennessee Higher Education Commission19Outcomes-Based Formula & Operating Appropriations

Tennessee Higher Education Commission2021$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 AppropriationsTennessee Higher Education Commission21Overall Percent Funded22Tennessee Higher Education Commission22The 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 23.23Formula Review Committee2015-2020Tennessee Higher Education Commission23Overall structure of the outcomes-based funding formula is the same.Incremental changes include: Operational definition refinements Removal/Replacement of Outcomes Subpopulation Alterations Updated Mission WeightsShare of total is key to recommendation24Overview of ChangesTennessee Higher Education Commission2425$37.5M for outcomes formula units.Largest state appropriation increases: Dyersburg State Community College7.6% increase Northeast State Community College7.6% increase University of TN at Chattanooga7.5% increase$3.4M for TN Colleges of Applied Tech2016-17 Operating State AppropriationsTennessee Higher Education Commission2526Breakdown of Component Parts

Tennessee Higher Education Commission2627

Breakdown of Component PartsTennessee Higher Education Commission2728

Community College Outcome ChangesTennessee Higher Education Commission2829University Outcome Changes

Tennessee Higher Education Commission2930Share of Outcomes-Based Formula

Tennessee Higher Education Commission3031Cumulative Change in Appropriationsat Universities Due to the FormulaTennessee Higher Education Commission3132Cumulative Change in Appropriationsat Community Colleges Due to the FormulaTennessee Higher Education Commission322016-17 Institutional Outcomes Improvement Fund$800K in non-recurring fundsCompetitively 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 success33Tennessee Higher Education Commission332016-17 Non-Formula Strategic Initiatives$6.2M requested for NF Strategic Initiatives:ETSU College of Medicine: Pediatric and Childrens Services, $583,600TSU Institute of Ag & Environmental Research: Required Federal Match, $1,039,000UT System: Business Intelligence System, $500,000UTIA and UT College of Veterinary Medicine: Governors Rural Challenge Advancing the Agricultural Economy, $3,853,500TBR System: Workforce Development Program Coordination, $200,000

34Tennessee Higher Education Commission34Capital Projects

Tennessee Higher Education Commission353662.8 million gross square feet of space.40.4 million square feet of E&G space.2,348 buildingsAverage year of construction: 1971Higher Education InfrastructureTennessee Higher Education Commission362015 Governors Capital Task Force on Higher Education Infrastructure and Capacity37Tasked with developing long-term strategies to address higher education capital and facilities issuesThemes that emerged:Improve the communication around and process of requesting funding for capital projectsIdentify strategies to address the deferred maintenance backlogRevise the capital outlay match programDevelop Drive to 55 program capacity projects

Tennessee Higher Education Commission3738Projects 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 linksCapital Outlay Projects BackgroundTennessee Higher Education Commission3839$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 RecommendationTennessee Higher Education Commission3940Capital 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 wasTennessee Higher Education Commission4041$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 enterpriseCapital Maintenance RecommendationTennessee Higher Education Commission4142State funding to improve affordability for students;Low to no tuition growth;Capital and strategic initiative requests to expand institutional program capacity

Final ObservationsTennessee Higher Education Commission422016-17 Funding RecommendationsTennessee Higher Education Commission

November 18, 2015Tennessee Higher Education Commission43Sheet12013-14 RecipientsUniversitiesCCsTCATsTotalPell Grants52,34249,1038,255109,700TSAA14,7648,2541,31424,332Lottery Programs48,08228,80911,62688,517TOTAL115,18886,16621,195222,549

Sheet12013-14 AwardsUniversitiesCCsTCATsTotalPell Grants$209,946,000$164,957,000$26,075,000$400,978,000TSAA$26,513,000$7,994,000$817,000$35,324,000Lottery Programs$193,965,000$36,282,000$12,575,000$242,822,000Total Grants$430,424,000$209,233,000$39,467,000$679,124,000

Tuition Revenue*$1,048,058,000$281,184,000$28,583,000$1,357,825,000Percent41.1%74.4%138.1%50.0%

CC

ChattanoogaClevelandColumbiaDyersburgJacksonMotlowNashvilleNortheastPellissippiRoaneSouthwestVolunteerWaltersStarting Point$496,600$204,800EffectEffectEffectEffectEffectEffectEffectEffectEffectEffectEffectEffectEffectStudents Accumulating 12 hrs$110,000$(386,600)0.00.00.00.00.00.00.00.0$106,900$(97,900)0.00.00.0Students Accumulating 24 hrs$(127,100)$(237,100)0.00.00.00.00.00.00.00.0$37,900$(69,000)0.00.00.0Students Accumulating 36 hrs$(253,100)$(126,000)0.00.00.00.00.00.00.00.0$15,100$(22,800)0.00.00.0Dual Enrollment$(204,400)$48,7000.00.00.00.00.00.00.00.0$256,000$240,9000.00.00.0Associates$(91,900)$112,5000.00.00.00.00.00.00.00.0$477,700$221,7000.00.00.01-2 Year Certificates$(39,500)$52,4000.00.00.00.00.00.00.00.0$503,400$25,7000.00.00.0