2011 Annual Report - USNH Financial Services - University System ...

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USNH 2011 ANNUAL REPORTA. RevenuesChart 1 shows revenue diversification in 2011, and Chart 2 shows these samerevenues broken down by institution.USNH general appropriations for 2011 were 11% of total revenue. The 2012 stateoperating appropriation will decrease by $48.3 million so that state appropriationsare expected to be only 5.7% of total revenue in 2012 (see Chart 3).$450400350300250200150100500Chart 3: Twenty-Five Year Revenue Comparison(not including capital additions/deductions)($ in millions)19881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010*BudgetedGrants and contracts, auxiliary enterprises, gifts, and other incomeTuition and fees (not netted for financial aid)State of NH general appropriations2011*2012Table 1: Full-Time Equivalent (FTE)Credit Enrollment in the Fall of Each Year2006 2007 2008 2009 2010UNH 13,741 13,856 13,925 14,250 14,211PSU 5,322 5,554 5,677 5,400 5,234KSC 4,550 4,815 4,979 5,084 5,096UNHM 848 861 840 889 913GSC 1,038 1,031 1,064 1,220 1,278Total USNH FTEs 25,499 26,117 26,485 26,843 26,732NH Resident 16,059 16,374 16,374 16,747 16,927Nonresident 9,440 9,743 10,111 10,096 9,805Total USNH FTEs 25,499 26,117 26,485 26,843 26,732Table 2: Freshman Applications, Acceptances and Enrollees atUNH at Durham in the Fall of Each Year2006 2007 2008 2009 2010Freshman applications received 13,991 15,122 16,246 16,132 16,545Freshman acceptances as % ofapplications (selectivity ratio) 67% 59% 65% 72% 73%Freshman enrolled as % ofacceptances (matriculation yield) 33% 30% 26% 26% 24%Student tuition and fees accounted for $390.9 million or 43%of USNH revenue in 2011 as enrollments at USNH institutionscontinued to grow. In the past four years, credit enrollmentsat USNH have increased 4.8%, or 1,233 FTE students, includingincreases of 868 resident students and 365 nonresident students(see Table 1).As seen in Table 2, there has been an 18% growth in annualapplications to the flagship campus, UNH at Durham, over thepast four years. During this period of growth USNH institutionshave maintained or improved the quality of their incomingstudents. Approximately 47% of new UNH students in the fallof 2010 ranked in the top 20% of their high school class. Thisis equal to the percentage in 2006. The combined SAT scoresfor new UNH students averaged 1105 in the fall of 2010, nearlyidentical to the 1104 average in the fall of 2006.The growth in enrollments combined with the economicdownturn has resulted in significant increases in need-basedstudent financial aid, particularly in 2010 and 2011. Need-basedawards were up $10.1 million (14.8%) from 2010 to 2011 whileother types of aid remained fairly constant. This compares toan increase of $19.0 million (38.5%) from 2009 to 2010, and anincrease of $38.0 million or 94.2% over the 2007 level.All campuses are working to generate revenues from facilitiesusage over the full year rather than just during the traditionalsemesters. In 2010 UNH added a highly successful shortsemester during the winter break. In addition, each campus isexpanding online as well as summer session courses to increasecapacity for additional enrollments without adding significantcosts. Summer housing opportunities are also being added tocomplement these programs.Auxiliary revenues grew $4.2 million and $11.1 million in2011 and 2010, respectively. The primary components ofthis revenue stream are enrollment-driven including studenthousing, dining, health, recreation and transportation fees. In2011 and 2010 auxiliary revenue also included $1.6 million and$0.9 million, respectively, from renewable energy credit andelectricity sales generated by UNH’s recently completed ECOLinerenewable methane gas pipeline (see the Capital and DebtActivities section for more information on energy infrastructureinitiatives).Grant revenues in 2011 are up $28.3 million or 19.9% over 2010.This compares to an increase of $7.9 million or 5.9% from 2009to 2010. Sponsors of UNH awards include the US government,the state, foundations, non-profits and the commercial sector.The ten-year record of UNH competitively-won awards forresearch and other sponsored programs is shown in Chart4. The large increase in 2011 is due to a single $44.5 million,three-year American Recovery and Reinvestment Acts (ARRA)award to UNH for the Network New Hampshire Now projectto implement high-speed broadband “dark fiber” to all tencounties of the state. Including cost sharing commitments frompublic and private partner organizations, this complex projectis expected to cost $65.9 million and includes 450 miles of fiber.Upon completion in 2013, the benefits will include high-speedinternet access for nearly all major institutions and businesses inNew Hampshire.Facilities and administrative cost recoveries on grants andcontracts totaled approximately $20.6 million in 2011 and $18.4million and $18.5 million in each of 2010 and 2009, respectively.This important unrestricted revenue stream is used to support16
USNH 2011 ANNUAL REPORTinfrastructure at each campus. During 2010, UNH successfully negotiatednew facilities and administrative cost rates for federally-sponsoredprograms for the next four years. The recovery rate for UNH on-campusresearch awards was 46% for 2011 and will increase by one-half percenteach year until reaching 47.5% for 2014 awards.As noted above, the general economy has impacted USNH with decreasedgeneral appropriation revenue and increased student financial aid costs.The economy is also impacting our gift revenue streams. Gift revenues ofall types (noncapital, endowment and plant) totaled $22.2 million in 2011and $21.6 million in 2010, respectively. This is down significantly from the$29.4 million received in 2009. USNH has targeted gift revenues as an areaof focus for future years, and has committed $14.7 million between fiscalyears 2007 and 2014 to supplement ongoing development operatingbudgets. The added investments are designed to improve advancementinfrastructure and fundraising results to help offset the reduced stateappropriation level going forward.B. Investing ActivitiesThe USNH endowment pool generated gains of 18.5% in 2011. Thiscompares to gains of 9.7% in 2010 and a loss of 23.2% in 2009. The largeloss of 2009 was unprecedented and effectively offset all previous gainsat that time. USNH began working with investment consultants, PrimeBuchholz, in late 2009 and with their assistance USNH has completelyrestructured the investment pool and adopted a new investment policy.In addition to reducing general appropriation revenue beginning in 2012,the state also announced that the UNIQUE endowment program wouldno longer be available to fund public institutions in New Hampshire. Thisrevenue stream generated $4.4 million during both 2011 and 2010, andwas an important source of annual additions to the USNH endowment.Chart 5 shows the change in USNH endowment and similar asset balancesover the past ten years. The State of New Hampshire adopted the UniformPrudent Management of Institutional Funds Act (UPMIFA) in 2009. Asa result of this new legislation, both USNH and UNHF updated theirendowment spending policies to allow payout from underwater trueendowment funds beginning in 2010. Management capped the USNHendowment payout-for-purpose in 2011 and 2010 at 85% of the 2009payout-per-unit level to mitigate the impact of the 2009 losses on theinvestment valuations, and will maintain this level for 2012 as well.USNH’s non-endowment operating investments generated positive returnsin 2011. The 2011 earnings of $9.7 million compare to $14.7 million in 2010and a loss of $0.3 million in 2009. USNH revised its operating investmentguidelines and further diversified its operating investments in 2011 toensure preservation of capital and adequate liquidity.C. Cost ContainmentUSNH has a long tradition of efficient operations, tight spending controls,balanced budgets, and now is committed to further reductions. As notedabove, USNH has put several measures in place in response to the dramaticgeneral appropriations decrease beginning in 2012. Employee separationexpenses totaled $6.3 million in 2011. This compares to $0.8 million in2010. The majority of the 2011 costs were for separation incentives offeredby UNH. Targeted staff reductions are being implemented at all campusesin 2012 as well.Medical and dental costs net of employee cost sharing increased a total of7.8% in 2011, in addition to increases of 6.7% in 2010 and 10.1% in 2009.The average annual increase over the past ten years was 7.2% per year. Inresponse to the continued increases in benefit costs, a full review of allsalary and benefit offerings called “Total Rewards” was conducted in 2011including comparison with peer employers in the state and across thecountry. Specific benefit program changes to be implemented in 2012Chart 4: Awards for Competitive Sponsored Programs,UNH Only($ in millions)$180160140120100806040200$400350300250200150100502002 2003 2004 2005 2006 2007 2008 2009 2010 2011Chart 5: Total USNH Endowment & Similar Funds(includes UNHF & KEA)Ten-Year Growth($ in millions)0Accumulated market appreciationBook value of gifts and other additions2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Chart 6: Uses of Total Revenue byFunctional Classification($ in millions)InstructionResearch and public serviceAuxiliary servicesStudent financial aidAcademic and student supportDepreciationOperations and maintenanceInstitutional support2011 = $911 Total2010 = $857 TotalInterest expense2009 = $803 TotalFundraisingVoluntary contribution to stateOperating margin*$0 50 100 150 200 250*Used to pay principal on debt, support plant acquistions/renovations, and supplement net assets.17
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