REVISED DRAFT 5/29/2014REVISED DRAFT 5/29/2014

Strategic Financial Strategic Financial Forecasting ProjectForecasting Project

Georgia Tech FoundationGeorgia Tech FoundationDevelopment CommitteeDevelopment Committee

Project UpdateProject Update

June 2014June 2014

History and Background• Initiative of GTF Development Committee

• Team assembled in July 2012; key core working group: David Perdue, Chair, GTF Development Committee Sandi Bramblett, DSG/Administration & Finance Emily Howell, College of Engineering Mark Long, Georgia Tech Foundation Renee Queen, GT Alumni Association Dorcas Wilkinson, Development

• Continuation of Project by Decision Support Group• Sponsor: Steve Swant, Executive Vice President for

Administration & Finance

• Forecasting Model Implementation Directors: • Jim Kirk, Institute Budget Planning and Administration • Sandi Bramblett, Institutional Research and Planning

Importance of Model in GT’s Financial Planning Process

• Focus on GT Strategic Plan in building the next year’s budget• Annual budget and program proposals from colleges & other

units – linked to Strategic Plan• Base budget analysis – considers performance/ workload

metrics for all campus units:• Enrollment and other student data• Sponsored program activity• Faculty and staff totals and ratios compared to workload

• Executive considerations in reviewing spending options: 1. Workload factors for colleges & other units2. Investments to further Strategic Plan objectives3. Future resource limitations – based on forecasting model

Importance of Model in GT’s Financial Planning Process

• December/January

• February/March

• April/May

GT’s Rolling Budget Review and Approval Process

• Revenue and spending projections for next FY• Tuition, fee, funding requests to BOR • Multi-year projections with scenarios

• Preliminary unit budget & strategic planning• Unit Presentation of priorities to President’s Office• Performance metrics to President’s Office

• Update of revenue projections:• BOR action on tuition, fees, allocations• Student enrollment update – summer/ fall• Multi-year projections update

• Executive allocation decisions for Original Budget• Hold-back items contingent on fall revenue picture

• June/July/August

• September/October

• December/January/February

• Initial allocations & adjustments to Original Budget• Fiscal year close-out & determination of year-end

resources available • Review of contingent/hold-back items

• Budget adjustments based on 1st quarter spending & revenue factors

• Preparation of revised list of hold-back items for consideration in 3rd quarter

• Budget adjustments based on 2nd quarter spending & revenue factors

• Multi-year projections update• Begin following year’s budget planning process

Importance of Model in GT’s Financial Planning Process

GT’s Rolling Budget Review and Approval Process

Strategic Financial Forecasting Project Goals

• Institute Ongoing Goals:• Identify multi-year gaps between the Institute’s projected revenues

and expenditures under various scenarios.• For annual budget process determine risks in making new

commitments.• Estimate the level of resources available for GT Strategic Plan and

other initiatives over extended period.• Consider alternate revenue sources to match requirements.

• Institutional Long- Range Development Goals (to be affirmed):• Determine Development priorities for upcoming Capital Campaign.• Determine how the next Capital Campaign will target its efforts to

fill the resource gap.• Common Goal: Jointly address resource requirements of the Institute

for instruction, research, and public service to students, businesses, sponsors, and other Institute stakeholders.

Project Approach – 1st Phase

• Enhancement of existing financial modeling efforts• Expanded scope of financial planning to consider:

• Entire Institute enterprise • Expanded timeframe – from 3 years to 6 years out• Particular needs of GTF Development effort

• Compiled and analyzed 9 years of actual trend data from Fiscal 2005-2013 & Fiscal 2014 budget data:• Revenue and expenditures• Student data• Faculty and staff data• Research activity

• Projected 6 year revenue, expenditures, and net revenue from Fiscal 2014 through 2019

• Sensitivity analysis for input variables to create scenarios

Long Term Forecasting Model Input FieldsResearch

RevenueExpense Source: Grants and Contracts, GT Research Corporation

EducationRevenue

Auxiliary Sales and Services*Private Philanthropy*Facilities and Administration Overhead Recoveries Revenue State Appropriations Revenue Other General Revenue (including student activity fees*)

Expense rates for GTF, F&A, State, Other General and TuitionFaculty SalaryStudent/Staff SalaryFringe BenefitsOther Non Personal ServicesMaintenance and Other Related Operating Capital Costs

* Expense = revenue for changes in these sources of funds

Selected Variables

Considered in

Forecasting Model

Long Term Forecasting Model Input FieldsTuition Factors

Enrollment GrowthUndergraduate - ResidentUndergraduate - Non-ResidentGraduate - ResidentGraduate - Non-Resident

Tuition Rate IncreaseUndergraduate - ResidentUndergraduate - Non-ResidentGraduate - ResidentGraduate - Non-Resident

WaiversUndergraduate - ResidentUndergraduate - Non-ResidentGraduate - ResidentGraduate - Non-Resident

Resident/Non-Resident MixUndergraduate Resident %Undergraduate Non Resident %Must equal 100%

Selected Variables

Considered in

Forecasting Model

Principal Assumptions for Base Scenario

• No program expansion or improvement in student/faculty ratio

• Modest enrollment growth

• Gradual undergraduate enrollment shift: residents to non-residents

• 5% resident & 2% non-resident tuition increases per year

• 1% state funding increase per year

• Faculty and staff salary increases of 3% per year

• Research expenditures & revenues based on recent trends

Enrollment Assumptions for Base Scenario

Enrollment Assumptions for Base Scenario

Sample Projected Net Revenues – Base Scenario

Actual ProjectionFY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

RevenueResearch 687,503,586 639,378,335 658,559,685 678,316,476 698,665,970 719,625,949 741,214,727 Education

State Appropriations 206,936,900 209,006,269 211,096,332 213,207,295 215,339,368 217,492,762 219,667,689 Tuition (net Waivers) 282,943,481 301,614,296 323,004,686 339,600,688 356,996,864 375,231,652 394,345,362 F&A Recoveries 146,774,006 136,499,826 140,594,820 144,812,665 149,157,045 153,631,756 158,240,709 Auxiliary/ Sales and Services 187,627,717 207,982,775 225,230,203 234,762,692 239,081,659 247,844,193 256,957,227 Other 104,054,052 112,200,619 114,229,227 116,318,692 118,470,841 120,687,555 122,970,770 Private Philanthropy 119,075,708 122,647,979 126,327,419 130,117,241 134,020,758 138,041,381 142,182,623 GT Research Corporation 13,741,596 12,779,684 13,163,075 13,557,967 13,964,706 14,383,647 14,815,157

Total Education 1,061,153,460 1,102,731,449 1,153,645,761 1,192,377,240 1,227,031,242 1,267,312,946 1,309,179,536 Total Revenue 1,748,657,046 1,742,109,784 1,812,205,446 1,870,693,715 1,925,697,212 1,986,938,895 2,050,394,264

ExpenseResearch Grants/Contracts

Faculty 97,008,191 90,217,618 92,924,146 95,711,871 98,583,227 101,540,723 104,586,945 Student/Staff 106,580,094 99,119,487 102,093,072 105,155,864 108,310,540 111,559,856 114,906,652 Fringe Benefits 53,873,307 50,102,176 51,605,241 53,153,398 54,748,000 56,390,440 58,082,153

Total Personal Services 257,461,592 239,439,281 246,622,459 254,021,133 261,641,767 269,491,020 277,575,750 Other Operating Expenses 443,530,690 412,483,542 424,858,048 437,603,789 450,731,903 464,253,860 478,181,476

Total Research Grants/Contracts 700,992,282 651,922,822 671,480,507 691,624,922 712,373,670 733,744,880 755,757,226

EducationFaculty 223,122,723 229,904,946 237,161,137 244,381,126 251,820,321 259,485,418 267,383,320 Student/Staff 221,451,106 227,986,656 235,231,589 242,629,612 250,262,740 258,138,559 266,264,903 Fringe Benefits 90,106,868 96,568,658 103,681,566 111,341,129 119,590,247 128,475,223 138,046,029

Total Personal Services 534,680,697 554,460,260 576,074,292 598,351,866 621,673,308 646,099,200 671,694,252 Other Operating Expenses 330,094,395 339,654,942 350,630,139 361,990,136 373,404,775 384,848,722 396,652,075 Sub-Total Education (No Facilities) 864,775,092 894,115,202 926,704,432 960,342,002 995,078,083 1,030,947,922 1,068,346,327 Education - Facilities

Maintenance and Other Related Costs 96,992,595 99,556,830 102,202,180 104,931,354 107,747,155 110,652,484 113,650,344 New Construction 50,499,654 77,416,187 87,113,743 88,790,765 84,936,358 85,194,799 85,459,701

Total Education - Facilities 147,492,249 176,973,017 189,315,923 193,722,119 192,683,513 195,847,283 199,110,046 Total Education 1,012,267,341 1,071,088,219 1,116,020,355 1,154,064,121 1,187,761,595 1,226,795,205 1,267,456,372

Total Expense 1,713,259,623 1,723,011,041 1,787,500,862 1,845,689,043 1,900,135,265 1,960,540,085 2,023,213,598

Net 35,397,423 19,098,743 24,704,585 25,004,672 25,561,947 26,398,810 27,180,666

Recap of Projected Net Revenues – Base Scenario

$27.2M for FY19 is only 1.3% over projected $2B total

Scenario A – Flat Enrollment

Scenario B – Tuition Increase 2% Above Base

Scenario C – Increase in State Funding to 2%/Year

Scenario D – Additional Other Operating Increases

Scenario E – 20 New Faculty & Support Per Year

Phase 2 Implementation of Model

• Revenue:• Link Strategic Financial Forecasting Model to other GT

projection models (e.g. tuition, enrollment, sponsored funds)• Develop scenarios for state revenue projections – determined

following changes to state funding formula• Develop methods for refining grants and contracts and

indirect cost recovery projections• Change, test, and challenge all projection assumptions

• Test multiple scenarios for revenue and expenditure assumptions

• Automate updates of model for future fiscal periods • Model has been updated for FY13 actual and FY14 YTD data