Minnesota State Enrollment and Education Insights

February 13, 2017 System enrollment and financial overview House Ways and Means Committee Minnesota State 1

We Are 376,000 Students 254,000 in credit classes 122,000 in non-credit programs 59% in greater Minnesota 127,000 from underrepresented groups 48,500 first generation students 10,000 veterans 37 Colleges and Universities with 54 Campuses 7 universities 30 colleges 47 Communities across the State From International Falls to Worthington Enrollment ranges from 445 to 32,131 2

Enrollment overview 3

Our colleges and universities serve: 63,400 students of color and American Indian students 48,500 first-generation college students 84,000 low-income students 10,000 veterans In each of these categories, our colleges and universities serve more students than all of Minnesota s other higher education options combined. 4

Educating all of Minnesota Twin Cities Area 146,346 39% Central 54,625 15% Northeast 31,264 8% Southwest 54,611 14% Northwest 52,734 14% Southeast 36,596 10% Total Headcount = 376,176 fiscal year 2016 5 Source: System Office Research Academic and Student Affairs

Racial and ethnic diversity White, 69.0% Other, 6.1% Am. Indian, 0.8% Asian & PI, 5.4% Black, 10.1% Hispanic, 5.2% Two or more, 3.4% Total American Indian and Students of Color = 63,423 Total Credit Headcount = 254,206 fiscal year 2016 6 Source: System Office Research Academic and Student Affairs

Student of color and American Indian student enrollment has grown in all regions of the state 39.4% 40% 57% Percent Students of Color 30% 27.5% Percent Increase in Students of Color & American Indian Students: 2007 to 2016 12% 112% 58% 61% 100% 20% 16.4% 16.2% 14.4% 14.1% 12.5% 13.0% 10.2% 8.1% 7.8% 10% 7.7% 0% Central Northeast Northwest Southeast Southwest Twin Cities 2007 2016 Students of Color & American Indian: 2007 = 39,405 2016 = 63,423 Increase = 61.0% 7 Source: System Office Research Academic and Student Affairs 7

Enrollment in credit courses grew during the recession but has since fallen 180,000 157,903 160,000 155,422 149,919 138,973135,089 131,217 143,924 140,000 134,220 139,885 120,000 100,000 FYE 80,000 60,000 40,000 20,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Est 2017 Est 2018 Fiscal Year 8

Total headcount peaked during the recession and has decreased since fiscal year 2013 as the economy recovered 500,000 435,480 433,471 431,143 423,106 420,824 410,425 395,690 389,495 381,422 400,000 376,176 300,000 279,300 276,967 275,733 272,501 264,510 259,549 259,283 254,206 249,953 242,362 200,000 163,823 162,979 156,504 155,410 145,915 141,524 139,542 139,060 136,141 121,970 100,000 0 2007 Credit 2008 2009 2010 Non-Credit 2011 2012 2013 2014 Total 2015 2016 Fiscal Year 9 Source: System Office Research Academic and Student Affairs

Credit headcount at the colleges and universities peaked during the recession and non-credit has decreased since 200,000 175,612 175,493 172,122 169,887 163,848 162,010 159,802 156,291 154,644 152,024 149,085 150,000 116,478 113,761 101,794 100,075 100,000 82,953 82,963 82,334 81,185 80,246 79,896 71,071 69,291 69,130 67,641 68,000 67,319 65,928 65,918 65,393 64,144 50,000 62,993 62,292 6,663 4,445 4,423 4,174 4,086 3,516 3,334 2,523 2,780 2,256 2,249 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fiscal Year College Credit University Credit College Non-Credit University Non-Credit 10 Source: System Office Research Academic and Student Affairs

Financial overview 11

Minnesotas higher education funding trails U.S. average significantly State and Local Educational Appropriations for Higher Education per FTE Student from 1995 to 2015 $9,000 $8,500 $8,464 $8,000 $8,057 $7,530 $7,500 $7,000 $6,966 $6,843 $6,500 $6,000 $5,988 $5,500 $5,000 $4,500 1995 2005 2015 Minnesota US 12 Source: SHEEO (2015). SHEF FY 15. Estimates have been adjusted for inflation.

Financial pressures threaten the ability of our campuses to serve students Revenue Between FY2008 and FY2017, state appropriation and tuition revenue combined increased an average of 1.17% per year. (State appropriation increased an average of 0.12% per year; tuition increased an average of 2.26% per year.) Expenses MMB negotiates fully 1/3 of our compensation costs and its results strongly influence the other 2/3 of our costs. Our college, university, and system office administrative spending is among the lowest in the country: the system ranks 35th out of 50 states and DC in administrative spending per student FYE 15% below the national average and below similar systems in all contiguous states (IA, WI, ND, SD). The total number of employees, system-wide, has declined by 10.6%; only 3.1% (525) of the system-wide employees are administrators, down 9% since 2009. The system office base budget has dropped from $43.5 million in FY2009 to $33.1 million in FY2016 (from 3.0% of the system-wide budget to 2.1%). 13

We have significantly reduced costs Our college, university, and system office administrative spending is among the lowest in the country: the system ranks 33th out of 50 states and DC in administrative spending per student FYE 11% below the national average and below similar systems in contiguous states (IA, WI, ND). The total number of employees, systemwide, has been cut by 10.2% between FY2010 and FY2016; only 3.1% (525) of the systemwide employees are administrators, down by 9.5% since FY2010. The system office base budget has dropped from $43.5 million in FY2009 to $33.1 million in FY2016 (from 3.0% of the system-wide budget to 2.1%). Institutional support expenses across all campuses have fallen from 12.4% of total expenses in FY2011 to 11.8% in FY2015. 14

All funds budget ($s in millions) $ Change from FY2016 % Change from FY2016 FY 2017 Budget Revenues General Fund Other Funds $8.0 $(7.8) $.2 0.5% (2.0%) 0.0% $1,576.8 $382.6 $1,959.4 Total budgeted revenues Expenses Compensation Other operating costs $14.2 1.1% $1,286.3 $662.4 $1,948.7 $(9.1) $5.1 (1.4%) 0.3% Total budgeted expenses Budget balance $10.7 15

Financial outlook worsens significantly if the structural imbalance is not addressed $s in millions FY2016 FY2017 Total FY2018 FY2019 Total State Appropriation and Tuition Support State Appropriation and Tuition Support 50.0 50.0 100.0 50.0 50.0 100.0 University (Tuition Revenue) 12.7 12.7 25.4 12.7 12.7 25.4 College (Tuition Revenue) (4.3) (4.3) (4.3) (4.3) (8.6) 0.0 Total State Appropriation and Tuition Support 62.7 58.4 121.1 58.4 58.4 116.8 Estimated Expenses Compensation 36.0 72.0 108.0 72.0 72.0 144.0 Other Operating Costs 11.0 23.0 34.0 23.0 23.0 46.0 Total Estimated Expenses 47.0 95.0 142.0 95.0 95.0 190.0 Revenues over/(under) estimated expenses 15.7 (36.6) (20.9) (36.6) (36.6) (73.2) 16

Reallocation (cuts) trends $60.0 $53.7 $50.0 $45.0 $38.8 $40.0 $36.1 $33.8 Millions $29.3 $30.0 $27.1 $24.5 $22.9 $20.0 $10.0 $- FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 17

Reductions/Reallocations ($s in thousands) # Layoffs & Vacancies Eliminated (FTE) # of Programs Impacted Category Dollar Amount Suspended or closed programs 9 8 $1,132 Faculty positions 121 132 $15,650 Administrative/staff positions 155 8 $12,683 Equipment 0 0 $1,068 Repair & replacement 0 0 $365 Student services 12 0 $861 Other 12 5 $4,309 General operating budget 0 0 $2,688 Total reductions/reallocations 309 153 $38,756 18

Reinvestments and Cuts ($s in thousands) # Positions Added/ Reassigned (FTE) # Programs Impacted Category Enhanced, redesigned, or new programs Added or reassigned faculty positions Added or reassigned admin/staff positions Equipment Invest facilities and/or R&R Student services Other Reinvestments subtotal Cuts made to balance the budget Total Reinvestments and Cuts Dollar Amount 11 24 57 0 0 2 3 93 0 93 17 31 45 0 0 0 2 91 0 91 $1,261 $1,963 $4,403 $1,169 $1,498 $1,329 $3,129 $14,631 $24,125 $38,756 Invests in direct mission activities Stems the growth in tuition and student fees supports programs that benefit students $11,085 $26,837 $11,452 19

FY2018-FY2019 Operating budget request 20

Our FY18-FY19 request: three important goals Protect programs and campuses so we can meet the workforce needs in communities across Minnesota Reduce economic and racial disparities by protecting affordability, access and advancing student success Provide the faculty, staff, and IT infrastructure needed to deliver these programs Student grants to reduce disparities Total FY18-FY19 needs ISRS Campus Support Next Gen $143 million $25 million $10 million $178 million 21

How important is state support? State appropriation and student tuition are the two primary sources of funding for our colleges and universities State appropriation sets constraints on available resources for: Compensation Program support and growth Student support services Technology and equipment Solutions to challenges campuses are trying to address New initiatives and investments New partnerships Innovations 22

ISRS Next Generation is a critical system investment that must be made Replaces the system s outdated 20-year old ISRS data system that is reaching its technological end of life Plays a critical role in the success of our students from applicant to graduate and nearly every process in between Serves as the cornerstone data system for our enterprise and requires high security Touches everyone and nearly every activity: application, registration, course schedule, housing, financial aid, transcripts, system finance, accounting, and HR 23

Composite Financial Index 24

GASB STATEMENT NO. 68 EFFECT GASB 68 has 3 components on the statement of net position Net pension liability of $364.8 million Deferred inflow of resources of $225.6 million with an offset to Deferred outflows of resources ($116.0 million) Total impact on net position $474.4 million Compares to $519.1 million in FY15 25

FY2016 Financial Summary Most colleges and universities reported operating gain due to GASB adjustment. Underlying loss due to an enrollment decline Campus budget reserves preserved critical risk management strategy Continued investments in building improvements and infrastructure - which help retain current and attract new students 26

Composite Financial Index - CFI FY2016 CFI = 2.22 (without GASB 68) FY2015 CFI = 1.74 (without GASB 68) FY2016 CFI = 1.50 (with GASB 68) FY2015 CFI = 0.79 (with GASB 68) 27

Composite Financial Index FY2016-2015 28

FY2016 Financial Summary CFI varies amongst colleges and universities CFI trends positive in FY 2015 and 2016, after declining the previous year due to falling enrollment System CFI relatively flat in the two long term measurements, with small increases in the two short term measurements Campuses displaying focused budgeting, planning and analysis 29

FY2016 Monitoring Results 4 colleges and 2 universities reported CFI below 1.50 based on 2 year average or less than .5 in most recent year Financial plans are required for these 6 colleges and universities Communication with campus leadership to discuss results 30

System enrollment and THANK YOU financial overview 30 East 7th Street St. Paul, MN 55101 651-201-1800 888-667-2848 MINNESOTA STATE IS AN EQUAL OPPORTUNITY EMPLOYER AND EDUCATOR 31

Extra Slides 32

Traditional PSEO and Concurrent Enrollment Traditional PSEO - Post-secondary Education Options is an opportunity for eligible high school students to enroll in college or university courses that earn credits simultaneously for both their high school diploma and their college degree Concurrent - Concurrent enrollment is a college or university course taught by a credentialed high school instructor and mentored by a college or university faculty member at a high school. 33

PSEO total headcount has grown by 83 percent and Concurrent headcount has grown by 114 percent 40,000 37,369 34,386 30,502 28,663 30,000 26,636 26,161 25,038 24,489 24,172 22,713 21,655 21,260 20,425 19,587 18,291 20,000 16,854 16,698 14,511 13,661 12,229 10,000 7,720 7,333 6,557 6,453 5,905 5,758 5,481 5,450 5,440 5,499 5,322 4,363 3,988 3,737 3,457 3,273 3,300 3,158 2,833 2,688 0 Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 PSEO Regular PSEO Concurrent PSEO Contract PSEO Total 9 34

PSEO Student Success MnSCU colleges and universities serve 90% of all PSEO students in Minnesota. PSEO students families saved $65 million in tuition and fees for college and university credits taken in fiscal year 2015. PSEO students course success rates are substantially higher than those of other undergraduate students. Minnesota State Colleges and Universities enroll 47% of the PSEO students that enroll in higher education after high school. PSEO students who enroll at our colleges and universities after high school have substantially higher persistence rates and completion rates than students who did not take PSEO courses. 35

Space and enrollment Enrollment - FYE FY2016 for credit enrollment: 135,090 FYE Academic Space FY2016 Total Academic Space: 22.6 million square feet Metro Area Metro Area Greater Minnesota Greater Minnesota 36 Source: Space 2016 FRRM / FYE FP&A Actual FY2016

Conclusions of Long Term Financial Sustainability workgroup 1. Incremental costs will continue to outpace incremental revenue unless there are substantial increases in revenues and substantial reductions in costs. 2. Potential shortfall of $66M - $475M by 2025 if not action taken. 3. Places at risk the ability of Minnesota state colleges and universities to deliver the talent Minnesota needs and help reduce disparities. 4. Minnesota s funding of higher education has plummeted, significantly trails the national average, and risks continuing to be crowded-out by Medicaid and K-12 spending as well as other state priorities. 37

Higher education is crowded-out by Medicaid and K-12 spending as well as other state priorities Higher education in Minnesota is more crowded-out by Medicaid and K-12 spending than it is in other states. Minnesota U.S. Average Share of Total State Spending, 2014 Higher Education 5.5% 12.9% K-12 Education 32.9% 23.5% Medicaid 17.4% 15.3% Other 44.1% 48.4% Source: Dan White and Sarah Crane, Moody s Analytics, Crowded Out: The Outlook for State Higher Education Spending, prepared for the National Commission on Financing 21st Century Higher Education, 2016, Appendix C. 38