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Business Officer Magazine
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Business Intel

A roundup of short news articles and useful resources for business officers

RESEARCH
More Institutions Expect Declines in FY12 Net Tuition Revenue

The recently released report, Moody's Third Annual Tuition Pricing Survey of U.S. Higher Education, reveals that 17 percent of public universities and 18 percent of private nonprofit institutions expect to see declines in  net tuition revenue in FY12. That compares to 8 percent  of public institutions and 13 percent of private colleges and universities that reported actual declines in net tuition revenue in FY11. These lowered expectations are based in part on enrollment shifts and discount rate movement.

The Moody's group of lower-rated private institutions (rated at A1 and below) are more likely to expect reduced net tuition revenues than their higher-rated counterparts. Lower-rated private institutions rely on student charges for 74 to 85 percent of their operating budget, depending on their Moody's ranking. As for the stability of the institutions' long-term enrollment, the report says that Moody's “remains cautious.”

Of course, not all institutions are projecting declines in net tuition revenue for FY12. Private institutions are seeing a median increase of 5 percent in net tuition over the previous year, while public colleges and universities are projecting an average increase of 4 percent.

The Moody's Tuition Pricing Survey is based on 152 private, not-for-profit institutions and 105 public institutions. Private institutions represented Moody's bond rating categories from Aaa to B2, and public institutions represented a smaller range in ratings categories from Aaa to A1.

Application and Enrollment Shifts

Moody's also reports that from fall 2010 to fall 2011 the median increase in applications of prospective freshmen was up 6.2 percent for private institutions and 3.7 percent for public institutions. This is in part because of the trend in students applying to a greater number of universities. The rate of application growth outpaced the change in number of accepted students. Hence, first-time freshman enrollment remains relatively flat, resulting in improved selectivity rates at some schools, but a smaller yield (defined as the share of successful applicants who accept offers of admission).

Moody's reports that private schools that are rated Aaa or Aa are more likely to see enrollment growth, while those rated Baa and lower are experiencing falling enrollment. The report explains it this way: “This ... has meant that the selectivity gap is widening between universities with a strong reputation and brand compared to those lacking a distinct market position.” Moody's also reports a shift in graduate enrollment to universities with Aaa ratings, while both public and private institutions with A ratings or lower have lost graduate student enrollment.

Rising Tuition

Moody's analysis reveals that higher education institutions with the lowest relative tuition and fee price were able to use their relative sticker price advantage to increase tuition and build net tuition revenue. In fact, Moody's reports that from fall 2010 to fall 2011, there is a direct correlation between an institution's sticker price and the percentage by which it could be increased.

Public institutions, on the other hand, raised their sticker prices at a higher rate than private institutions to compensate for falling state appropriations. Public in-state tuition increased by a median of 6.5 percent, while out-of-state tuition saw a 4.7 percent increase. In contrast, the median tuition increase for private institutions was 4 percent.

Movement in the Discount Rate

A little over half of the private institutions in the study increased their discount rates from fall 2010 to fall 2011, with 39 percent increasing the rate between 0 and 2 percentage points. A nearly equal proportion of schools (32.9 percent) lowered their discount rates and another 13.6 percent held their discount rates constant. Moody's methodology for calculating the discount rate was not disclosed in this report.

RESOURCE LINK The 2011 Moody's survey is the third annual survey of its kind and can be purchased from www.moodys.com/researchandratings.
SUBMITTED BY Natalie Pullaro, manager, research and policy analysis, 202.861.2596 .

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FACILITIES
Supporting Higher Ed's Stake in Standards and Code Issues

With the release of its “Public Policy Agenda 2011–12, Standards and Code Issue Priorities of the APPA Code Advocacy Task Force,” APPA prepares the foundation for broad discussion of regulatory issues that affect the cost structure of its member institutions. The publication tracks 14 years of the association's participation, via its Code Advocacy Task Force (CATF), in writing the rules for life safety and property protection on campuses. The task force estimates that since 1997, achievements in codes and standards writing have resulted in cost avoidance on the order of $10 million to $100 million per year for the educational facilities industry alone.

The broad concepts that underlie the work of CATF can be summarized in three questions:

  • How can the total cost of ownership of educational infrastructure be reduced by using codes and standards that support optimal synergy between operations and maintenance (O&M) cost and initial (building) cost?
  • How can educational institutions take exceptions and variances to national standards without increasing liability risk?
  • How can the economic size of the education facilities industry be leveraged to demand innovation in products and processes, with much of that innovation occurring in international markets?

The task force takes a bottom-up approach, engaging every document, product, and process in the higher education facilities environment. The group has access to expertise in architecture, engineering, law, and management, coordinating member institutions and expert agencies in identifying four areas for improvement:

  • Inefficient O&M practices rooted in the generic requirements of prevailing national standards.
  • Document silos that ignore interacting efficiencies present when a 24/7/365 on-site staff manages multibuilding campuses.
  • Product development or system integration practices that are stalled on the innovation curve.
  • Self-dealing regulations put in place by consortia that profit from their adoption—typically manufacturers, insurance companies, and labor interest groups.

APPA encourages business officers and facilities managers to seek the task force's expertise to help with state, local, or national regulatory issues. To learn more, go to www.appa.org/standardscatf.cfm and select "APPA Standards Public Policy Agenda" from the bulleted list.

SUBMITTED BY Richard Robben, executive director, plant operations, University of Michigan, and E. Lander Medlin, executive vice president, APPA Leadership in Educational Facilities

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QUICK CLICKS

Play A Role in Sustainable Practices

www.parking.org

The International Parking Institute's “Framework on Sustainability for Parking Design, Management, and Operations” outlines industrywide goals and action items that can provide education, incentives, and forums for parking professionals to learn about and contribute to environmentally friendly parking solutions.

Connecting Work-Study Jobs to Career Goals

www2.ed.gov/programs/fws/index.html

The National Association of Student Financial Aid Professionals (NASFAA) is partnering with other stakeholders on a White House initiative to encourage college campuses to use the Federal Work-Study Program. This represents only one part of the Obama Administration's multifaceted Startup America initiative to coordinate the country's entrepreneurs, corporations, universities, foundations, and others with a wide range of federal agencies.

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