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Leadership Briefing November 18, 2008

Leadership Briefing November 18, 2008. OUR PERSEVERANCE AND SUCCESS. OUR PERSEVERANCE AND SUCCESS. Michigan’s Fiscal Future. For seven years Michigan has endured its worst financial crisis in more than 50 years.

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Leadership Briefing November 18, 2008

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  1. Leadership Briefing November 18, 2008

  2. OUR PERSEVERANCE AND SUCCESS

  3. OUR PERSEVERANCE AND SUCCESS Michigan’s Fiscal Future • For seven years Michigan has endured its worst financial crisis in more than 50 years. • Michigan economy and state and local government programs and finance have been under significant stress since Fiscal Year 2001. • If current spending and taxing policies are unchanged, a gap of $6 billion will develop by FY17 in the General Fund and $3.6 billion in the School Aid Fund. Source: Citizen’s Research Council of Michigan, May 2008

  4. OUR PERSEVERANCE AND SUCCESS Michigan’s General Fund (FY00 to FY07) Michigan’s General Fund (FY00 to FY07) • Revenues dropped by $1.5 billion (15.4 percent) • Income tax revenues declined by $802 million (15.6 percent) Source: Citizen’s Research Council of Michigan, May 2008

  5. The Michigan economy has shown little improvement since the 2001 recession Since the Michigan employment peak in June 2000, Michigan payroll employment has declined by 494,900 jobs or 10.5% Michigan payroll employment in August 2008 was 69,500 jobs below the August 2007 level Since June 2000 Michigan has lost 36.9% of its total manufacturing jobs and has lost 50% of its vehicle manufacturing jobs Michigan payroll employment is expected to continue to decline by 1.8% in 2008 and 1.5% in 2009 OUR PERSEVERANCE AND SUCCESS Michigan’s Economic Outlook Source: Senate Fiscal Agency: Senate Budget Update, September 10, 2008

  6. Over the age of 65 cohort increases 2.8% per year; other age cohorts decline School age (5-17) population declines by 1.5% per year The decline in Michigan’s share of the U.S. population will accelerate from 0.7% per year (1997 – 2007) to 1.1% per year (2007 - 2017), dropping the share from 3.3% to 3.0% OUR PERSEVERANCE AND SUCCESS Population Projection Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future, May 2008

  7. OUR PERSEVERANCE AND SUCCESS Michigan’s Changing Population 2007-2017 -3.9% -14.3% +31.5% -8.5% Source: Citizens Research Council of Michigan, Michigan’s Fiscal Future: Long-term Analysis of Michigan’s Economy and State Budget, September 2007

  8. Disinvestment in Higher Education OUR PERSEVERANCE AND SUCCESS

  9. Disinvestment in Higher Education OUR PERSEVERANCE AND SUCCESS

  10. Disinvestment in Higher Education OUR PERSEVERANCE AND SUCCESS Source: State budget data, Bureau of Labor Standards

  11. OUR PERSEVERANCE AND SUCCESS Appropriation per FYES Oakland University’s FY 2009 appropriation per FYES is estimated to be $951 per FYES less than the FY 2000 level.

  12. OUR PERSEVERANCE AND SUCCESS Tuition Dependency Comparison of General Fund Revenue Sources FY 1992, FY 2002 and FY 2009 Budget Budgeted Since 1992, Oakland University’s relative reliance on tuition and fees in the General Fund has grown from 41% to a budgeted 72% in 2009.

  13. OUR PERSEVERANCE AND SUCCESS Against the Odds • Against economic odds over the last seven years, the university has continued to grow at a steady pace in all facets of its operations. • This has been due to: • Careful strategic planning • Purposeful action • Strong leadership • Faculty and staff commitment and dedication

  14. OUR PERSEVERANCE AND SUCCESS Financial StewardshipBudget Reductions and Cost ContainmentCumulative FY 2003 - 2008

  15. OUR PERSEVERANCE AND SUCCESS Comparison of State Appropriation Average Percentage Increase Versus OU Percentage Source: Enacted state appropriation bills

  16. OUR PERSEVERANCE AND SUCCESS Student, Faculty and Building Growth • 27% increase in enrollment from 1998 – 2008 • 112 new faculty added in the last 9 years • Dozens of new buildings, laboratories and building renovations added in the last decade.

  17. OUR PERSEVERANCE AND SUCCESS Fall Enrollment Growth 18,169 18,082 16,059 14,379

  18. OUR PERSEVERANCE AND SUCCESS Partnerships and Engagement • Oakland University – Macomb • Intent to develop 21st-century satellite campus • 1,900 students enrolled at MUC and the MISD • 351 students enrolled in M2O • 15,000 alumni in Macomb County

  19. OUR PERSEVERANCE AND SUCCESS Partnerships with other Universities • Legal education – Cooley Law School Auburn Hills campus • Doctorate of Pharmacy – Wayne State • Bachelors of Social Work – Michigan State • DNP degree – Northern Michigan

  20. OUR PERSEVERANCE AND SUCCESS Medical Education • Oakland University William Beaumont School of Medicine • Oakland Medical Initiative • New Human Health Building

  21. OUR PERSEVERANCE AND SUCCESS Meeting Marketplace Demand • 55 new degree programs added since 1995 • Dozens of academic program accreditations • Student life enhancements – student organizations, career services, housing • Global experiences – Max Stern College, University of Botswana, OU-Guizhou Exchange program

  22. OUR PERSEVERANCE AND SUCCESS Applied Research and Economic Development • A record $12.8 million received in grants and contracts in 2007 • Regional economic impact of $500 million annually • OU INC – 9 emerging companies, new jobs created, OU student internships, grant awards • Macomb – OU INC, new SmartZone

  23. OUR PERSEVERANCE AND SUCCESS Community Outreach • City of Rochester – partnerships with Rochester Regional Chamber and DDA • Auburn Hills, Rochester Hills, Pontiac • Students gaining internship experience • Faculty lecturing in the community • Students engaging in community events and service • Positive PR

  24. OUR PERSEVERANCE AND SUCCESS New Initiatives • Center for Integrated Business Research and Education • Kresge Library Technology Center • Royal Park Conference Center • Accelerated Nursing program - St. John Health System’s Riverview Hospital in Detroit • Performing Arts

  25. OUR PERSEVERANCE AND SUCCESS Marketing and Visibility • UG and grad student recruitment ad campaigns, regionally and in out-state markets • Building OU brand regionally, nationally… Strengthening position among competitors • Fundraising communications to advance campaign, institutional vision, grow donor and alumni base

  26. OUR PERSEVERANCE AND SUCCESS Comprehensive Campaign • Early conclusion - $110 million raised a year ahead of schedule • Of $100 million raised: • 58 new endowments created • 86% of funds have come from commitments of $25,000 or more • 53% of funds allocated to academic programs, 38% to endowments, 9% to facilities

  27. Oakland Universit – Growth on all Fronts OUR PERSEVERANCE AND SUCCESS Others - Taking Notice • Carnegie Classification – among the country’s 83 doctoral/research universities • Division I standing – increased visibility • 2007 Detroit News front page article (Once-quiet college aims for the big time) • U.S. News & World Report America’s Best Colleges – OU listed among national-doctoral universities since the 2002-03 edition

  28. OUR PERSEVERANCE AND SUCCESS A Story of Success • Reputation enhanced and secure in the region • On path to national university recognition through 2020 vision planning and execution • A tribute to strategic planning, leadership, action, and faculty/staff commitment and dedication • Top leadership understands the personal uncertainty and challenges that our faculty, staff and students are facing

  29. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS

  30. Higher Education - $200M Options: Eliminate MI Promise Grant Reduce Higher Education 7.1% Merge/Consolidate Universities and/or Community Colleges Privatize UM-Ann Arbor Develop a Funding Formula ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Legislative Commission on Government Efficiency

  31. Higher Education – Value OU – Contributions/Value Advocate for Best Option Lobby Legislators/Opinion Makers Mobilize Friends/Supporters ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Legislative Commission on Government Efficiency

  32. FY2008-2009 Appropriation FY 2008-2009 Cut: 1.5% – ? FY 2008-2009 Additional Cut - ? FY 2009-2010 Cut Revenue down 3% vs. FY 2008-2009 (Before current job losses) January Revenue Conference Community Colleges vs. Universities Long Term ENVIRONMENTAL SCANNING – SITUATION ANALYSIS State Appropriations

  33. Promote Higher Education Advocate for OU Lobby for OU Mobilize for OU Plan for Cuts ENVIRONMENTAL SCANNING – SITUATION ANALYSIS State Appropriations

  34. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Endowment Market Values Note: Market values are net of contributions, spending distributions, fees, investment income or loss, both realized and unrealized.

  35. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Money - 2008 Credit Market Deterioration • Bond Counsel and Underwriters report difficulty selling bonds • Investors prefer treasuries over bonds • Bank liquidity is limited, therefore, lending is limited • The London Interbank Offered Rate (LIBOR), the rate at which banks lend/borrow to/from each other, is very volatile • LIBOR increased 61% in September • LIBOR decreased 36% in October

  36. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Money - 2008 Credit Market Deterioration • OU Variable Rate Bonds weekly interest rates – September 2008: • 09/09/08 - 1.25% • 09/16/08 - 1.75% • 09/23/08 - 5.50% • 09/30/08 - 7.75% • OU Variable Rate Bonds weekly interest rates – October 2008: • 10/07/08 - 7.5% • 10/14/08 - 4.5% • 10/21/08 - 3.25% • 10/28/08 - 2.25% • OU’s Moody’s rating is A2 Stable, comparable to our peers

  37. Closely monitor and manage investments Adjust payouts to investment return Secure more endowment dollars ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Endowment/Payment

  38. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS The Great Consumer Crash of 2009 Source: “The Great Consumer Crash of 2009”, by James Quinn, Senior Director of Strategic Planning, the Wharton School, University of Pennsylvania, August 14, 2008

  39. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS The Great Consumer Crash of 2009 Source: “The Great Consumer Crash of 2009”, by James Quinn, Senior Director of Strategic Planning, the Wharton School, University of Pennsylvania, August 14, 2008

  40. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS The Great Consumer Crash of 2009 Source: “The Great Consumer Crash of 2009”, by James Quinn, Senior Director of Strategic Planning, the Wharton School, University of Pennsylvania, August 14, 2008

  41. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS The Great Consumer Crash of 2009 • The average household has credit card debt of $9,840 versus $2,966 in 1990, at an average interest rate of 19%. Credit card delinquencies have increased to 4.51% in the 1st quarter. • Foreclosure Activity – In 2005 there were less than 600,000 foreclosures in the U.S. In the 1st two quarters of 2008 there have been more than 1,350,000 foreclosures, with the pace accelerating. • Government unemployment figures have begun to skyrocket, while the true unadjusted unemployment figures point to a major recession. If the number of people who have given up looking for a job were included, the official 5.7% unemployment rate would jump to 14%. Source: “The Great Consumer Crash of 2009”, by James Quinn, Senior Director of Strategic Planning, the Wharton School, University of Pennsylvania, August 14, 2008

  42. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS The Great Consumer Crash of 2009 • Car sales have plummeted. The major car manufacturers have stopped leasing cars to consumers. J.D. Power and Associates forecasts car sales of 14.2 million units in 2008, a 12% decrease over the 16.1 million units in 2007. This would be the lowest level since 1993. • Retail store closing and retail bankruptcies have begun to accelerate. This will lead to hundreds of thousands in job losses. • Mall owners and commercial developers are on the brink of bankruptcy. • Consumer confidence is at multi-decade low levels. Small business confidence is also at historic lows. Source: “The Great Consumer Crash of 2009”, by James Quinn, Senior Director of Strategic Planning, the Wharton School, University of Pennsylvania, August 14, 2008

  43. Move quickly to establish OU’s excellent, high value education as accessible and affordable. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS The Great Consumers Crash 2009

  44. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Competition • Eyes are focused on Oakland, Macomb, Wayne Counties – our primary market

  45. Do not let a competitor get an edge Continue work to enhance image and perception Constantly assess activities of competitors Be Proactive ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Competition

  46. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Tuition Dependency Comparison of General Fund Revenue Sources FY 1992, FY 2002 and FY 2009 Budget Budgeted Since 1992, Oakland University’s relative reliance on tuition and fees in the General Fund has grown from 41% to a budgeted 72% in 2009.

  47. Address cost of attendance to show affordability. Emphasize access. Get this message in front of families who typically send students away to college. Families have lost jobs, are concerned about jobs, or have stress from current financial crisis. Demonstrate that OU is an affordable, quality option right in the backyard in tri-county area. Tuition is a bargain given the quality of faculty and the level of research. Immediate “economic stimulus” to recruit. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Tuition Dependency

  48. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS High School Graduation Rate 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

  49. Increase OU market share Expand inquiry pool Enhance relationships with inquiry pool Expand admit pool Enhance relationships with admit pool Focus on conversion admit pool to matriculate Increase communications and marketing (new market study) Strategically employ financial aid Search for new markets (international, displaced workers, veterans, etc.) Expand outreach in primary and secondary markets Implement new ties with key high schools Streamline processes Out of State Tuition ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Demographics – High School

  50. ENVIRONMENTAL SCANNING – SITUATION ANALYSIS Admissions/Matriculation

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