4. Finances Auburn increasingly relies on tuition and fees, as state appropriations fail to keep pace with the university’s overall budget growth. While today representing about one-third of AU’s annual budget, public fiscal support as a percentage of Auburn’s revenue has been declining for more than a decade. AU receives lower funding per student from state appropriations combined with tuition than almost all out-of-state competing institutions. Accordingly, AU is not resourced appropriately to compete directly with these peers The “It Begins at Auburn” campaign will more than double AU’s endowment, advancing the University to the 75 th percentile among its SREB peers (based on 2004 data and assuming no change in their endowment levels). Despite recent growth, annual giving to Auburn is notably high, at 77 percent of the SREB median dollar level in 2005. Alumni participation, measured on different bases as 21 percent or 11 percent, also suggests opportunity for growth Messina & Graham 102
State budgets across the U. S. are under pressure, which will continue – driven by health care costs and other factors. “The share of the state pie garnered by higher education has fallen as that devoted to Medicaid has risen dramatically. ” 2 Total state spending on higher education by all states combined dropped four percent from 2002 to 2004, and by ten percent after adjusting for inflation Alabama earmarks sales and income tax revenues for the Educational Trust Fund (ETF). This shelters education funding from health and other demands on the state’s tax revenue, but these taxes fluctuate with the economy. While the ETF’s revenues have grown at about five percent per year on average since FY 1992, (driven by employment growth and wage increases), they dropped by nearly five percent in FY 2001 and had no growth in FY 2003. ETF revenues grew by nine percent in 2004 and 11 percent in 2005. A proration-prevention account helps to cushion volatility somewhat; the state transferred $198 million (3. 8% of the ETF tax share) to that Rainy Day fund in 2006 2 Ford Policy Forum, 2004 Messina & Graham 103
AU’s share of the Educational Trust Fund can be expected to vary in the future: the ETF is divided among K-12 schools, community colleges, the UA system, and other institutions. Even the fund’s continuing control of the major tax streams may carry some legislative risk, as health and other demands bear down AU’s state appropriation from 2001 to 2005 grew at an annual rate of about 2. 6 percent, roughly the same as the CPI. The state appropriated 13 percent more for AU for 2005 -06 than for 200405, and another 19 percent more than that for 2006 -07, as the Alabama economy grew strongly State appropriations have represented a decreasing fraction of AU’s overall revenue, declining from 41. 9 percent in 1995– 96 to 30. 1 percent in 2004– 05. Based on the most recent information, that percentage will likely rise by a few points during 2006 -07 Chart 37 Messina & Graham 104
State Appropriations as Share of Auburn’s Total Revenue FY 1996 - 2005 Chart 37 41. 9% 34. 4% 30. 1% Source: AU OIRA Messina & Graham 105
• This ETF growth rate over the medium term will be probably less than the future growth in AU’s costs. AU total spending growth averaged 5. 6 percent per year from 1995 -96 to 2002 -03, though the expense growth rate was only three percent in 2004 -05. The possibility of a gap between appropriations growth and spending growth implies the need for developing other funding sources • AU’s state appropriation per student in 2004 -05 was lower than that received by most of its direct competitors, including U of A (by a small amount), U of TN, U of FL, UGA and Georgia Tech. Chart 38. This may oblige AU to charge higher tuition than others in order to approach being competitive in total financial resources. Data are not yet available for assessing to what (if any) extent the double-digit increases in AU’s state appropriations since 2004 -05 have closed the funding gap Messina & Graham 106
State Appropriations per FTE Student Auburn versus Competition – FY 2005 Chart 38 $10, 062 $9, 006 $8, 281 $8, 144 $7, 281 $6, 010 $5, 622 $5, 180 $4, 502 GA Tech UGA FL ST UFL UTN U of A AU Clemson UMS Source: SREB; AU OIRA Messina & Graham 107
• The U. S. is in an extended period of increased private giving, resulting from the sharp rise in numbers of multi-millionaires, generational wealth transfer by the Baby Boomers, and other factors. Giving to universities has doubled since 1994 (reflecting accumulative annual growth rate of 6. 85 percent), and it has risen 57 percent in CPI-adjusted terms. Chart 39 Messina & Graham 108
U. S. Private Giving to Higher Education Chart 39 $ Billions Up 57% after CPI adjustment 25. 6 12. 4 Source: Council for Aid to Education Messina & Graham 109
• Most institutions depend on regular gifts – both annual fund and endowment – from alumni and friends to help cover operating costs and to fund scholarships, programs, research, and expansion - The top universities in the nation raise as much as $600 million in a year, and several have multi-billion-dollar campaigns under way. The top ten money-raisers account for 16 percent of all funds raised - Friends who are not alumni have become significant contributors, although their participation varies appreciably from year to year - Annual support (excluding major, one-time capital gifts) may range from only a percent or two to nearly ten percent of a university's annual budget • Despite recent growth, annual giving to AU of $29. 6 million in 2005 is notably high, at 77 percent of the SREB median. Alumni participation, measured on different bases as 21 percent or 11 percent, also suggests opportunity for growth in view of the Auburn spirit and measures of graduates’ satisfaction Messina & Graham 110
• Projecting the “It Begins at Auburn” $500 -million campaign to achieve its target and augment the current endowment by some $290 million, AU will more than double its current endowment. At $26, 600 per student, this would put AU at the 75 th percentile of its SREB peers (based on 2004 data and assuming no change in their endowment levels). This will place AU ahead of close competitors like U of A and Clemson, while still well behind the top regional research universities such as Georgia Tech. Chart 40 Messina & Graham 111
Endowment per FTE Student – AU versus Competitors – 2004 Chart 40 $ Thousands 71 “It Begins at Auburn” ($290 million total increase) 23 GA Tech UMS Source: AU OIRA 27 21 U of A 20 17 UTN FL 17 16 Clemson UGA Messina & Graham 13 AU 12 FL ST 112
Assessment of Strengths, Weaknesses, Opportunities, and Threats (“SWOT” Assessment) Auburn University STRENGTHS • AU’s big-school, big-time sports, small-town campus near fast-growing Atlanta is attractive to many Alabama and Georgia students. AU draws the top share of Georgia students who leave their home state for a Southern Region Education Board public research university • AU has notable strengths in selected academic areas. AU’s Wireless Engineering program is a leader. The undergraduate Engineering and Business programs rank well in USNWR’s lists. Several of AU’s College of Architecture programs rank strongly in the Design Intelligence Survey • AU ranks well on USNWR’s retention value-added measure and on the National Survey of Student Engagement’s “supportive campus environment” measure • AU has research strengths in selected engineering and agri-science areas • AU has a track record of good financial management, and development has recently shown great progress with “It Begins at Auburn” • AU’s large alumni base expresses strong Auburn spirit – and AU has solid political support in Alabama 113 Messina & Graham
WEAKNESSES • Academically, AU lags nearby states’ best universities in measures of incoming undergraduate quality. It also has a reputation for students who do not study hard and are consumed by athletics • AU’s undergraduate education likely does not prepare students as well as it could to enable them to compete in the twenty-first century. On the Collegiate Learning Assessment, AU’s seniors achieve “at expected level, ” like the students of a majority of other participating schools. The Spellings Commission and others regard “the expected” as no longer good enough. AU’s scores on National Survey of Student Engagement measures are Bs and Cs relative to the top ten percent of schools. AU’s six-year graduation rate is below that of its competitors as well as the national average for four-year schools • AU is not competitive on key measures in most research areas, and being located away from a major growth and research hub is problematic for research leadership • AU is under-resourced – for its array of programs and relative to competitors – owing to historically declining real state appropriations, comparatively low endowment and alumni giving, and limits on feasible tuition increases • AU’s cohesiveness as a community has been adversely affected over the last five years or so by several factors – including lack of consensus on vision and mission, a divided Board, presidential turnover, and frayed relations among the Board, administration, faculty, and other constituencies Messina & Graham 114
OPPORTUNITIES • Coalesce Board and faculty behind a new President and an agreed-upon vision • Market AU’s stronger undergraduate programs and the Honors College much more proactively to win more talented students • Build on AU’s past lead in value-added retention by enhancing undergraduate education quality for the current profile of AU students; experimenting with innovative approaches in program design, teaching, and learning; and using the results to market to prospective students • Focus research in a few areas of natural strength and relative advantage, and drive collaborations with nearby research powerhouses, taking advantage of telecommunications technologies • Rationalize program offerings to moderate expense growth and gain critical mass in areas of focus • Harness technology thoughtfully to improve quality while containing costs in selective distance-learning offerings, elements of undergraduate instruction, back office operations and extension • Continue to strengthen alumni and friends’ financial support of the University through “It Begins At Auburn” and intensified annual-fund campaigns, leveraging these communications opportunities to build greater awareness and understanding of Auburn, its accomplishments, and its aspirations 115 Messina & Graham
THREATS • Demographic trends in high-school graduates are neutral for student enrollment, and the growing fraction of Hispanic students will present a new challenge for AU • AU’s dependence on Georgia for students paying out-of-state tuition is vulnerable to any flattening in Georgia’s high-school graduate numbers and to lesser-ranked Georgia colleges’ becoming more competitive with AU • AU could face increasing financial challenges if Alabama state appropriations do not keep pace with AU expense increases and if resultant tuition hikes meet market resistance • AU’s value proposition could erode if students, parents, or the state begin to emphasize the college years as a time for gaining competitive skills – unless AU can demonstrate stronger value-added • The U of A’s aggressive recruitment of high academic achievers could reduce AU’s share of strong in-state students and damage AU’s reputation. It may also have the potential to discourage state appropriations to both universities if the schools are perceived as using public funds to compete for prestige • Technology developments in higher education create opportunities for fast-moving competitors, so AU must be constantly vigilant about remaining at the forefront of applying relevant techniques Messina & Graham 116
Strategic Challenges and Implications Auburn University • Areas of Strategic Concern • Potential Strategic Directions (Illustrative) • Action Implications of Possible Strategic Priorities (Illustrative) Messina & Graham 117
Areas of Strategic Concern Auburn University AREA CONCERN STUDENT ENROLLMENT • AU is accepting 84 percent of applicants • Not much room for greater selectivity or for managing enrollments by adjusting standards • Over 40 percent of out-of-state students (entering fall 2006) are from Georgia • Vulnerable to decrease because of possible Georgia economic downturn, policy changes, or other factors • ACT scores, while among the best in state, are still well below those of nearby competitors • Could make it harder to build reputation for excellence Messina & Graham 118
Areas of Strategic Concern (Continued) Auburn University AREA CONCERN STUDENT ENROLLMENT • Tuition increases averaged 8. 9 percent per year from 1995 -96 to 2005 -06 • This is 3. 5 times the increase in CPI, and twice the rate of increase of public four- year colleges in general. How sustainable? What effect on perception of value? RESEARCH • Flat to declining projected federal research funding • Increasing competition for federal research dollars • AU not in a strong position in many research fields • Research is costly, with expenditures consistently exceeding revenues Messina & Graham 119
Areas of Strategic Concern (Continued) Auburn University AREA CONCERN FUNDING • AU is under-resourced. AU’s total- revenue-per-student is below that of competitors • The shortfall of between ~$1, 500 to $3, 500 relative to regional competitors is not made up by alumni giving or other sources. This represents a significant disadvantage PRIVATE GIVING • The percent of alumni giving seems relatively low • May indicate that many alumni do not feel informed about or strongly connected to AU Messina & Graham 120
E U ILL ST IV AT R Potential Strategic Directions • Instruction. Renew the University’s primary emphasis on instruction, with undergraduate education the top priority. Become more selective on admissions, raising standards over time. (This echoes the 21 st Century Commission report of a decade ago) • Research. Focus research on building from areas of strength and developing collaborations (including with industry); seek supplemental funding • Extension. Implement a technology-leveraged business model for extension and outreach • AU system. Better link with AUM, and collaboratively expand on-line presence and brand image among working students • Operations. Continue to improve efficiency to help reduce the rate of cost increases • Finances. Increase financial resources to enable excellence - Consider expanding capital campaign - Implement an initiative to increase annual giving - Pursue opportunities for special gifts Messina & Graham 121
E ST U ILL Action Implications of Possible Strategic Priorities (Continued) IV AT R Auburn University IF A CHOSEN STRATEGIC PRIORITY WERE TO BE. . . THEN ACTIONS AU COULD TAKE WOULD INCLUDE. . . Improve the quality of the undergraduate experience • Realign faculty responsibilities (and evaluations) to allow more time for undergraduate teaching • Hire a larger fraction of teaching-oriented faculty • Challenge the deans and faculty to develop ways to make AU a leader on the Collegiate Learning Assessment • Perform a broad review of the undergraduate curriculum in light of pervasive and higher education trends and recent thinking • Become more selective in admissions • Increase the use of technology to leverage teaching and learning interactions • Build additional dormitories and common spaces Messina & Graham 122
E IV AT R T US ILL Action Implications of Possible Strategic Priorities Auburn University IF A CHOSEN STRATEGIC PRIORITY WERE TO BE. . . Increase research scale THEN ACTIONS AU COULD TAKE WOULD INCLUDE. . . • Focus resources on building from areas of natural strength • Expand funding sources (endowment, annual giving, special gifts) to support a larger research enterprise • Encourage more research collaborations with leading nearby universities • Take a series of best-practice steps to win more grants (greater dollar value, higher success rate) • Realign faculty responsibilities (and evaluations) to allow more time for research • Hire a larger fraction of research-oriented faculty Messina & Graham 123
IV. Auburn University Montgomery • Comparison of Auburn University and AUM • Profile • Assessment of Strengths, Weaknesses, Opportunities, and Threats (“SWOT” Assessment) • Strategic Challenges and Implications *Acknowledgment: The Vice Chancellor for Administrative Services and the Strategic Planning Committee of Auburn University Montgomery were extremely helpful in compiling and critiquing selected data presented in this profile of Auburn, and in suggesting additional sources. Even so, the selection of data to be presented, all judgments expressed, and any remaining errors are the sole responsibility of Messina & Graham 124
Comparison of Auburn University and Auburn Montgomery Chart 41 AUBURN AUM YEAR FOUNDED 1856 1967 INSTITUTIONAL ROLE Land Grant, Comprehensive Research Institution Education of Central Alabama’s Diverse Citizens, Supported by Research and Service USNWR CATEGORY Top National Universities Master’s South – Third Tier TOTAL ENROLLMENT 23, 000 5, 100 NUMBER OF GRADUATE STUDENTS 3, 000 800 DOCTORATES AWARDED (2003) 159 0 Messina & Graham 125
Comparison of Auburn University and Auburn Montgomery (Continued) Chart 41 AUBURN AUM REVENUES ($ Millions) $495 $61 ENDOWMENT ASSETS ($ Millions) $269 $22 FEDERAL RESEARCH ($ Millions) $45 $0. 1 IN-STATE TUITION $5, 500 $4, 600 STUDENT: FACULTY RATIO 17: 1 16: 1 STUDENT SOURCE 40% Out-of-State 80% Montgomery County, 3% Out-of-State PERCENTAGE WHITE 88% 60% Messina & Graham 126
Comparison of Auburn University and Auburn Montgomery (Continued) Chart 41 AUBURN AUM PERCENT WORKING STUDENTS 80 -90% PERCENT OF PART-TIME UNDERGRADUATES 9% 34% FRESHMEN ACT SCORE (25 / 75 percentile) 21 / 27 18 / 23 FRESHMEN FROM TOP 10% OF HIGH SCHOOL 35% N/A SIX-YEAR GRADUATION RATE 65% 28% Messina & Graham 127
Comparison of Auburn University and Auburn Montgomery (Continued) Chart 41 AUBURN LEADING UNDERGRADUATE COURSES TAKEN (%) AUM Liberal Arts (24%) Business (19%) Engineering (15%) Science & Math (13%) Education (8%) Architecture (7%) Human Sciences (6%) Agriculture (5%) Nursing (3%) Business (30%) Science (24%) Liberal Arts (17%) Education (15%) Nursing (10%) Messina & Graham 128
Profile of Auburn University Montgomery (AUM) AUM’s students come mostly from the local Montgomery area, as do Troy-Montgomery’s. Chart 42. This reflects the educational role of AUM, serving the more place-bound, joboriented, working student for whom studying close to home and job are prime considerations. It makes AUM much more heavily dependent on local demographics, economics and competition than AU, for example The Montgomery-area population of prime potential students – high-school graduates age 1824 – has been on a steady rise since 1990 and is expected to rise by another eleven percent in the next ten years. Chart 43 The working-adult population is projected to rise by about five percent in the same period. Chart 44 Messina & Graham 129
Source of Undergraduates Chart 42 AUM – Fall 2005 Elmore Co. 15% Troy-Montgomery – Fall 2004 Elmore Co. 14% Montgomery Co. 49% Montgomery Co. 64% Autauga Co. 10% Autauga Co. 9% Lee & Dallas Co. 6% Other 12% Other 21% Source: AUM OIRA Messina & Graham 130
Montgomery Area High-School Graduates Age 18 - 24 Chart 43 60, 000 57, 000 63, 000 50, 000 46, 000 Growth Rates 1990 – 2005 – 2015 Actual 1990 Actual 2000 Projected 2005 Projected 2010 21% 11% Projected 2015 Note: Includes Montgomery, Elmore, Autauga, Lee and Dallas Counties Source: Center for Demographic Research, AUM Messina & Graham 131
Projection of Montgomery Area Working Adults Age 25 - 44 Chart 44 124, 000 127, 000 134, 000 129, 000 2005 - 2015 5. 5% Increase Actual 2000 Actual 2005 Projected 2010 Projected 2015 Note: Includes the traditional five-county market area, only those with high-school diplomas Source: Center for Demographic Research, AUM Messina & Graham 132
Despite the population growth of AUM’s traditional five-county market area, enrollment declined between 1995 and 2000, and today it remains well below its 1995 level. Chart 45. There is some impact from strong job opportunities, (e. g. , in the growing auto industry), that compete for prospective students, but a share loss to other Montgomery institutions may also have played a part. Chart 46 Of Montgomery area four-year schools, AUM comes second to ASU in enrollment, ahead of Troy-Montgomery, with Faulkner and Huntingdon much smaller. Chart 47. But the competition for Montgomery students is more with Troy than ASU, whose students appear – although various sources differ sharply on this – to come from across the state and nation. In terms of share of degrees awarded in Business (one of the most popular programs in all the institutions) AUM comes first and is far ahead of ASU, partly reflecting better success in graduating students. Chart 48 Messina & Graham 133
AUM Enrollment Trends Chart 45 1995 - 2006 Fall Semester Number of Students 5, 882 4, 900 1995 2000 5, 123 5, 128 5, 079 2004 2005 2006 Source: AUM OIRA Messina & Graham 134
Montgomery Competitor Enrollment Trend Fall FTE Enrollment All Students (Undergraduate and Graduate) AUM* ASU 1994 2000 2004 6000 1994 2000 2004 Chart 46 Troy-Montgomery 5000 4000 3000 2000 1000 0 1994 2000 2004 * Lower than headcount numbers because of FTE adjustment of part-time students Source: ACHE Fall Credit Hour Production Reports and Alabama College System Enrollment Summary Fall 1994 - 2004 135
Share of Montgomery Area Four-Year Institution Undergraduate Enrollment – 2005 Chart 47 100% = 10, 949 FTE (#) Troy-M 23% (2511) ASU 38% (4152) Faulkner 5% (600) Huntingdon 6% (622) AUM 28% (3064) Source: ACHE Public Four-Year Headcount Enrollment and FTE Fall 2005; Peterson’s 2006; Articles from Montgomery Advertiser; Faulkner University Website Messina & Graham 136
Share of Montgomery Area Bachelor’s Business Degrees Conferred – 2005 Chart 48 100% = 611 Degrees (#) Huntingdon 3% (20) ASU 13% (77) AUM 34% (206) Faulkner 24% (146) Troy-M 26% (162) Source: ACHE Institutional Data on Bachelor’s Degrees conferred 2005 Public and Private Four-Year Institutions; Alabamamentor. org. (Peterson’s) – Percent of Business / Marketing Majors by Institution Messina & Graham 137
Market research findings suggest that AUM has the best academic reputation in Montgomery across all segments. But Troy-Montgomery is widely perceived to be the better option for working adults, offering more convenience in several ways. Chart 49. AUM’s Education and Business programs are seen as strong by some key segments. Students and former students report problems with the financial-aid office and career center, while high-school counselors state that the admissions office is not user-friendly. There is a general perception that campus facilities and campus life are lacking. Chart 50 In terms of ACT scores, AUM, Troy and Faulkner compete for similar students and require an 18 for most of their admits, but have programs for a minority of lower achievers. Huntingdon students are on average academically stronger and ASU students weaker than those at AUM Chart 51 AUM’s six-year graduation rate, while low, is better than ASU’s and much better than Troy’s, consistent with the picture of AUM as a higher-quality institution. Chart 52. On the other hand, AUM seems to experience considerably more transfers out than the in-town competition Chart 53 Messina & Graham 138
Market Research on AUM’s Competitive Position Chart 49 OVERALL PERCEPTIONS MARKET SEGMENTS SHARING THIS VIEW AUM instruction and faculty quality is high, with the strongest academic reputation of local competitors Current students (85%); recent graduates; students at local competitors; private HS counselors; HS parents; Montgomery public Troy-Montgomery is a better school for working adults because of convenient course times, TV and on-line courses, and flexible mini-quarters Recent graduates; transfers-out; students at local competitors; public HS counselors; HS parents; Montgomery public (46% versus 26%) AUM is harder but better than local competitors Recent graduates; transfers-out; students at local competitors; Montgomery public Source: AUM Market Surveys and Focus Groups, August 2006 Messina & Graham 139
Market Research on Specific AUM Strengths and Weaknesses Chart 50 SPECIFIC FEATURES MARKET SEGMENTS SHARING THIS VIEW Nursing program is strong Students at local competitors But NOT Public HS counselors or Montgomery public Education and Business programs are strong Public and private HS counselors; Montgomery public Inadequate course availability by time and day Current students Unhelpful financial-aid office and career center Current students; recent graduates; transfers-out Admissions office not user-friendly Public and private HS counselors Campus life and facilities need work Current students; recent graduates; private HS counselors; HS parents Source: AUM Market Surveys and Focus Groups, August 2006 Messina & Graham 140
Competitor ACT Comparison – 2005 Percent of Entering Freshmen Scoring 18 or Higher Chart 51 96 84 72 74 26 ASU Troy U* AUM Faulkner Huntingdon (all campuses) *No separate data available for Troy-Montgomery Source: Peterson’s, 2006 Messina & Graham 141
Comparison of Selected Competitors – 2005 Chart 52 AUM Troy-Montgomery % Completing Bachelor’s Degree in 6 Years or Less 28 ASU 9 23 % of Students 25 or older 26 63 55 % African-American 33 56 95 % Full-Time Students 66 36 57 % Living on Campus 12 0 43 500 6 172 Size of Campus (acres) Source: Peterson’s; ACHE; USNWR; Articles in Montgomery Advertiser Messina & Graham 142
Transfers from Montgomery Public Universities Fall – 2005 Chart 53 236 99 To Other 140 49 To AU 88 To Troy 72 27 50 41 To Other To AUM 41 To Troy 9 As % of Enrollment 5% 1% 3% AUM received transfers of 83 students Source: ACHE Messina & Graham 143
The annual cost comparison of local colleges in the Montgomery press – based on reporting by the Alabama Commission of Higher Education – shows AUM about ten percent higher than Troy. M and ASU. Chart 54. The effective cost of AUM for students taking the typical number of credits is no higher than at those competitors, but the perception of a higher price may be enough to drive some students’ choices. Even so, price did not emerge as a factor in AUM’s recent market research. Both Faulkner and Huntingdon offer attractive financial aid to attract Montgomery students, which puts them to some degree in competition with AUM, at least in attracting stronger students. Chart 55 Messina & Graham 144
Competitor Tuition and Fees 2005 -06 Chart 54 As Reported in the Press $10, 5003 $4, 6401 AUM $4, 0081 $4, 0042 ASU Troy-M Faulkner Source: 1 ACHE Annual Undergraduate Tuition and Required Fees Combined, Public Four-Year Institutions 2005 - 2006 2 Peterson’s 2006 3 College Opportunities Online Locator, Faulkner Profile, 2005 - 2006 Estimated Expenses, Tuition and Fees Messina & Graham 145
OM FR R N KE KNE TA UL E FA BSIT WE Montgomery Private University Commuter Scholarships Chart 55 HALF OFF TUITION FOR COMMUTING STUDENTS! The Capital City Commuter Award offers the opportunity for students from the surrounding area to receive a quality education in an excellent Christian environment! This award is the equivalent of 50% off tuition to qualifying students, and can be combined with any federal or state financial aid for which the student is eligible. It is also renewable for up to nine semesters! To be eligible for this award, you must have at least an 18 composite on the ACT, enroll as a full time student, with at least 15 semester hours, enter school following your graduation, and commute from your home to Faulkner. The first step to qualify for this award is to apply for admission! Source: Faulkner University Website – Financial Aid Messina & Graham 146
AUM performs a range of public services, collaborating with state government and other partners. Chart 56 Messina & Graham 147
Public Service Chart 56 • AUM participates in several partnerships and collaborations with public and private organizations – for example - Black Belt initiative - Writer’s Block • AUM partners with local, state, and regional governmental agencies to provide consulting and training – for example - Air Force Information Technology Conference - Montgomery Police Department - SMART Governing - Governmental Accounting Messina & Graham 148
State appropriations have declined as a percentage of revenue over the past decade, although the state decided on double-digit increases for 2005 -06 and for 2006 -07, as the Alabama economy grew strongly. Tuition and contracts are very significant components of AUM’s revenue. Charts 57 Messina & Graham 149
AUM Revenue Components FY 2004 - 2005 Chart 57 $ Millions 2004 2005 Other* 2004 2005 Contracts 2004 2005 Tuition & Fees 2004 2005 State Appropriations *Includes auxiliary revenue, sales and services of educational departments, and net investment income Source: AU Comprehensive Annual Financial Report, 2005 Messina & Graham 150
Assessment of Strengths, Weaknesses, Opportunities, and Threats (“SWOT” Assessment) Auburn Montgomery STRENGTHS • AUM is academically stronger than local competitors, and it has built a reputation for quality among current and past students, high-school counselors, and the Montgomery public • AUM’s separately-accredited programs such as Business, Education, Medical Technology, Nursing, and Public Administration set AUM apart as a leader in preparing students for professional careers • AUM’s six-year graduation rate exceeds that of local competitors • AUM has a strong position in support of state government • AUM is named as a Best-Value College and Best Southeast College in the 2006 Princeton Review Messina & Graham 151
WEAKNESSES • AUM has experienced declining enrollment, likely reflecting in part a loss of market share to competition, and it suffers high transfers out • AUM lags Troy-Montgomery on perceived convenience for working-adult students. AUM’s shift to a semester system and Troy’s more numerous on-line and TV-based program offerings contribute to this perception gap • AUM is seen as requiring harder work to obtain a degree and probably has not communicated the value to students of a more academically-demanding program • AUM is seen as not user-friendly in administrative areas such as admissions, financial aid, and the career center • AUM’s campus facilities and campus life are not perceived as attractive • AUM’s growth prospects are limited, since it already attracts a large share of high-school seniors from its traditional five-county market area, it accepts nearly 100 percent of applicants, and it enrolls roughly 80 percent of its acceptances Messina & Graham 152
OPPORTUNITIES • Market the value to students of AUM’s program quality more effectively, in terms of superior job opportunities and graduation rates, leading number of degrees conferred in Business, etc. • Improve customer service and turn around perceptions of inconvenience by better communicating the array of evening and weekend course offerings • Shift to mini-terms for working students • Introduce competitive on-line course offerings where these appear to be educationally effective, and exploit information technology for “time-shift” convenience of working students • Capitalize on the connection with Auburn main campus for joint programs and other opportunities to create value for prospective students • Develop comprehensive international business (and possibly science and liberal arts) programs to address globalization trends, building on relationships with Korean, Chinese and Mexican schools and Auburn’s main-campus language / cultural programs • Focus on proven methods of raising the six-year graduation rate for AUM’s working students Messina & Graham 153
THREATS • AUM is heavily dependent for enrollment on the Montgomery area, which is expected to experience slowing growth in high-school graduates, although the working-adult population may keep growing • AUM’s market is the working student, so credit hours, if not the absolute numbers of students, are vulnerable to how students weigh their immediate job pay against the value of studying for a degree. Continued growth in automotive jobs that do not require degrees could hurt AUM • AUM’s target students may increasingly choose the “easy option” of programs at competing schools, as on-line and TV (“distance-learning”) options become culturally even more attractive than more demanding learning approaches, regardless of quality • Troy’s business model – on-line, lower-quality programs with potentially higher fixed and lower variable costs – may generate more dollars than AUM for marketing to prospective students, leading to further loss of share for AUM • AUM’s pricing flexibility – for example, to respond to any shortfall in state appropriations – may be very limited, given its market demographics and local low-price competition • Generous commuter scholarships offered by Faulkner and Huntingdon may siphon off an increasing share of AUM’s most academically-attractive applicants Messina & Graham 154
Strategic Challenges and Implications Auburn Montgomery • Areas of Strategic Concern • Potential Strategic Directions (Illustrative) Messina & Graham 155
Areas of Strategic Concern Auburn Montgomery AREA CONCERN • AUM enrollment decline • Possibly losing share to competition and/or to employment as an alternative to college. Is this trend reversible? • Market perception that Troy Montgomery is more convenient for working adults • AUM cannot afford to concede this large segment to a competitor • Competition using more on-line and TV instruction than AUM, of uncertain quality • How should AUM respond to lower-cost, more-convenient instruction? Messina & Graham 156
Areas of Strategic Concern (Continued) Auburn Montgomery AREA CONCERN • Transfers out of AUM running at five percent of enrollment, higher than competition • Apart from direct loss of tuition revenue, if not understood and reversed, this attrition could harm AUM’s market image • Widespread dissatisfaction with admissions, financial-aid and career offices • Could be contributing to enrollment declines and transfers out • Nursing program not perceived as leader • Potentially missing opportunity to promote a high-quality, joint AUM / AU program Messina & Graham 157
E U ILL IV AT R ST Potential Strategic Directions Auburn Montgomery • Customer service. Make AUM’s admissions, financial aid and career offices the best in Montgomery, after objective review of the challenges in providing satisfying experiences to students and other ‘customers’ • Campus. Upgrade campus facilities and campus life in ways that increase enrollment and pay for themselves or are funded by private giving • Instruction. Implement educationally effective, alternative methods of course delivery for working adults – for example, mini-terms and on-line and hybrid (mix of on-line and face-to-face) instruction. Emphasize improvement of six-year graduation rate over time • AU system. Take fuller advantage of the Auburn brand develop collaborative Auburn-AUM programs that meet market needs • State government. Further capitalize on AUM’s location in the state capital, a competitive advantage for both AUM and Auburn in meeting government’s consulting needs and preparing students for careers in government • • Operations. Continue to improve efficiency to help reduce the rate of cost increases Finances. Consider development campaigns and other ways of obtaining incremental resources that would allow AUM to compete more effectively Messina & Graham 158
V. Next Steps • Building on the dialogue already initiated regarding external factors, discuss the AU and AUM profiles with the AU University Senate and Deans, and with AUM’s Advisory Board and Strategic Planning Committee • Perform additional fact-gathering in selected areas – for example - Profile the graduate programs and the faculty - Review research activities in greater depth - Benchmark best practices of other universities in selected areas, such as Hispanic student enrollment and retention • Initiate high-level financial analyses using recently-developed tools – for example - Evaluate research economics - Model the resource requirements associated with possible future scenarios • Continue to explore potential strategic opportunities for AU and AUM to pursue together Messina & Graham 159
Appendices • Auburn University Strategic Planning – Profile of the Environment, July 2006 (separately bound) • Ranking Methodologies • Selected Information Sources Messina & Graham 160
Ranking Methodologies US NEWS & WORLD REPORT What goes into the USNWR rankings of national universities? Indicator Weight Peer Assessment of Academic Reputation Graduation Rate Expenditures per Student SAT/ACT Faculty Compensation Class Size 1 -19 Percent of Freshmen in Top 10% HS class Alumni Giving Value Added Freshmen Retention Percent of Faculty with Terminal Degree Class Size 50+ Acceptance Rate Student/Faculty Ratio Percent Full-Time Faculty 25. 0% 16. 0% 10. 0% 7. 5% 7. 0% 6. 0% 5. 0% 4. 0% 3. 0% 2. 0% 1. 5% 1. 0% 100. 0% Total USNWR gathers the data by survey from the colleges themselves. Source: OIRA; USNWR Website Messina & Graham 161
Ranking Methodologies (Continued) PRINCETON REVIEW Princeton Review Top-20 lists are compiled based on comparing results of student surveys, “about 300 per campus, ” completed in the prior three years, almost all administered on-line. The survey asks some 80 multiple -response questions about academics, students and life at school. The results are reported in 62 Top-20 lists DESIGN INTELLIGENCE Design Intelligence, an architecture and design publication, annually surveys the principals and recruiters of a long roster of firms of architects and interior, industrial and landscape designers. The survey asks these firms from which programs their best new associates have graduated over the past five years Results are compiled for each specialty (architecture, industrial design, etc. ) A national list shows the responses of all firms from across the U. S. Another set of lists shows how firms in each region responded to the question However, since graduates of schools with top architecture and design programs go to work in every region, Southern firms, for example, might cite a Northeastern school as a leader. Design Intelligence therefore compiles a third set of lists that show the top Southern schools mentioned by Southern firms, and so on for each region Source: Princeton Review Website; Design Intelligence Messina & Graham 162
Ranking Methodologies (Continued) The. Center Since 2000, the Lombardi Program on Measuring University Performance at the University of Florida, known as “The. Center”, has published an annual report, “The Top American Research Universities. ” This report is widely regarded as the most reliable and authoritative source of comparative data on the research performance of those American universities that have at least $20 million in annual federal research expenditures. The report ranks universities according to their standing on nine quantitative measures: total and federal research dollars, endowment assets, annual giving, national academy members, faculty awards, doctorates granted, postdoctoral appointees, and undergraduate SAT/ACT score ranges. Those that are in the top 25 on every one of the nine measures rank first (MIT, Stanford and U Penn were the only ones in the 2005 report), those who were in the top 25 on eight measures rank next, and so on. The. Center goes to some pains to ensure comparability and accuracy in the data used. One consequence is a two to three year time lag in the data reported. The December 2005 report is the latest available as of October 2006, and is based on 2003 performance. Source: The. Center Messina & Graham 163
Selected Information Sources Books on Issues and Opportunities in Higher Education Bok, Derek. Our Underachieving Colleges. Princeton: Princeton University Press, 2006. Brewer, Dominic J. , Susan M. Gates, and Charles A. Goldman. In Pursuit of Prestige: Strategy and Competition in U. S. Higher Education. Somerset: Transaction Publishers, 2005. Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. New York: Farrar, Straus and Giroux, 2005. Geiger, Roger L. Knowledge and Money: Research Universities and the Paradox of the Marketplace. Palo Alto: Stanford University Press, 2004. Hersh, Richard H. , and John Merrow. Declining By Degrees: Higher Education at Risk. New York: Palgrave Mac. Millan, 2005. Rosovsky, Henry. The University: An Owner’s Manual. New York: W. W. Norton Company, Inc. , 1991. Vedder, Richard. Going Broke By Degree: Why College Costs Too Much. Washington, D. C. : The AEI Press, 2004. Messina & Graham 164
Selected Information Sources (Continued) Commissions and Reports Alliance for Regional Stewardship. “Making Place Matter. ” 2004. Auburn University. “Recommendations of the Twenty-First Century Commission. ” March 20, 1997. Baum, Sandy, and Lucie Lapovsky. “Tuition Discounting: Not Just A Private College Practice. ” The College Board, 2006. Byrne, John V. “Public Higher Education Reform Five Years after the Kellogg Commission on the Future of State and Land-Grant Universities. ” NASULGC, January 2006. The College Board. “Trends in College Pricing. ” New York: College Board Publications, 2005. Council for Aid to Education. “Report on Contributions to Colleges and Universities. ” February 16, 2006. Huron Consulting Group and The Washington Advisory Group, for North Carolina State University. “Enhancing the Ability of North Carolina Public Research Universities to Contribute to State Economic Development. ” 2004. Messina & Graham 165
Selected Information Sources (Continued) Commissions and Reports Kellogg Commission. “Returning to our Roots: Executive Summaries of the Reports of the Kellogg Commission on the Future of State and Land-Grant Universities. ” NASULGC, January 2001. Mc. Pherson, Michael S. , and Morton Owen Schapiro. “The Promise and Perils of Universal Higher Education. ” Ford Policy Forum (2004). The National Center for Public Policy and Higher Education. “Measuring Up 2006: The State Report Card on Higher Education – Alabama. ” 2006. National Science Board. “An Emerging and Critical Problem of the Science and Engineering Labor Force. ” 2004. United States. Department of Education. Miller, Charles, and Cheryl Oldham. “Setting the Context. ” Issue Paper, 2006. United States. Department of Education. Spellings Commission Final Report. “A Test of Leadership – Charting the Future of U. S. Higher Education. ” 2006. Messina & Graham 166
Selected Information Sources (Continued) Recent University Strategic Planning Documents University of Alabama Clemson University Dartmouth College Florida International University George Washington University Georgia Southern University Georgia State University Georgia Institute of Technology University of Georgia at Athens University of Illinois University of Kentucky Mississippi State University Rice University of Southern California Middle Tennessee State University Texas A&M University of Texas, Trends Affecting Higher Education, September 2005 The Society for College and University Planning (SCUP) website SCUP Trends in Higher Education, July 2005 Messina & Graham 167
Selected Information Sources (Continued) Databases ACT, website Alabama Council on Higher Education (ACHE), website database American Association for the Advancement of Science, website database The. Center, The Top American Research Universities, December 2005 and other years College Opportunities Online Locator, website database Design Intelligence: America’s Best Architecture & Design Schools, 2006 National Association of State Universities and Land-Grant Colleges (NASULGC) National Center for Education Statistics, 2004 National Science Foundation, website OECD Peterson’s, website database Princeton Review, college database SREB Fact Book on Higher Education, 2005 U. S. Census Bureau U. S. Energy Information Administration U. S. News and World Report, “America’s Best Colleges Premium Online Edition, ” 2006 and 2007 U. S. News and World Report, “America’s Best Graduate Schools Premium Online Edition, ” 2007 Messina & Graham 168
Selected Information Sources (Continued) Periodicals The Atlanta Journal-Constitution, “Technology Reboots Curriculum, ” May 10, 2006 Aviation Week, website Business Week, “Campus Revolutionary, ” February 27, 2006 Chronicle of Higher Education, “Big Dreams in the Bluegrass State. The University of Kentucky Seeks to Make His State’s Flagship University a Top-20 Public Research Institution, ” April 28, 2006 Chronicle of Higher Education, “College Presidents and Governing Boards Must Strengthen Bonds, Report Says, ” September 29, 2006 Chronicle of Higher Education, “The Legitimacy of Assessment, ” September 22, 2006 Chronicle of Higher Education, “Ole Miss Embraces Its Painful Past to Move Forward, ” September 29, 2006 Chronicle of Higher Education, “Report Blames College Practices for Limiting Access of Minority and Low-Income Students, ” September 1, 2006 Chronicle of Higher Education, “Researcher Proposes Basing College Rankings on Different Criteria, ” September 22, 2006 Chronicle of Higher Education, “Regions and Universities Together Can Foster a Creative Economy, ” September 15, 2006 Chronicle of Higher Education Forum, “The Spelling Report, ‘Warts and All, ’” September 1, 2006 Chronicle of Higher Education News Blog, “Charles Miller Assails Private and Research Universities in ‘Personal’ Letter, ” September 28, 2006 The Economist, Bill Gates’ Comment, May 4, 2006 169 Messina & Graham
Selected Information Sources (Continued) Periodicals The Economist, “Poison Ivy, ” Lexington Column, September 23, 2006 Finance. yahoo. com, “Learning Is A Leader’s Edge, ” article written by Jim Citrin, quote by Jeff Immelt, May 10, 2006 Harvard Magazine, “Summers in Summary, ” September – October, 2006 Huntsville Times, “Auburn University Professor: Football Too Big, ” September 15, 2006 Mc. Kinsey Quarterly Web Exclusive, “An Executive Take on the Top Business Trends: A Mc. Kinsey Global Survey, ” April 2006 Mc. Kinsey Quarterly, “Ten Trends to Watch in 2006, ” January 2006 Mc. Kinsey Quarterly, “Sizing the Emerging Global Labor Market, ” 2005 Montgomery Advertiser, “ASU Goes Over the Top, ” October 10, 2002 Montgomery Advertiser, “At Auburn, AUM, Tuition Hikes Come Despite Better Funding, ” April 16, 2006 Montgomery Advertiser, “Collegians Rally For Record Budget, ” March 3, 2006 Montgomery Advertiser, “Local Colleges Expect to See Jump in Enrollment, ” August 15, 2005 Montgomery Advertiser, “Students Find it Pays to Travel, Universities Reach Out to Commuting Students, ” February 24, 2005 Motley Fool, “e. College: Getting Good Marks, ” May 11, 2006 The New York Times, “BMW’s Custom-Made University, ” August 28, 2006 Opelika-Auburn News, “Auburn University Receives $5. 6 M For Aquatic Research, ” September 18, 2006 Messina & Graham 170
Selected Information Sources (Continued) Periodicals PARCA Quarterly, Winter 2005 – 2006 The Presidency, Winter 2006 The State. com – South Carolina’s Home Page, “Higher Education Panel Calls for Strategic Plan, ” September 29, 2006 University Business, White Paper “Connecting Enrollment and Fiscal Management, ” January 2006 USA Today, “Retiree Benefits Grow Into Monster, ” May 25, 2006 The Wall Street Journal, “Degrees at State. U. Edu, ” May 9, 2006 The Wall Street Journal, “Hispanics Gain in Census, ” May 2006 The Washington Post, “Canada Pays Environmentally for U. S. Oil Thirst, ” May 31, 2006 The Washington Post, “Online Degree Programs Take Off, ” May 16, 2006 Other Sources Alabama Cooperative Extension System, website Alabama Economic Outlook, Center for Business and Economic Research, University of Alabama, 2006 Auburn University Competition Analysis – Fall 2003 Freshmen Applicants Not Enrolled – Where They Enrolled, May 2004 Auburn University Comprehensive Annual Financial Report, 2005 Messina & Graham 171
Selected Information Sources (Continued) Other Sources Auburn University Montgomery Market Surveys and Focus Groups, August 2006 Auburn University Montgomery Office of Institutional Research and Assessment (OIRA) Auburn University Office of Institutional Research and Assessment (OIRA) The Boeing Company, website Center for Demographic Research at AUM College Board, “Advanced Placement Report to the Nation, ” 2006 Faulkner University, website IBM, website International Telecommunications Union, website Internet. World. Stats. com Jet Propulsion Laboratory, website National Merit Scholarship Corporation Annual Report, 2005 Pew Internet and American Life Project Southern Regional Education Board (SREB), Legislative Report, July 2005 Southern Union State Community College, website Texas A&M Fact Book The University of Alabama, website Messina & Graham 172
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