Three main sources fund The National Hispanic University’s general fund operations: tuition, grants and contracts and donations. Our goal is to increase student tuition revenue, increase grant & contract revenue and begin a process to lower the percentage that donations represent of NHU’s unrestricted operating funds.

     The activities depict an operations-based plan of action. Success in meeting these goals will fully fund anticipated operating costs for the next three years and fund activities (academic and student support) necessary to create a competitive, local education solution.

Background

     After WASC’ visit in 2000 NHU recognized the need to better connect the budget process to institutional planning so that the process was less driven by bottom line considerations.

     In June 2001 Dr. Cruz initiated a Budget Oversight Committee with the responsibility of “facilitating good communications and effective coordination of planning and monitoring efforts of the Finance office”. The President, Vice President of Administration, Provost and Chief Financial Officer were responsible for developing and acting upon agreed recommendations. One of the recommendations of the Budget Oversight Committee was that the Provost and CFO visit other universities of comparable size and complexity and learn from their counterparts about their budget processes.

     During the summer and fall of 2001 the Provost and CFO visited a number of institutions including Holy Names, Mount St. Mary’s (Los Angeles) and SJSU. In spring 2002 the Provost and CFO indicated that they were developing a procedure, focusing on academic departments, to decentralize the budget process. The initial, “pilot”, year was AY 2002-2003. Starting in April of 2002 departments began a budgeting process that briefly addressed revenues and detailed line item expenses. Their projections and rationale were forwarded to the Provost whose recommendations were then passed on to the President’s Cabinet. This process culminated in a Board adopted budget in time for the new AY beginning July 1, 2003.

     Concurrently the campus was preparing to break ground on a new, 65,000SF educational facility on almost 11 acres of land fully paid for. Construction financing was being finalized and various administrative and academic units were focused on construction related activities. Fundraising and grant activity declined, and a new President was in the process of being selected. Consequences related to the campus’ transformation and the magnitude of associated costs were only beginning to be raised.

     Forward planning related to recruitment, for example, resulted in only nominally improved numbers for the 2002-2004 period. The enrollment numbers did not meet projections. The resulting revenue shortfall from recruitment efforts contributed, along with the momentum loss in donation and grant activity, to operating deficits. Recognition of these deficits was not part of the implementation of the university’s budget process that started around April of 2003 for the next AY (2003 – 2004). This process largely mirrored the prior year. This academic year was notable for completion of the new campus building. The University was fundamentally different. This was a time of profound change.

Transition

     Financially the university was facing new challenges. Not realizing the capital campaign’s $25M goal resulted in the University entering into a 7 year, interest only, $9.6 million mortgage for the balance of building project. This raised operating costs by approximately $550,000 each year. Operating the new building also raised other costs like utilities and maintenance. Personnel costs associated with student instruction and support also increased in anticipation of higher enrollment. Coupling increased operating costs with reduced revenues from tuition and grants/contracts resulted in operating deficits that we are working our way out of.

     It is important to digress a bit in order to understand why the university went down the path described above. Successful completion of the campaign, as originally planned, would have resulted in a debt free campus and approximately $3M in seed capital for an endowment. This multimillion-dollar infusion into the endowment would have served as a launching point for future fundraising activities. Dr. Cruz’ passing, unfortunately impacted the campaign’s success.

     In spring 2004 the budget process started as before with new personnel. The finance department had additional construction related responsibilities related to the project such as punch list items, final project accounting, releases, and obtaining a permanent loan and no attendant increase in personnel. This impacted the finance department’s capacity to provide meaningful information to the budget process.

     In fall 2004 a new VP of Finance and Administration was brought in to address the financial issues raised by the changes. One challenge was to better align the budget process with institutional planning and inform stakeholders of the financial challenges and opportunities.

     Based on a review of WASC recommendations and internal personnel dynamics (July 2002 wherein it was stated “The University must make certain that its priorities are in alignment with its financial capacity by developing and implementing strategic planning) budgets were re-centralized and an ad-hoc group was formed from the existing Faculty senate budget subcommittee to more strategically examine the university’s finances. Several staff members met a number of times to discuss the university’s financial status, future funding priorities and evaluation metrics. This group included the Provost, VP of Finance and Administration as well as senior staff from the faculty, finance and student services. This core group reviewed current financial information, discussed priorities within the strategic plan framework.

     Our findings were shared at NHU’s Board retreat in spring 2006 focusing on strategic issues. These included funding strategic priorities, the Board’s role and governance. From this retreat we gained direction on specific items that staff needed to address.

     As a group, we were asked to identify and quantify a list of priorities needing funding within a three (3) year time frame. The President and Board of Trustees would then review and, assuming agreement; pursue an appropriate fundraising effort (Appendix 2A). This is a step forward in our development of a strategic financial planning framework, the budget process being a central element.

     The budget process needs to continually improve in the areas of institutional alignment and transparency. By this we mean equating financial capacity to priority, and creating broad awareness of near and long term institutional goals. NHU adopted, for the 2006-2007 academic year a revised budget process that provides for broader representation at decision-making levels (Appendix 2B). The budget process will bring together a representative group focused on building a sustainable university strategic plan. This process provides macro level guidance to the organization while allowing for flexibility at the department level and incorporating more accountability into the budget equation.

Interim

     The fall 2004 staff retreat focused attention on three critical areas; recruitment, retention and revenues. These would have the most impact on our long-term sustainability as substantive cost cutting was seen as endangering our core mission. Consensus was built around building enrollment, improving retention strategies and re-building grant activity to prior year levels.

     An ambitious recruitment goal of 250 new students was set and a plan led by the President’s office was initiated. This plan focused attention on surrounding feeder high schools and included a substantial amount of radio, TV and newspaper coverage. This coordinated effort resulted in the largest ever freshmen cohort and the largest influx of new students to NHU and in a year-to-year tuition revenue increase of 9%.

     New retention strategies were employed for the first time that focused on better preparing incoming students for the rigors of college and providing improved student activities and technology (Appendix 2C). Lessons learned during this period were incorporated into subsequent enrollment periods. Most important was the recognition that an effective summer bridge program would tangibly and positively impact student success.

     Revenue enhancement activities initially focused on developing improved coordination between faculty and the grant office. Coordination between the two offices would result in grants that would complement existing programs, build capacity and improve student support. There was also a move to incorporate more elements of the university’s resources (library, research etc.) into the grant submission process. Donation activity remained relatively high due in large part to supportive Board members and community supporters.

     All of these endeavors helped concentrate staff attention on the core challenges facing the university. Improving understanding, coordination and leveraging of these actions would be the next challenge in building a sustainable university.

Sustainability

     As a post secondary institution with a short history NHU must primarily rely on its operating sources of revenue. This spotlights the need for its programs to be competitive and relevant. Students’ educational opportunities are greater and NHU needed to build competitive and relevant programs for its prospective customers. Staff discussions held in advance of the 2006 Board retreat reinforced the need to invest substantial sums toward the building of competitive programs. This led to Board initiated discussions on fundraising that would guide NHU’s efforts to realize the goals outlined in the strategic plan. Specifically, NHU would address the capacity issues thru a fundraising campaign to improve academic offerings that would in turn provide rationale for increased tuition rates. Increased per student revenue should then allow for a decrease, over time, of the need to generate grant and other revenue. The ultimate goal over the next several years is to have net tuition revenue represent the greatest percentage of university revenues.

A. Donations

     As described earlier, NHU is embarking on a $12 million dollar, 3-year fundraising initiative (averaging $4 million per year). For planning purposes we forecast initial year success at 60% of the annual amount, consistent with the capital campaign’s achievement. Borrowing from that campaign’s organizational framework and operational plan (Appendix 2D), we are closely integrating our Board of Trustees’ social network to help realize our goals. Second and third year success rates are expected to increase as we gain experience and confidence. With our history of success (Appendix 2A-Donors) and remarkable Board of Trustees we have reason to realistically look forward to success.

     Our case statement builds on a 25-year history of meeting the educational needs of a non-traditional student population. With our faculty and community partners NHU is now able to deliver on an 8-year educational pipeline, from high school to a baccalaureate. This is a first for our traditional population; first generation, first in family, Hispanic and low income. Our challenge is to demonstrate the value proposition that is NHU and how supporting it can energize to other communities to employ proven strategies for meeting a vexing educational issue.

B. Tuition

     WASC has commented on NHU’s past dependence on donations and Dr. Cruz’s role therein. Some of these comments were telling. It’s a measure of the organization’s maturity that 4 years have passed and we’re still feeling the impact. It’s equally important to note that 4 years have successfully passed. Many accomplishments have taken place, most notably the largest freshmen cohort in university history in AY 2005 – 2006.

     NHU must continue to build our tuition revenue to a level complementing other revenue sources. Driving net tuition revenue are the depth and breadth of our course offerings coupled with an appropriate enrollment management strategy. Also significant will be our ability to recruit (Appendix 1L & 1M) and retain students (Appendix 2E) on a full time basis. While NHU built an attractive campus infrastructure the process of building academically attractive programs sufficient to have students pay competitive tuition rates is ongoing.

     Tuition rates for this (2006 – 07) and the next two years were set by the Board of Trustees in 2003 when they established a five-year tuition plan (Appendix 2F). We have considered the competitive landscape (namely San Jose State University and Evergreen Community College) to determine whether our rates are appropriate given our limited academic offerings. At this point, no changes are recommended.

     This is why NHU began a 3 year, $12M fundraising initiative. The focus is to improve academic programs, expand library offerings, enhance student life and further develop industry opportunities for graduates.

     Students today have a range of available educational options and NHU must be relevant in order to be competitive. Academic offerings must provide meaningful skills, in professional areas of need, with local employers attractive enough for students to invest their time and resources. This is our challenge, financially and academically.

     For the next three years we anticipate tuition revenues will be at or below both donation and grant/contract revenue. As we move towards AY 2008 – 2009 tuition revenues should increase relative to grants and contracts reflecting increasing enrollment.

C. Grants and Contracts

     Projected revenues from grants and contracts declined as personnel dedicated to those functions changed roles in the 2004–2006 period. Ongoing management of these activities was not impaired, only development of future opportunities consistent with our strategic plan. This reduced volume is seen in the total grant revenues in place for AY 2006 – 2007 as of academic year-end 2005-2006.

     Complementing tuition revenue, on an operating basis, will be our grants and contracts activity (Appendix 2G). This area has historically concentrated on federal grants as a means to build capacity and fund scholarships. While there are continuing opportunities, we are cautioned to not engage in activities academically inconsistent or requiring institutionalization of non-mission centered activities.

    Over the past 18 months staff has developed a number of draft processes related to grants and contracts (Appendix 2H). Some relate to the administration of existing grants/contracts. Others center on the pre-application timeframe wherein discussions relate to academic appropriateness, management, and institutional value. Through these and other efforts, we believe that NHU will reach and exceed past levels of grant activity.

     As for contracts, NHU is now in a position to serve as a vendor to state, federal and other public agencies. We’ve successfully contracted local city agencies to provide training (< 18 months duration) in one of our certificate programs. These same agencies are looking at NHU to expand other services we’ve provided in the past, GED, ECE and ESL to name a couple. Overall, grants and contracts will likely represent 40 - 50% of NHU’s overall revenue over the next three years.

Conclusion

     NHU is now better aligned to address issues in a manner that strengthens existing programs and ensures successful implementation of our core mission.

     In a fall 2004 staff retreat the President identified Recruitment, Retention and Revenues (3R’s) as being the focus of our collective efforts. Understanding the dynamics of these areas and their interdependencies has been an ongoing process. One result is the broad based budget processes that will better inform stakeholders leading to better decision-making. Another is the development by staff of fundraising objectives that became the basis for the President’s 3-year fundraising initiative. The first year program is another example of university communities working together to create a program designed to meet the unique challenges of a first generation, first in family college population.

     These activities, among others, have worked to build a broader understanding of our challenges. With this understanding comes awareness, which we are translating to actionable and measurable milestones. The milestones represent the recently added 4th “R,” for results. As an institution we will work to improve our recruitment, retention and revenue efforts to demonstrate positive growth as an institution of higher education.