The Opinion Shop

NCSU chancellor Woodson on Hofmann Forest, endowment, UNC system presidency

NC State University Chancellor Randy Woodson met with editorial and newsroom folk this week to talk about wide-ranging topics. Here are my notes. They are NOT VERBATIM.

I’ve been here five years. I started by coming to this paper. I promised you I’d be accessible and try to get here for meetings at least annually. It turns out there’s always stuff happening.

From my vantage point, and of course I’m the chief bragger on the university, I think in those five years we’ve made a lot of progress. We had to get more control over and a handle on enrollment growing at a rate that was unsustainable. The first key we put in place was an enrollment management plan that has served us well. We’re still growing but not at an unsustainable rate. We’re among the top 100 universities but had one of the lowest private endowments. That’s another I think real bright spot for us. After five of the most economically difficult years we’ve been through as a university, we’ve grown the endowment to almost a billion dollars. We’ve had year over year record fundraising in the last few years.

On the research front, we’ve topped $300 million in sponsored research in the past year. Over $400 million on research expenditures. I’m very proud of our faculty for competing with the best in the country. The biggest was when President Obama came to announce last year the innovation manufacturing institute. It’s kind of a big deal. It’s great for our university to compete at that level, but it’s great for the state. It turns into economic development. It supports companies that are here.

Q: What has happened with the scholarship fund for three students killed in Chapel Hill? You started with kicking in $60,000.

WOODSON: It’s above $150,000, end of last week. Every year we do annual fundraising, That’s one of the only sources of completely discretionary resources. Typically . when people give money they give for a specific reason. There’s a limited pot of money there for the university’s greatest needs. That affords me the opportunity to launch something like this. I took $60,000 to start this with goal of challenging of others to help.

They were amazing young people in a lot of ways. Certainly amazing on our campus in terms of leadership and impact on the community. This was a good way for us to honor their memory but also to really emphasize the service learning aspect, the giving back to the community.

Q: And now Hofmann Forest is in the news.

WOODSON: It’s important for everyone to understand Hofmann Forest is not a public forest. It is not owned by the state, and was never owned by the state. It was purchased by individuals who wanted to create a resource for the college. It was purchased by a foundation, managed by a foundation for the purpose of generating revenue for the college. When we started the process two years ago, we announced the process, we really had three key things we wanted: to derive value from the forest to support students and faculty, we wanted to work with a buyer that would maintain it as a working forest, a sustainable working forest. Third, we wanted to maintain access to the forest for research purposes. And I guess fourth, which is increasingly critical for the state, we wanted to make sure the forest had potential to serve the military through easements. There aren’t a lot of 80,000-acre bloc parcels they could train on. But for that right, there’s an easement, they have to pay for the right to use it.

We went about the process trying to achieve all of those, with No. 1 being money. We had hoped we could do that through a sale of the forest, though through that process it became clear there were other avenues of deriving long-term value from the forest without managing it. The idea of retaining ownership of a large portion of the forest, but use those acres as a way to work with a sustainable timber company, and secondly to pursue a variety of easements both conservation and military that also derive value. There are groups that will invest in conservation easements for a variety of reasons, some economic and some because of what they stand for as an organization. Through the process it became clear to us if the deal fell through, and it did, we had a different process we could go through and derive not as much value initially but in the long term we could derive greater value actually.

Q: Rumors are swirling that people want you to be the UNC system president. Are you interested?

WOODSON: I am very interested in who’s the president. I am interested in being chancellor of N.C. State. But my goal is to be successful at N.C. State.

Q: Is there any scenario you can imagine accepting the job?

WOODSON: It’s hard for me to see that. You can never say never for most things in life. But that is not a goal of mine. My goal is to be successful running a university I care deeply about. The president of the university is a very different job. If you think about what I get to do every day, look faculty and staff in the eye and help them do their job, I get to interact with alumni of the university, when you think about the role of a university chancellor, it involves all of those constituents. Those constituents are complicated. I’ve made it as clear as I know how to those who have asked me. I have no interest, no plan to leave the university. I’m flattered people would ask me about that. It’s a very important job for my success as a chancellor, a very important job for the success of the university and a very important job for the state. I’m deeply interested in who is the president.

Q: Will they have a hard time attracting someone to that job? Given the past five years, the economic situation, the cuts and how the board treated Tom Ross?

WOODSON: This is a great state, and it’s a great university system. Still to this day, in spite of everything we all read, it’s still one of the best-supported systems from the state. Last year’s data on per-student funding, the University of North Carolina system received more from the state than all but two other states, Wyoming and Alaska, where there’s not a lot of students and a lot of natural resources. So not a big tax base.

A system presidency is a more difficult job than mine. People often say to me we need an academic leader in there. That’s true, you need a leader that understands the academics, but think about the people who have been president. Bill Friday wasn’t a longtime member of the faculty, but he had the ability to garner support. I know they’ll have a lot of people interested in it. I’m interested in who’s interested in it. I work for ’em.

Q: As for Hofmann, how far along are you in talks with the military?

WOODSON: We’ve been talking to them for 12 years. The reality is that’s a long-term process. Any easement with the military that included long-term acquisition of rights will require congressional action, and so we’re focusing most of our attention on the federal policymakers that will help the military achieve their goals through the funds necessary for easements. It wouldn’t be fair for me to paint a picture that I think will resolve it tomorrow. What I will tell you is we can’t wait forever. We can’t avoid other opportunities for conservation easements or timber management deeds or other things that bring back to the college waiting on the military, but we do need to give the military a chance to engage. It’s critical to the state.

There is currently no easement on the property where they use the property for training. Very little, very little. There are occasions when they asked for one time. They benefit from the property now because it’s dark.

Our congressional delegation would be critical in taking the lead because it’s in the state’s interest.

The first priority is to select, to give people an opportunity to respond to the request for proposals. To select a conservation entity that has a track record of success in managing large blocs of property for timber production and conservation purposes. There’ a handful of such entities around the country that could take on a project of this scope.

The first decision was we’re going to maintain ownership, and that changes the nature of people who will interact with us. That’s not on the table.

Before, we saw a buyer to meet those four goals. A single buyer was identified. Subsequent to that you reported on a modification of that deal where the bulk of the property, close to 56,000 acres, was to be managed through a second party that was brought to the table, a sustainable forest group. At the end of the day, the complications of all that, the deal fell under its own weight. That really began to open our eyes in a number of ways, that we can derive value for this property consistent with our values, Those four points I outlined. We had a contractual obligation to see the deal through. But once that deal ended, we stepped back. We sought advice and counsel. It was clear to use there were significant resources to be garnered through a process more focused on conservation, military rights and timber rights, all of which that could allow us to continue to own the property.

If you sell timber rights to a company and require that whoever that is not only harvest trees but grows trees in a sustainable way, we can say that contract is for a period of time, 25 years, then you derive that value upfront, and 25 years from now you do it again, but it’s your decision. You decide.

We came to the key point that to accomplish all of these things, we needed to retain ownership. There’s a key part of this property that has more development interested because of the proximity to Camp Lejeune and Jacksonville south of Highway 17. So that’s why we’ve been careful not to say we’re retaining complete ownership, but 70 of 79,000 is a pretty big forest.

Q: How big is your endowment now?

WOODSON: As of June 30, $858 million, which was the last time we officially reported. We count every day. We were well north of $900 million by Dec. 31. Barring a collapse which is entirely possible, the estimate is we’ll be north of a billion by end of the fiscal year.

In 2009-10, we were at $460 million. The markets have been better, but we’ve had some pretty big gifts.

By point of comparison, Carolina is at $2.5 billion? Around that. But they’ve been at this a long time. My chief development officer reminds me Harvard had its first campaign in 1690.

It’s an important resource. A complicating thing for us last year was the Board of Governors limited the amount of money we could use for tuition. We were well above the cap, and so we have an imposed cap on the amount of money ... there are really only two sources of money that drives a university economically, and that’s state appropriations and tuition. And the endowment is really about supporting scholarships, to support faculty in key programs, and then research funding is restricted. We get grants to do research on topic x y z, but we can’t use it to hire the faculty. We’re restricted to using those two primary sources for financial aid. It pushes us to keep campus accessible to those who have financial need.

The honest answer is, we have peers we’re constantly monitoring. Everybody else has gone forward. We’re about to launch publicly a major campaign for funding, that campaign is probably going to be shooting for $1.5 billion in new funds raised. We need the endowment to be bigger. I could set another number. We’re smaller than most of our peers.

It’s a capital campaign, targeting support for ours students, support for our faculty and support for our facilities. One of the biggest concerns we have is the governor’s proposed budget limits our ability to invest in development.

The governor’s proposed budget caps the investment by the university from state-appropriated resources at a million dollars for fundraising. Very mature campuses that have large endowments are able to support their fundraising operations through the endowment, so they don’t use a lot of state resources, but those like ours still rely on significant investment from our university budget for fundraising. We raise almost 12 dollars for every dollar invested, regardless of the source of the money. We’re very efficient. But this would be a big hit to us and would make it very difficult to raise private resources to help us in our endowment where state resources are more restricted.

Last year we spent $6 million from the state, but we spent more in total, but we raised $131 million on about $15 million invested.

It would restrict our future investment to no more than $1 million, and we’d lose the money we’ve currently budgeted. It would cut our budget. It not only restricts future investments but takes the money we budgeted. It takes the current spending and anything above a million we’re spending we would lose. It’s a cut, but this is the governor’s budget. It’s not the final budget

My response to it is our goal is to reach a level of sustainability, to form a large enough endowment where we can fully fund private development activity. It’s an organizational structure. Our vice president for advancement, alumni relations, the part we’re talking about is development. The budget pays all the people who do that work.

There’s good things in the governor’s budget, too. I don’t want it to go unsaid. The best example, he’s proposed fully funding enrollment growth, which has been a huge challenge for us. We’re growing dramatically, particularly at the graduate level. Also building resources. But he also proposed an overall cut to the operating budget of around 2 percent.

There are about 12 campuses in the UNC system that are cut. Ours is the largest because we’re the largest university. We have the biggest budget, but we’re a large university that didn’t have a large endowment. My hope is working with the legislature, we’re able to convince them it is a goal of ours to become less dependent on the state for this critical part of the university, but we need time to get there.

You would like to think the private money you raise to support the university could be raised with private money, but the reality is donors understand we’re a state university and they want to partner with the state to support the university. We’re not a private university where donors know it’s their money alone that drives excellence. They feel like when they give to the university, they’re doing it in a partnership with the state.

Q: There have been some numbers showing that a lot of faculty with job offers are leaving as quickly as they can. Are you having difficulty retaining top faculty?

WOODSON: Here’s the good news for us. Raleigh is a nice place, and we’re proud to be in this city, in the county. A lot of people want to live here. We’ve had five years, six years of very limited salary adjustments for people. I say that fully recognizing that we are not the only industry that has struggled in that regard. There’s a point when people lose faith in this being the place to cast their lot for the future. And we’re seeing a real challenge in retaining faculty right now. Having said that, we’ve been largely successful in retaining faculty. It winds up costing you more than it would cost you if you just managed for retaining ... when someone has their foot out the door, it’s a little hard to get them back in the barn. Faculty retention is a challenge for us right now.

We lost a group last year to Georgia Tech, a group of computer scientists we really hated to lose. The best way to say it is we work hard to retain those people you would recognize. We really do. But we worry that there’s a lot of people who work hard at our university every day you wouldn’t recognize who need to be recognized.

Q: You talked about an enrollment management system. What do you mean?

WOODSON: N.C State, in the last decade and maybe 12 years, we’ve grown our undergraduate population by 30 to 40 percent and our graduate population by almost 70 percent. When I got here and looked at our enrollment plan, applications were going up, everything was very positive. The problem was we weren’t getting funding for those students. We were running out of space, too many to schedule in key classes, so the graduation rate was going down, the retention rate was down, we were struggling to get students in key classes they needed. We needed a plan that recognized the limitations of faculty, buildings.

We reduced the size of the freshman class to meet the space limitations we had. We’re the largest public land-grant university in America and in percentage of students that are STEM students. They’re all taking physics, chemistry, calculus. There’s some scale issues here. We needed a freshman class closer to 4,200, not 4,800. We reduced to give more room for transfers. As our community colleges get better and mature, we see more start in the local community college. We needed room for them. We’re looking at all those numbers, how many transfers, how many freshmen. We’ve done that in way that kept undergrad enrollment at about 25,000 students. Our graduation rate has gone from 68 to 75. Our freshman retention rate is almost 94 percent now. The challenge with the enrollment management plan has made our university more competitive. Our freshman class is really quite remarkable in terms of their GPA, their SAT.

As we’ve been more limited in size of the freshman class, our application rates have gone up dramatically. More people are applying, with a similar number of seats, so it’s more competitive.