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Creating a University for the 21st Century, FINANCIAL SUSTAINABILITY | ROADSHOW

EXPANDED LEADERSHIP TEAM| MARCH 2015

DAVE LAWLORVICE CHANCELLOR & CHIEF FINANCIAL OFFICER

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Agenda

FramingEconomic ModelCapital PlansPrioritiesStructureVC-CFO Initiatives

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Framing

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UC Davis of the 21st century, in order to accomplish its core

mission, must be run as well as the best global enterprises.

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Why?

UC Davis of the 21st Century, Why?

in order to accomplish its core mission, To attract & invest in faculty, research, academic programs, & support infrastructure we must be wise stewards of all resources, and have sufficient resources to be competitive on important dimensions.

must be run as well as the best global enterprises.

There are more pressures on families than ever before to afford a quality university education.

We must become an irresistible investment opportunity for federal, state, and corporate investments in our core mission and in new partnership opportunities.

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Guiding Principles• Financial stability enables the core

mission• We take a One UC Davis

perspective in all that we do• Financial sustainability means that

we take a comprehensive, balanced, long-term view

• We engage in sophisticated yet digestible conversations

• Key decisions are viewed through the economic lens also

• We need a deeper understanding of institutional data in order to make better decisions

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Financial Sustainability Action Plan:

New Revenues

Cost Efficiencies

Increased Research

Fundraising

Faculty

Student Services

Research

Student Success

Staff

Infrastructure

• At maturity generate $50M of annual recurring funds per year to be spent on key academic initiatives1.

1 This excludes tuition & fee price increases and other associated base compensation growth.

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 -

10.0

20.0

30.0

40.0

50.0

60.0

New Investments in UC Davis

$500M on a cumulative Basis

Sources Uses

Invest Half a Billion

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Financial Sustainability Action Plan

FSAP Tranparency Report

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50

100

150

200

250

Sources Funnel Available for Investment Invested

Financial Sustainability Action PlanBase Year FY12, Goal Year FY21

We have identified $200M of new sources of funnel which we are presently pursuing.

Of these funnel items, in FY14 we have generated $34M+ of incremental Net Revenue available for investment. $34M was generated from the 2020 Initiative; $XM from Administrative Efficiencies, $YM from ICR growth, and $ZM in new Payout on new gifts to our endowment.

$xM has been invested in recurring items.

Not shown on the recurring chart: $cM of one time sources have been harvested, and $dM of which has been invested in one time uses.

DRAFT

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The Economic Model

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A Future Profile - Operating

• Revenue Growth• Research Growth• Efficiencies: Working Smarter• Payout on New Gifts to the

Endowment

• Things to Fix:• Recharge Philosophy &

Methodology• Deferred Maintenance• Others?

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How things fit together…

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Period review of Actuals to Budget & Review of

Forecasts for balance of the year

Meet monthly with Assistant VCs and Assistant

Deans

Top Down Guidance

Bottoms Up Budgeting (NBM)

Quarterly Monitoring & Reforecasting

lineSee Instructions for Definitions of Fund Types

State Funds & Tuition

ICR All Student

FeesAll Other

FundsTotal

State Funds & Tuition

ICR All Student

FeesAll Other

FundsTotal

PRIOR YEAR CARRYFORWARD:1 Total $3,652 $1,852 $836 $5,227 $11,567 $5,821 $1,337 $901 $4,598 $12,6572 Change from Prior Year $2,169 -$515 $64 -$629 $1,089

SOURCES OF ANNUAL OPERATING FUNDS(net of depreciation, improvements reserves, and distributions out of org)

3 State Funds and Tuition $45,982 $45,982 $49,712 $49,7124 Indirect Cost Return $3,110 $3,110 $3,937 $3,9375 Course Material Fees $895 $895 $660 $6606 Summer Sessions $419 $419 $1,753 $1,7537 COSMOS Program $465 $701 $1,166 $467 $826 $1,2938 All Other Funds $3,378 $3,378 $2,423 $2,423

9 ANNUAL OPERATING SOURCES $46,447 $3,110 $1,314 $4,079 $54,950 $50,179 $3,937 $2,414 $3,249 $59,778

USES OF ANNUAL OPERATING FUNDS

EMPLOYEE COMPENSATION:Faculty

10 Regular Faculty (ACAD, SB01, SUB0) $20,461 $78 $37 $20,576 $21,854 $12 $321 $13 $22,20011 Academic Administrators (SB05) $41 $41 $39 $0 $0 $5 $4312 Other Academics (SB06, SB03, ACAX, ACGA) $201 $12 $103 $316 $301 $0 $91 $0 $393

13 Teaching & Research Assistants, House Staff (SB02, SB07, SB04) $6,058 $62 $22 $6,141 $6,828 $0 $402 $70 $7,301

14 Staff Salaries (STFO, SUBS, SUBG, SUBX, STFB) $5,477 $969 $185 $1,375 $8,006 $6,161 $914 $270 $1,435 $8,780

15 Employee Benefits (SUB6, SB28, SB67) $9,514 $325 $101 $531 $10,471 $10,876 $255 $177 $567 $11,87516 Total Employee Compensation $41,751 $1,294 $438 $2,068 $45,551 $46,059 $1,181 $1,262 $2,090 $50,591

OPERATING EXPENSES AND EQUIPMENT17 Supplies & Expense (SUB3) $1,911 $1,153 $694 $1,964 $5,722 $1,672 $971 $758 $2,598 $6,00018 Equipment & Facilities (SB34, SUB4) $243 $843 $10 $89 $1,184 $979 $385 $91 $45 $1,50019 Total Operating Expenses and Equipment $2,154 $1,996 $704 $2,053 $6,907 $2,652 $1,356 $849 $2,643 $7,500

20 TRAVEL (SUB5) $124 $283 $108 $386 $901 $231 $190 $86 $455 $962

21 FINANCIAL AID (SCHL) $249 $52 $111 $412 $93 $93 $0 $163 $349

22 OTHER UNALLOCATED (SUB8, SUB7, SBMC) $105 $105 $0 $0 $69 $69

23 TOTAL EXPENDITURES $44,278 $3,625 $1,250 $4,723 $53,876 $49,034 $2,820 $2,198 $5,419 $59,471

24 ANNUAL NET OPERATING POSITION [Surplus (+)/Deficit (-)] $2,169 -$515 $64 -$644 $1,075 $1,145 $1,117 $216 -$2,170 $308

Explanatory Notes: Regular faculty category includes temporary instructors ($2.3M in 13-14). 13-14 income and 14-15 carryforward has been reduced by $1.0M for COSMOS on-line tuition payments that were transferred to other UC campuses in July 2014. MPS had $7.0M in COBL obligations at YE13-14 primarily for faculty startup and retention funding commitments. Projected $2.0M deficit in 14-15 Other Funds operating position reflects the utilization of carryforward balances.

Division of Mathematical and Physical SciencesSources & Uses All Funds, Excluding Contracts & Grants and Agency Accounts

(Dollars in thousands)

2013-14 Actual 2014-15 Budget Estimate

Iterations to reconcile during budget setting process

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Comparison Institutions

UC DAVIS

UC BerkeleyUCLAUC San DiegoUniversity of MichiganUniversity of Illinois at Urbana-ChampaignUniversity of Wisconsin - MadisonUniversity of VirginiaCornell UniversityUniversity of Southern California

We are envisioning what the university of the 21st century looks like and we will be using that vision as our guide

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Capital

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A Future Profile - Capital

• Operating strength enables capital strength

• Affordability dimensions: build, operate, & maintain

• Long range financial planning & short term implementations

• Systematically solving the deferred maintenance problem

• Leverage multiple funding sources

2014-24 Capital Financial Plan - $2.9B

Type of Project Project GoalType of Project $303,660

$1,634,1

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$605,613

$40,723 $362,667

Project Goal

Regulatory Student Success Student ExperienceResearch/Initiatives Support and Stewardship

$867,750

$190,067 $1,370,664

$457,558

$45,000

Type of Project

New Construction and Renovation InfrastructureNew Construction RenovationDeferred Maintenance Program

CapitalPriorities:Regulatory (Seismic)Critical InfrastructureCapacity (e.g. 2020)…etc…

Determine appropriate proportions

Deferred maintenance handled parallel

Capital

Capital and Space Planning - February 2015

Note:• 2020 total seat goal = 12,000.

Growth provides 14,490 seats for 2020. If ADA and fire code upgrades are made to existing classrooms, anticipate 2,103 seat loss. Result is 12,387 seats following upgrades.

• The number of classrooms in Haring Hall phases is yet to be determined.

Capital

Deferred Maintenance Needs - $1.3B

$141,222

$67,998

$68,062

$39,248

$34,590

Facilities Immediate Needs - $42M

Mechanical

Electrical

Plumbing/Steam

Structural

Roofing

Blank Slice

$16,862

$8,119

$8,127

$4,686

$4,130

Maintenance/Repair - $351M Mechanical

Electrical

Plumbing/Steam

Structural

Roofing

Blank Slice

$396,272

$190,804

$190,984

$110,131

$97,062

Modernization/Renewal - $985M Mechanical

Electrical

Plumbing/Steam

Structural

Roofing

Blank Slice

Deferred Maintenance Composition

• Institute new policies whereby deferred maintenance doesn’t get worse with new projects (FFEs for DM required).

• Develop a prioritized list of items over a 20 year time frame• Resolve via: Replacement, Discontinued Use, Remediation

Multi-pronged approach to DM reduction

• The core deferred maintenance balance will be mitigated by a combination of items:

• Replacement Facilities• Renovations• Discontinuance• Acceptable State Continuance• DM investments

New Construction

StopUsing

GoodEnough

Renovations

Total Deferred Maintenance

$1.3B

$X

$Y$W

$Z

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Priorities

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Priorities

Resource Stewardship

Planning & Execution

Delight Our Customers

We must delight our customers in every aspect

of what we do.

Thoughtful planning and relentless execution

becomes our reputational core.

We will use our scarce resources in a thoughtful,

optimal manner, being ever aware of scarcity of

resources and the need to be financially healthy.

Develop & Inspire Our Team

Together we will reach the next level of

performance while supporting, developing, &

Caring for our team-mates.

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A Key HR Focus:

Develop & Inspire Our Team

Together we will reach the next level of

performance while supporting, developing, &

Caring for our team-mates.

Performance management Stay the course on PfR rollout, educate & assist supervisors, set clear cascaded

goals, focus on results. Manage expectations. Get to qualified “Yes”. Change management:

Are we doing a good job of defining the burning platform Support

What are the greatest needs of the organization? Are we prepared to train and equip our leaders and team members?

Be sensitive to workload, capacity, backlog. Create capacity and help people find smart ways to stop doing things without compromising customer service.

Development Providing the tools, training, creating time, etc. Encourage and support a continual learning environment.

Care (winning their hearts) How we go about engaging our workforce. Characteristics such as: transparency,

clarity in expectations, excellence in communication, Community Principles. Even when it’s a tough message.

See and care for the person.

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StructureVC-CFO Senior

Leadership Team(Comprised of Direct Reports)

VC-CFO Expanded Leadership Team (~100)

(Included Department Heads)

VC-CFO Council(Compilation of key leaders both inside and outside the VC-CFO)

Assistant Vice Chancellors & Assistant

Deans(Dotted Line Reports to the VC-CFO)

Leads the VC-CFO function on strategic and operational (Job

#1) topics.

The linkage with Executive Leadership (At UCD and UCOP).

Accountable for attaining excellence across VC-CFO.

Ambassadors for creating and cascading a vision, key

priorities, and operational excellence.

We will invest time and energy to mentor and develop this group of people—the core leadership team of VC-CFO

Eyes and ears to report back on how things are going, monitors of progress, morale, successes,

cautions, opportunists.

Focused on key priorities—The imperatives which will allow us

to move to the next level.

This is the group of our most talented senior leaders, those with great potential, people who have a reputation for

getting it done in the right way—change agents.

Liaisons to the Schools/Colleges and Administrative Units.

Those close to the heart-beat of the Schools/Colleges/Units.

Able to influence Deans, Department Chairs, Faculty,

Vice Chancellors.

The accountability drivers across the university—a critical mechanism to attain financial

health.

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VC-CFO Administrative Initiatives

• Business Management and Analysis Group• Telecommuting • Employee Performance Management (EPAR)• CFO Internship program

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Business Management and Analysis GroupBusiness Management & Analysis Group (BMAG) is the internal support group that provides consistent high level services to support both VC-CFO and campus initiatives. Arriving soon: http://bmag.ucdavis.edu

New Services- • Project Management

• Tools, Training and Services

Rebranded Services – • Human Resources consulting • IT desktop support and system

administration • Targeted financial administration &

analytical support

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Telecommuting Initiative

• Building on campus tools & piloting new focus for campus• Creating a 2015 spring / summer cohort goal of 24 employees• Supervisors supported with monthly meetings• 6 month trial period• Long term this initiative creates capacity for additional staff workstations by

having shared workspace for employees

• VC-CFO program specifics coming soon.

Creating an environment within VC-CFO that robustly adopts and supports telecommuting for increased employee engagement.

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Employee Performance ManagementVC-CFO will be providing unit wide guidelines by March 25th

• Rating distributions / calibration• Structure of the Departmental Approval Chain• Development and quarterly review of employee goals

• Specific • Measureable• Attainable• Results oriented• Time framed

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CFO Internship Program

Creates a highly competitive opportunity for administrative & business minded students to work on meaningful high-level projects while receiving 1:1 mentoring from campus leaders.

• Generated student excitement at the Spring 2015 internship fair• Program launched for spring quarter 2015 with ~ 5 positions• Fall 2015 recruitment will occur during spring quarter that will grow

program cohort.

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