opening comments

The University of California


Opening Comments

Peter TaylorChief Financial OfficerOffice of the President


OVERVIEW

2


The University of California Includes 10 Campuses, 5 Academic Medical Centers and the Lawrence Berkeley National Laboratory

• Established in 1868 and Governed by a 26-member constitutionally autonomous Board of Regents

• Educated over 230,000 full-time equivalent students in FY 2009-10 and has conferred approximately 1.9 million degrees

• Pre-eminent faculty who have won 57 Nobel Prizes, more than any other U.S. public university

– 28 Nobel Prize winners currently on faculty

• Over 380 University researchers have been elected to the prestigious National Academy of Sciences


“… Amherst has created a model for attracting talented low- and middle-income students that other colleges can copy. It borrows, in part, from the University of California, which is by far the most economically diverse top university system in the country.”

- David Leonhardt, “Top Colleges, Largely for the Elite” The New York Times, May 24, 2011

AFFORDABILITYACCESS

QUALITY

– A large proportion of UC students come from low-income families

– UC’s strong financial aid program – including the Blue and Gold Opportunity Plan - have kept UC financially accessible to students from every income level

– Over the past eight years, the amount of financial aid given to UC students has tripled. In 2009-10, for example, UC students received more than $1.5 billion in financial aid.


Undergraduate Access and Excellence at UC– California’s ongoing fiscal crisis has raised concerns that the University would be

unable to sustain its strong track record of promising access and excellence. Recent data suggests the opposite:• UC enrolls more Pell Grant recipients than ever before, at every campus ($286

million in 2009-10)• Average high-school GPA of Fall 2011 California freshmen admits is 3.83• 46% of first-year students are first-generation college students

42%

42%

34%

32%

31%

30%

26%

25%

25% 31

%

16%

15%

15%

15%

13%

12%

47% 49

%

40%

36%

34%

32%

31%

31%

30% 35

%

54% 56

%

44%

37%

36%

34%

35%

34% 36

% 39%

0%

10%

20%

30%

40%

50%

60%2008-09

2009-10

2010-11

Pell Grant Recipients (UC 2008-09, 2009-10, 2010-11 & Select Universities 2008-09)

7%


FINANCIAL SUMMARY & BUDGET CHALLENGES


UC Overall Financial Position($ in millions for the year ended June 30)

http://www.universityofcalifornia.edu/finreports

2011 2010Change from

Prior Year

Total Assets $49,813 $46,589 $3,224 Total Liabilities 30,048 27,238 2,810 Total Net Assets $19,765 $19,351 $414

Financial Position


(in millions of dollars at and for the year ended June 30) 2011 2010 ChangeOperating Revenues $19,04

0$17,32

6$1,714

Operating Expense (24,154)

(22,929)

(1,225)

Non-operating Revenues, Net 5,074 4,717 357

Other Changes in Net Assets 454 361 93

Increase (Decrease) in Net Assets $414 $(525) $939

UC Operating Results($ in millions for the year ended June 30)

Statement of Revenues, Expenses & Changes in Net Assets


Revenues & Expenses($ in millions for the year ended June 30, 2011)

-Diverse revenue sources comprise UC’s core revenues

- Operating Revenues grew by $1.7 billion or 10%

Revenues

State13%

Student Tuition and

Fees11%

Grants and Contracts

23%

Educational and

Auxiliary Enterprises

12%

Medical Centers

(net)27%

DOE Labs4%

Other10%

Expenses

Salaries and Benefits

65%

Supplies10%

Dep. & Amort.

5%

DOE Labs4%

Other 16%

- 65% of expenses relate to Salaries & Benefits

- Operating Expenses grew by $1.2 billion or 5%


Financial Myths and Facts

Billions in Unrestricted Net Assets can close budget gap

While Unrestricted Net Assets do not have externally imposed restrictions, these funds are already internally allocated

Myth: Fact:

The cost per student has decreased steadily over the last 20 years, from over $21,000 to $17,400

Cost of UC Administration has risen over the years

While the majority of UC hospitals’ revenue isrestricted, some of the hospitals’ net revenue wastransferred to the health professional schools in FY11

Medical center revenues can be used to support core operations

Private giving greatly adds to what the Universitycan accomplish, however the use of the fundsis almost always restricted. Only about 2% is “unrestricted” in purpose

UC can use endowment to supplant losses in State funds


Per-Student Average Expenses for Education

1990-91 1995-96 2000-01 2005-06 2011-12 Es-timated

$0

$5,000

$10,000

$15,000

$20,000

$16,720 $12,860 $15,020

$10,100 $6,770

$1,970

$1,880 $1,920

$2,140

$2,080

$2,680 $4,850

$3,920

$5,370 $8,540

Student Tuition and Fees UC General Funds

Average inflation-adjusted resources per general campus student. Excludes financial aid, 2010-11 dollars.

• The cost per student has decreased steadily over the last 20 years, from over $21,000 to $17,400


The Long-term Budget Problem

• Core expenses will continue to increase

• Pace of growth in mandatory costs is accelerated by post-employment benefit contributions

• UC needs steady and predictable revenue growth to address budget shortfalls and meet our future financial expenses

• Failure to bridge the gap threatens UC’s quality, access, and affordability

• By FY2015-16 the budget gap is projected to equal $2.5 billion


UC Budget Gap: $2.5 billion

Dollars in billions.

Display 13

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

Cost Drivers Solutions

SolutionsEnrollment Reductions

Professional Degree Tuition Increases

Nonresident Enrollment Increases

Research Cost Recovery

Philanthropy

Other Cost Reductions

Efficiencies and OP Reductions

Tuition Revenue-Enrollment Growth

Cost DriversOther Non-salary Costs

Capital Renewal Costs

Other Benefits Costs

Post-Employment Benefits Costs

Compensation Costs

Enrollment Growth Costs

2011-12 Budget Gap

Budget Gap:$1.5 billion


Alternative Budget Gap Scenarios for FY2015-16

Scenario 1 Scenario 2 Scenario 3$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

Cost Reductions and Alternative Revenues State SupportTuition and Fees

8% State support

increases 4% State support

8% tuitionincreases 12% tuition

increases 16% tuitionincreases

Dollars in billions.


Credit Ratings Drive Our Borrowing Costs• Credit ratings assess the credit worthiness of our debt issues

• Analogous to individuals’ credit scores

• Assess probability of default and expected loss under a default

• Assigned by credit rating agencies such as Moody's and Standard & Poor's

• Ensure market access

• Determine cost of borrowing

Cost vs. Aa1/AAAa AA UC GENERAL REVENUE BONDS

A A +0.63%(UC saving $630,000 on interest/yr on every $100M of bonds)

Baa BBB +1.37%(UC saving $1,370,000 on interest/yr on every $100M of bonds)

Ba & belo

w

BB & below Considered non-investment grade (or junk)

Based on current municipal bond yields


NEW INITIATIVES


“Working Smarter”

Keep the pipeline full on three levels of change:

• Campus restructuringinitiatives

• Regional centers ofexcellence

• Systemwide efficiencymeasures

Vision: 10 campuses using ONE administrative framework:

• Common, integrated financial and payroll systems

• Common, integrated time & attendance/HR systems

• Common, integrated extramural fund accounting

• Common, integrated data warehousing

• Common, integrated asset management

• Common, integrated strategic investment program

• Common, integrated e-procurement

• Common, integrated energy solutions

• Common, integrated approach to ICR

$500 million of positive fiscal impact in five

years


Human CapitalManagement System

Tiger Teams

San DiegoSuper Computing

and eventually more…

BusinessSoftware

Campus and Regional Efforts Already Underway

Extramural FundAccounting System

E-Procurement

OrganizationalExcellence

OperationalExcellence

StreamlinedAdministration

FinancialSystems

ProcessSimplification

Organizational Improvement at

Individual Campuses

Existing Regional / Collaborative Efforts

Future Regional / Collaborative Efforts

RestructuringSteering Cmte.

Job ClassificationSystem

E-Procurement

FacilitiesMaintenance System

EfficienciesWorkgroup

USHIP / GSHIP1

and eventually more…

1 Undergraduate/Graduate Student Health Insurance Program

http://www.google.com/imgres?imgurl=http://www.ohlone.edu/org/transfer/images/logo-ucmerced-bobcat-mascot.gif&imgrefurl=http://www.ohlone.edu/org/transfer/tag.html&usg=__kfKPrS4CfBjrPF_S-CqX6S2p34s=&h=120&w=150&sz=6&hl=en&start=8&um=1&itbs=1&tbnid=jiWIw6JYh_kiRM:&tbnh=77&tbnw=96&prev=/images?q=uc+merced+bobcats&um=1&hl=en&sa=N&tbs=isch:1









http://www.uchastings.edu/index.html

http://www.uchastings.edu/index.html


CFO Mission, Vision, Values & Operational Focus Areas

1. Common Systemwide Technology Systems

2. Procurement 200

3. Reduce Cost of Risk

4. Lean Organizational Alignment

5. Balance Sheet Management

Mission:The mission of the CFO Division is to provide leadership, operational oversight, and system coordination of financial products and services for the UC Community. We add value with accurate, insightful, and timely information, analysis, and solutions that promote informed decision-making.

2011-12 CFO Operational Focus Areas

Vision :The CFO Division will be known as a model for organizational efficiency and effectiveness that leverages:Integration of risk considerations to enhance decision-making processes and operations;Benchmarking to improve accountability, transparency, and performance; andProfessional expertise to deliver results on behalf of our customers.

Values:Effective Fiscal StewardshipCustomer ServiceContinuous Improvement


Payroll Personnel System Replacement Project

Overview

Status

• Signed contract with Oracle• Implementation began in early September with PMO planning

activities and training for UC team members• Early adopters/first wave implementation locations will be UCLA

(including medical center), UCM, UCOP, UCSC and UCSD (including medical center).

• Deploy a single payroll system and a single human resources system across all ten campuses and five medical centers

ProjectedFiscal Impact

• One-time implementation costs, excluding restructuring costs, total $151M

• Ongoing costs are expected to be ~$60 million over the next eight yrs

• Over this period, cost reductions/savings are expected to be ~$750 million, resulting from technology efficiency gains, process standardization and consolidation of transactional activities into a shared services center.

• Project Net present value is over $250 million*

* 9% Discount Rate


GOAL: Increase annualized savings from $65mm to $200mm and help drive efficiencies

Central data repository from all locations (financial, procurement, P-Card, etc)

Ability to produce reports on all line item purchases

Ability to scrub procurement systems and bring back “tags” for minority vendors

Move all RFP’s from paper to on-line

Ability to see all contracts (t&c’s, language, etc) and streamline the contracting process

Introduce reverse auction for better pricing on items with set specifications

Track all procurement opportunities/needs to allow joint projects

Use SharePoint to help with version control and to reduce email attachments

P200mm

Build a new commodity focused team of specialists

Build a strong analytics and reporting team and processes

Build a “compliance” team to make sure the RFP and contracts process is followed

Manage the data flow to eliminate the repeated request for “more” data to the campuses

Leverage the use of GPO contracts to help drive savings and efficiencies

On-going training and support for campuses and UCOP

Define the “value” all will provide as part of their role

Technology People & Process

Implementation starts in early 2012 and will run through 2014


EnhanceTRIP

Investment$1 bn transfer generated add.

$40M in FY10-11

$8.9 billion

In STIP

Debt restructuring and hedging

strategies

Sell MOP Loans

Increase liquidityCentral Bank and expanded

SIP

Liquidity Mgmt.

Ratings Strategy, Bank lines of credit,

reserve analysis

Balance Sheet Management

StrategicBalanceSheet

Management


UC Strategic Investment Program CapEquip

(Capital Equipment Financing)

C3 (Cross-Campus Collaborations)

STARs1 (Strategic Teaching Acquisition

& Retention)

Purpose: Equipment acquisition in lieu of 3rd-party leasing

Regional centers of excellence, systemwide efficiency initiatives

Lab renovations/equipment specific to a single faculty recruit

Strategic Goal:

Cut costs through economies of scale inherent in UC debt program

Cut duplication and increase systems commonality

Maintain competitive research and academic excellence

Size: $200 million authorized/year $20-50 million authorized/year $20-50 million authorized/year

Structure:

Amortizing loans funded via CP on reimbursement basis



Rate: 1.99% (subject to annual review) 0% 0%

Term: 3-7 years 3-7 years 11 years avg. (15 renovations, 7 equipment)

Debt Service:

Campus funds that formerly paid third-party lease payments

Principal possibly paid by savings (interest covered by program)

Principal possibly paid by ICR (interest covered by program)

Awards: Campuses submit authorization requests annually to Regents

Campuses competitively apply throughout the year

Campuses competitively apply throughout the year

1 STARs is still in the developmental / conceptual stage. It’s roll-out date is not yet determined.


UC Contribution to Economic Activity

Report can be found at the following link:http://www.universityofcalifornia.edu/regents/regmeet/sept11/f7.pdf

UC generates about $46.3 billion in economic activity in

California and contributes $32.8 billion to the gross state

product

‐ $25 billion in annual direct spending from the University creates successive rounds of economic activity through consumers and businesses

‐ Economic activity related to UC supports about 1.8% of CA’s gross state product

Every $1 the California taxpayer invests in UC,

leveraged by other revenue sources, results in $13.80 in

economic output

‐ California’s $3.35 billion in UC-related spending including general support, Cal Grants, contracts, health care payments, and special appropriations is matched by an additional $17 billion from non-state government sources

‐ Through the economic “multiplier effect” the $3.35 billion investment provides foundation for a total economic impact of $46.3 billion creating $13.80 in economic output for every $1 of state investment

‐ In terms of employment, UC creates 128 jobs per $1 million in state taxpayer funding or about $7,790 per job

Every $1 that is cut from the State’s support of UC would

result in direct losses of about $2.10 in the state’s economic

output, $1.30 in employee compensation, and $1.60 gross state product plus a potential

for negative secondary impacts associated with a decline in the scale and

quality of UC’s academic and research programs

‐ This report evaluates the primary economic impact of two hypothetical funding scenarios, one in which the state cuts UC employee compensation and another in which it cuts total UC operating expenditures.


UC Continues its Commitment to Excellence


InstructionFY2009-10 UC students received more than $1.5 billion in financial aid

Research57 Nobel Prize

Winners Including 25 Since 1995

Public ServiceTop THREE spots in the Washington Monthly's 2010 annual college rankings


Thank you!

And enjoy the Business Officer Institute

AFFORDABILITYACCESS

QUALITY

opening comments

Documents

university system

university researchers

year students

middleincome students

fulltime equivalent

percent capital assets

california freshmen

total net assets