The University of California
The University of California
Opening Comments
Peter Taylor
Chief Financial Officer
Office of the President
The University of California
OVERVIEW
2
The University of California
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
The University of California
QUALITY
ACCESS
AFFORDABILITY
“… 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
–
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.
The University of California
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 ($286 million in
2009-10)
• Average high-school GPA of Fall 2011 California freshmen admits is 3.83
• 46% of first-year students are first-generation college students
Pell Grant Recipients (UC 2008-09, 2009-10, 2010-11 & Select Universities 2008-09)
60%
7%
13%
12%
0%
15%
10%
2010-11
15%
20%
15%
30%
2009-10
16%
40%
2008-09
34%
40%
44%
32%
36%
37%
31%
34%
36%
30%
32%
34%
26%
31%
35%
25%
31%
34%
25%
30%
36%
31%
35%
39%
50%
42%
47%
54%
42%
49%
56%
–
The University of California
FINANCIAL SUMMARY & BUDGET
CHALLENGES
The University of California
UC Overall Financial Position
($ in millions for the year ended June 30)
http://www.universityofcalifornia.edu/finreports
Financial Position
2011
Total Assets
Total Liabilities
Total Net Assets
$49,813
30,048
$19,765
2010
$46,589
27,238
$19,351
Change from
Prior Year
$3,224
2,810
$414
The University of California
UC Operating Results
($ in millions for the year ended June 30)
Statement of Revenues, Expenses & Changes in Net Assets
2011
2010
Change
Operating Revenues
$19,040
$17,326
$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
$414
$(525)
$939
(in millions of dollars at and for the year ended June 30)
Increase (Decrease) in Net Assets
The University of California
Revenues & Expenses
($ in millions for the year ended June 30, 2011)
Revenues
Expenses
-Diverse revenue sources comprise UC’s core
revenues
- Operating Revenues grew by $1.7 billion or 10%
State
13%
Other
10%
Medical
Centers
(net)
27%
- Operating Expenses grew by $1.2 billion or 5%
Student
Tuition and
Fees
11%
Grants and
Contracts
23%
DOE Labs
4%
- 65% of expenses relate to Salaries & Benefits
Educational
and
Auxiliary
Enterprises
12%
Other
16%
DOE Labs
4%
Dep. &
Amort.
5% Supplies
10%
Salaries and
Benefits
65%
The University of California
Financial Myths and Facts
Myth:
Fact:
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
Cost of UC
Administration has
risen over the years
The cost per student has decreased steadily over the
last 20 years, from over $21,000 to $17,400
Medical center
revenues can be used to
support core operations
While the majority of UC hospitals’ revenue is
restricted, some of the hospitals’ net revenue was
transferred to the health professional schools in FY11
UC can use endowment
to supplant losses in
State funds
Private giving greatly adds to what the University
can accomplish, however the use of the funds
is almost always restricted. Only about 2% is
“unrestricted” in purpose
The University of California
Per-Student Average Expenses for Education
•
The cost per student has decreased steadily over the last 20 years, from
over $21,000 to $17,400
Student Tuition and Fees
$20,000
$2,680
$1,970
$15,000
UC General Funds
State General Funds
$3,920
$4,850
$1,920
$1,880
$5,370
$8,540
$2,140
$10,000
$16,720
$12,860
$5,000
$2,080
$15,020
$10,100
$6,770
$0
1990-91
1995-96
2000-01
Average inflation-adjusted resources per general campus student. Excludes financial aid, 2010-11 dollars.
2005-06
2011-12
Estimated
The University of California
The Long-term Budget Problem
• Core expenses will continue to increase
• Pace of growth in mandatory costs is accelerated by postemployment 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
The University of California
UC Budget Gap: $2.5 billion
$3.0
Solutions
Enrollment Reductions
Professional Degree Tuition Increases
$2.5
Nonresident Enrollment Increases
Budget Gap:
$1.5 billion
$2.0
Research Cost Recovery
Philanthropy
Other Cost Reductions
Efficiencies and OP Reductions
$1.5
Tuition Revenue-Enrollment Growth
Cost Drivers
Other Non-salary Costs
$1.0
Capital Renewal Costs
Other Benefits Costs
Post-Employment Benefits Costs
$0.5
Compensation Costs
Enrollment Growth Costs
2011-12 Budget Gap
$0.0
Cost Drivers
Dollars in
Solutions
Display 13
The University of California
Alternative Budget Gap Scenarios
for FY2015-16
Cost Reductions and Alternative Revenues
State Support
Tuition and Fees
$2.5
$2.0
$1.5
8% tuition
increases
8% State
support
increases
$1.0
12% tuition
increases
16% tuition
increases
4% State
support
$0.5
$0.0
Scenario 1
Dollars in billions.
Scenario 2
Scenario 3
The University of California
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/AA
Aa
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 &
below
BB &
below
Based on current municipal bond yields
Considered non-investment grade (or junk)
The University of California
NEW INITIATIVES
The University of California
“Working Smarter”
Keep the pipeline full on
three levels of change:
• Campus restructuring
initiatives
• Regional centers of
excellence
•
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
• Systemwide efficiency
measures
Vision: 10 campuses using ONE
administrative framework:
•
Common, integrated e-procurement
•
Common, integrated energy solutions
•
Common, integrated approach to ICR
$500 million of positive
fiscal impact in five years
The University of California
Campus and Regional Efforts Already Underway
Organizational
Improvement at
Individual Campuses
Operational
Excellence
Organizational
Excellence
Existing Regional /
Collaborative Efforts
Future Regional /
Collaborative Efforts
E-Procurement
Job Classification
System
Extramural Fund
Accounting System
Tiger Teams
E-Procurement
Business
Software
San Diego
Super Computing
Financial
Systems
Streamlined
Administration
and eventually more…
USHIP / GSHIP1
Efficiencies
Workgroup
Human Capital
Management System
Restructuring
Steering Cmte.
Facilities
Maintenance System
and eventually more…
Process
Simplification
1
Undergraduate/Graduate Student Health Insurance Program
The University of California
CFO Mission, Vision, Values & Operational Focus Areas
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.
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; and
Professional expertise to deliver results
on behalf of our customers.
Values:
Effective Fiscal Stewardship
Customer Service
Continuous Improvement
2011-12 CFO Operational Focus Areas
1. Common Systemwide Technology
Systems
2. Procurement 200
3. Reduce Cost of Risk
4. Lean Organizational Alignment
5. Balance Sheet Management
The University of California
Payroll Personnel System Replacement Project
Overview
Status
Projected
•
Deploy a single payroll system and a single human resources system
across all ten campuses and five medical centers
•
•
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).
•
•
•
•
Fiscal
Impact
* 9% Discount Rate
•
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*
The University of California
P200mm
GOAL:
Increase annualized savings from $65mm to $200mm and help drive
efficiencies
Technology
Central data repository from all locations (financial,
procurement, P-Card, etc)
People & Process
Build a new commodity focused team of specialists
Ability to produce reports on all line item purchases
Build a strong analytics and reporting team and
processes
Ability to scrub procurement systems and bring back
“tags” for minority vendors
Build a “compliance” team to make sure the RFP and
contracts process is followed
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
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
Track all procurement opportunities/needs to allow joint
projects
Define the “value” all will provide as part of their role
Use SharePoint to help with version control and to
reduce email attachments
Implementation starts in early 2012 and will run through 2014
The University of California
Balance Sheet Management
Enhance
TRIP
Investment
$1 bn transfer
generated add.
$40M in FY10-11
Debt
restructuring
and hedging
strategies
$8.9
billion
In STIP
Strategic
Balance
Sheet
Management
Liquidity
Mgmt.
Ratings
Strategy, Bank
lines of credit,
reserve analysis
Sell MOP
Loans
Central
Bank and
expanded
SIP
Increase liquidity
The University of California
UC Strategic Investment Program
CapEquip
C3
STARs1
(Capital Equipment
Financing)
(Cross-Campus Collaborations)
(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
Structure:
Amortizing loans funded via CP
on reimbursement basis
Amortizing loans funded via CP on
reimbursement basis
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
$20-50 million authorized/year
STARs is still in the developmental / conceptual stage. It’s roll-out date is not yet determined.
$20-50 million authorized/year
The University of California
UC Contribution to Economic Activity
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 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.
Report can be found at the following link:
http://www.universityofcalifornia.edu/regents/regmeet/sept11/f7.pdf
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 UCrelated 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
The University of California
UC Continues its Commitment to Excellence
Instruction
FY2009-10 UC students
received more than $1.5
billion in financial aid
The University of
California
Public Service
Top THREE spots in the
Washington Monthly's
2010 annual college
rankings
Research
57 Nobel Prize
Winners Including
25 Since 1995
The University of California
QUALITY
ACCESS
AFFORDABILITY
Thank you!
And enjoy the
Business Officer Institute