opening comments
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Opening Comments. Peter Taylor Chief Financial Officer Office of the President. Overview. The University of California Includes 10 Campuses, 5 Academic Medical Centers and the Lawrence Berkeley National Laboratory. - PowerPoint PPT PresentationTRANSCRIPT
The University of California
The University of California
Opening Comments
Peter TaylorChief Financial OfficerOffice 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
“… 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.
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 ($286
million in 2009-10)• Average high-school GPA of Fall 2011 California freshmen admits is 3.83• 46% of first-year students are first-generation college students
42%
42%
34%
32%
31%
30%
26%
25%
25% 31
%
16%
15%
15%
15%
13%
12%
47% 49
%
40%
36%
34%
32%
31%
31%
30% 35
%
54% 56
%
44%
37%
36%
34%
35%
34% 36
% 39%
0%
10%
20%
30%
40%
50%
60%2008-09
2009-10
2010-11
Pell Grant Recipients (UC 2008-09, 2009-10, 2010-11 & Select Universities 2008-09)
7%
The University of California
FINANCIAL SUMMARY & BUDGET CHALLENGES
The University of California
UC Overall Financial Position($ in millions for the year ended June 30)
http://www.universityofcalifornia.edu/finreports
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
The University of California
(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
The University of California
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%
The University of California
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
The University of California
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 University of California
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
The University of California
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
The University of California
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.
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/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
The University of California
NEW INITIATIVES
The University of California
“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
The University of California
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
The University of California
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
The University of California
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
The University of California
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
The University of California
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
The University of California
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
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 STARs is still in the developmental / conceptual stage. It’s roll-out date is not yet determined.
The University of California
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.
The University of California
UC Continues its Commitment to Excellence
The University of California
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
The University of California
Thank you!
And enjoy the Business Officer Institute
AFFORDABILITYACCESS
QUALITY