The Financial State of the University

Geoff Chatas, Chief Financial Officer | The Ohio State University

THURSDAY, NOVEMBER 15, 2012 | UNIVERSITY SENATE

University Core Goals

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Teaching and Learning

Research and Innovation

Outreach and Engagement

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Our Focus: The Academic Core

Our Financial Strategy: Supports the Academic Core

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The Financial State of the University

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Look before you leap. To achieve our ambitious academic goals, we need to take a strategic approach:

Where are we going?

The Financial State of the University

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Otherwise, just where will you land?

Strategy is paramount.

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“Even before the recession struck, it was evident that expanding our funding streams would protect our academic core as nothing else possible could.”

President Gee, Address to Faculty, October 18, 2012

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“We cannot carry out our historic purposes and focus on teaching and knowledge without a firm financial foundation.”

President Gee, Address to Faculty, October 18, 2012

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Progress

Challenge

Uncertainty

Ambitious Academic Goals

From Excellence to Eminence

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So, just how do we fund our ambitions?

What We Know

Government support is permanently shrinking.

Financial burdens cannot be shouldered by students and families alone.

Federal budget sequestration looms.

We need to identify new revenue sources.

We need to use existing resources responsibly.

We need to understand and manage our risk.

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Examples of Recent Funding Efforts

Asset Monetization

Parking Lease $483 million

Faculty Initiatives and Research Discovery Endowment Fund:

$200 million

Century Bonds

Funding expansion of Wexner

Medical Center

Additional revenue will be available for

other needs over the years

Partnerships

Huntington Bank Affinity Agreement

$25 million from Huntington, which the university will use for academic scholarships

and educational programming

Tech Commercialization

Pathway for faculty to

bring their innovations to market

Cost-Savings Efforts

Strategic procurement saves nearly $22 million

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Striving for Simplicity

Improve quality Reduce wasteful efforts Maximize our existing resources Minimize costs Reduce time

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The Financial State of the University

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Our bold financing strategies are attracting attention.

• September 2012: Columbus Business First awarded “Transaction of the Year” honors for the sale of $500 million worth of 100-year bonds – making Ohio State the first public university to issue century bonds.

• November 2012: Ohio State earns The Bond Buyer “Deal of the Year” in the non-traditional financing category for our 50-year lease and concession agreement of parking facilities and operations in exchange for a $483 million up-front payment.

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Moody’s Investors Service has assigned a Aa1 rating

to the university. The

outlook is stable.

Standard & Poor's Ratings Services: Long-term Rating

AA/Stable

The Financial State of the University

What the Future Holds

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Fourth University Core Goal

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•To become the model of an affordable public university recognized for:•Financial sustainability•Unsurpassed management of human and physical resources•Operational efficiency and effectiveness

Primary Focus:

Resource Stewards

hip

B&F Goals and Vision: 2012-2013

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Operating With Financial Soundness and Simplicity

Growing New Revenue

Reviewing Assets

Building the Endowment

Unlocking the Financial Potential of Our InventionsOperating With Efficiency and Effectiveness

B&F Goals: Generation of New Resources

Generate new resources through:

• Identification of savings• Redirections of existing funds• Innovative development of new funding sources

Estimated Resource Generation Over Ten Years: More Than $2 billion

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Resource Generation Scorecard – Fiscal 2013 Targets

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Current Year

Current Year

Target

Progress Against Current

Year Target 2020 Goal

A. Revenue Enhancement1. Affinity Arrangements $25 $25 $1902. Commercialization $5 $5 $91

3. Tuition Management net of academic salary increases $7 $7 $1804. Auxiliaries $12* $12* $845. Net New Cash Development $10 $10 $3856. President/Provosts Reserve $34 $34 $440

B. One-Time Revenue Options1. Asset Monetization $200* $200* $400

C. Expense Management (Streamlining & Procurement)1. Strategic Procurement Savings $30 $30 $3902. Strategic Streamlining Savings $20 $20 $425

D. Capital1. Capital Sources Available $748 $748 $4,7272. Capital Uses Requested or Approved $748 $748 $3,627

E. Reallocation of Base Funding to Colleges/Support Units $3 $3 $24

* = 2 year goal

Resource Generation Scorecard Year to Date September 30, 2012

Metric (in millions)

Meets or Exceeds Goal Performance Up

Caution or Data Pending No Change in Performance

Below Goal - Action Needed Performance Down

University Financial Scorecard: Fiscal Year-to-Date September 30, 2012

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Actual Budget

1. $208 $2202. $190 $1863. $264. $108 $1075. $4 $1

1. $1,207 $1,2032. $1,138 $1,1253. $144 $964. $69 $785. $652 $589

1. 79,062 79,419 2. 179 1503. NA < 4.0%4. 0.24% 0.07%5. 2.13% 1.52%6. 2.63% 4.25%7. 7.89% 4.25%8. AA AA

Meets or exceeds goal Performance up

Below goal No change in performance

Far below goal Performance down

Liquidity – Primary Reserve Ratio (Days Cash on Hand)Actual Debt Service to Operations (measured semi-annually)Short Term Investment Pool Return

YTD Long Term Investment Pool Return >4.25%Long Term Investment Pool Average 3 Year Return >4.25%Credit Rating

Intermediate Investment Pool Return

Enrollment - Summer & Autumn

Federal, State, Local and Private Grants & ContractsAdvancement Cash ReceiptsState SupportIncrease in Net Contribution from Auxiliary Enterprises

B. Financial Snapshot (in millions)Total Revenue excluding endowment performanceTotal ExpensesChange in Net AssetsChange in Net Assets excluding endowment performanceChange in Net Financial Assets

C. Performance Metrics

Tuition and Fees

University Financial ScorecardFiscal Year-to-Date: September 30, 2012

Metric Actual vs Budget

A. Revenue Drivers (in millions)

Challenges For the Future

Aligning resources with academic priorities

Managing reductions in government support

Reducing student debt

Minimizing tuition increases

Diversifying revenue streams

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Challenges For the Future

Reducing expenditures

Meeting capital and infrastructure needs

Measuring performance

Managing risk in a complex world

Driving accountability

Understanding the implications of globalization in higher ed

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The Financial State of the University

Optimistic View for the Future Reinvestment in Our Academic Core Ambitious Goals to Achieve Positive Financial State and Outlook

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The Financial State of the University

Questions and Answers

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