The Regents of the University of California Financial

The Regents of the University of California Financial Update January 2011

Working to serve California and the nation every year UC Davis CONDUCTING over $4 billion in research CONFERRING UC Davis Medical Center over 40, 000 bachelor’s degrees and 3, 800 Ph. Ds UC Berkeley UC Merced UCSF TRAINING 40% of all interns and residents statewide UCLA UCSF Medical Center UCLA Medical Center EMPLOYING over 180, 000 Californians UC Santa Cruz UC Irvine Medical Center UNIVERSITY OF CALIFORNIA HANDLING 3. 7 million outpatient visits, 254, 000 ER visits, and 142, 000 inpatient admissions UC Santa Barbara EDUCATING UC Riverside over 220, 000 students UC San Diego GRADUATING UC San Diego Medical Center GENERATING $4 billion in tax revenues CREATING 2. 3 million California jobs this decade 60% of all med school grads In California 1

Two-year University budget picture Add’l. State Funds, 65. 4 UNIVERSITY OF CALIFORNIA Add’l. State Funds, 65. 4 Debt Restructuring, 75. 0 2

UC management has responded swiftly to budgetary challenges presented by reductions in State funding UNIVERSITY OF CALIFORNIA • • Net reduction of more than $600 million in FY 2010 vs. FY 2008 was addressed by revenue increases & expense reductions – Student fee increases – Two sequential 15% increases for undergraduate & professional students – Curtailed freshmen enrollment by 2, 300 in fall 2009 and 1, 500 in fall 2010 – Reduced enrollment not funded by the State – Employee furloughs / salary reduction – Campus and systemwide layoffs, programmatic reductions – Restructuring of UC General Revenue Bonds – Targeted approximately $75 million in each of FY 2010 & FY 2011 – Executed as a current refunding of debt service due May 15 Mandatory State appropriation deferrals – – Over $1 billion of mandatory deferrals in FY 2011 Bridge financing with CP borrowing and STIP liquidity 3

“Working Smarter” towards administrative efficiencies Keep the pipeline full on three levels of change: • • UNIVERSITY OF CALIFORNIA • Campus restructuring initiatives Regional centers of excellence Systemwide efficiency measures 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 4

UC Strategic Initiative Program (CAPEQUIP, C 3, AND STARS) • Internal-loan financing program would leverage the University’s high credit rating to make low borrowing costs available to the campuses for a broader range of purposes beyond solely capital construction • Encourage strategic investments and partnerships across the system through three segments of the program: Cap. Equip UNIVERSITY OF CALIFORNIA • • Low fixed-rate loans for capital equipment acquisitions, in lieu of higher-rate third-party leasing) Goal: Cut costs through economies of scale inherent in UC debt program • • • No-interest loans to fund regional centers of excellence and/or systemwide efficiency initiatives Goal: Cut duplication and increase systems commonality • • STARs (Strategic Teaching Acquisition and Retention) No-interest loans to fund lab renovations and lab equipment for star faculty recruits Goal: Maintain competitive research and academic excellence Strategic funds accumulated by the capital equipment segment would fund the interest costs of the other two segments 5

The Regents of the University of California Debt Portfolio UNIVERSITY OF CALIFORNIA UC Credits Rating (Moody’s/S&P) Par Amount Security Pledge General Revenue Bonds Aa 1/AA $5. 87 Billion General revenues of the Regents, excluding state appropriations and medical center revenues Limited Project Revenue Bonds Aa 2/AA- $1. 85 Billion Auxiliary project gross revenues, subordinate to General Revenues Medical Center Pooled Revenue Bonds Aa 2/AA- $2. 30 Billion Gross academic medical center revenues Tax-Exempt & Taxable Commercial Paper P-1/A-1+ $713 Million ($2 Billion authorized) Project revenues * As of 12/1/10. Excludes State Lease Revenue Bonds and campus-originated leases. 6

UNIVERSITY OF CALIFORNIA Debt Service in $000’s UC Debt Service Restructuring for Cash Flow Relief * As of 12/1/10. Excludes capitalized interest payments, campus-originated leases and State Lease Revenue Bonds. 7