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The Financial State of the University Geoff Chatas, Chief Financial Officer | The Ohio State University THURSDAY, NOVEMBER 15, 2012 | UNIVERSITY SENATE University Core Goals Teaching and Learning Research and Innovation Outreach and Engagement 2 The Financial State of the University Our Focus: The Academic Core Our Financial Strategy: Supports the Academic Core 3 The Financial State of the University Look before you leap. To achieve our ambitious academic goals, we need to take a strategic approach: Where are we going? 4 The Financial State of the University Otherwise, just where will you land? Strategy is paramount. 5 The Financial State of the University “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 6 The Financial State of the University “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 7 The Financial State of the University Progress Challenge Uncertainty 8 Ambitious Academic Goals From Excellence to Eminence So, just how do we fund our ambitions? 9 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. 10 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 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 Additional revenue will be available for other needs over the years 11 Striving for Simplicity Improve quality Reduce wasteful efforts Maximize our existing resources Minimize costs Reduce time 12 The Financial State of the University 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. 13 The Financial State of the University 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 14 The Financial State of the University What the Future Holds 15 Fourth University Core Goal Primary Focus: Resource Stewardship • To become the model of an affordable public university recognized for: • Financial sustainability • Unsurpassed management of human and physical resources • Operational efficiency and effectiveness 16 B&F Goals and Vision: 2012-2013 Operating With Financial Soundness and Simplicity Growing New Revenue Reviewing Assets Building the Endowment Unlocking the Financial Potential of Our Inventions Operating With Efficiency and Effectiveness 17 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 18 Resource Generation Scorecard – Fiscal 2013 Targets Resource Generation Scorecard Year to Date September 30, 2012 Metric (in millions) A. Revenue Enhancement 1. Affinity Arrangements 2. Commercialization 3. Tuition Management net of academic salary increases 4. Auxiliaries 5. Net New Cash Development 6. President/Provosts Reserve B. One-Time Revenue Options 1. Asset Monetization C. Expense Management (Streamlining & Procurement) 1. Strategic Procurement Savings 2. Strategic Streamlining Savings D. Capital 1. Capital Sources Available 2. Capital Uses Requested or Approved E. Reallocation of Base Funding to Colleges/Support Units Current Year Current Progress Year Against Current Target Year Target 2020 Goal $25 $5 $7 $12* $10 $34 $25 $5 $7 $12* $10 $34 $190 $91 $180 $84 $385 $440 $200* $200* $400 $30 $20 $30 $20 $390 $425 $748 $748 $3 $748 $748 $3 $4,727 $3,627 $24 * = 2 year goal Meets or Exceeds Goal Performance Up Caution or Data Pending No Change in Performance Below Goal - Action Needed Performance Down 19 University Financial Scorecard: Fiscal Year-to-Date September 30, 2012 University Financial Scorecard Fiscal Year-to-Date: September 30, 2012 Metric Actual A. Revenue Drivers (in millions) 1. Tuition and Fees 2. Federal, State, Local and Private Grants & Contracts 3. Advancement Cash Receipts 4. State Support 5. Increase in Net Contribution from Auxiliary Enterprises B. Financial Snapshot (in millions) 1. Total Revenue excluding endowment performance 2. Total Expenses 3. Change in Net Assets 4. Change in Net Assets excluding endowment performance 5. Change in Net Financial Assets C. Performance Metrics 1. Enrollment - Summer & Autumn 2. Liquidity – Primary Reserve Ratio (Days Cash on Hand) 3. Actual Debt Service to Operations (measured semi-annually) 4. Short Term Investment Pool Return 5. Intermediate Investment Pool Return 6. YTD Long Term Investment Pool Return >4.25% 7. Long Term Investment Pool Average 3 Year Return >4.25% 8. Credit Rating Meets or exceeds goal Budget $208 $190 $26 $108 $4 $220 $186 $1,207 $1,138 $144 $69 $652 $1,203 $1,125 $96 $78 $589 79,062 179 NA 0.24% 2.13% 2.63% 7.89% AA 79,419 150 < 4.0% 0.07% 1.52% 4.25% 4.25% AA Actual vs Budget $107 $1 Performance up Below goal No change in performance Far below goal Performance down 20 Challenges For the Future Aligning resources with academic priorities Managing reductions in government support Reducing student debt Minimizing tuition increases Diversifying revenue streams 21 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 22 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 23 The Financial State of the University Questions and Answers 24