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FY 2019/2020 Budget Review

FY 2019/2020 Budget Review. Finance & Investment Committee 5/10/19 Board of Directors – 5/17/19. FY 2019/2020 Budget Agenda. Action Items General Assumptions/Key Drivers Campus Contributions Financial Summary and Statements Operating Statements (Detailed Hand Out)

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FY 2019/2020 Budget Review

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  1. FY 2019/2020 Budget Review Finance & Investment Committee 5/10/19 Board of Directors – 5/17/19 FY 2019/2020 Budget Review

  2. FY 2019/2020 BudgetAgenda • Action Items • General Assumptions/Key Drivers • Campus Contributions • Financial Summary and Statements • Operating Statements (Detailed Hand Out) • Capital Expense and Funding (Hand out) • Cash Flow, Liabilities and Assets • Reserves • Issues/Recap FY 2019/2020 Budget Review

  3. Action Items

  4. FY 2019/2020 BudgetAction Items • Seeking Approval of: • FY 2019/2020 Operating Budget • Operating Contribution of $308,677 • Reported Net Contribution of $888,677 • Individual Corporate Donations in excess of $2,500 • Capital Funding • FY 2019/2020 Capital Request - $821,200 • FY 2018/2019 Unbudgeted Expenditures -$12,573 • $26,135 FY 2017/2018 Budgeted Carryover • Reserve Funding • Fund Designation in the amount of $15,039,000 • CalPER Unfunded Liability Options FY 2019/2020 Budget Review

  5. General assumptions &key activities

  6. FY 2019/2020 Budget General Assumptions • Enrollment up 2.3% per Campus Forecast • Executing to contracts in place • Full Occupancy rate for Housing • All known rate increases accounted for • Annual insurance/contribution increases of 5-8% • Health Insurance, Workers Comp, PERS, Liability, etc. • Labor per California Law • Campus Allocations per EO-1000, Utilities • General price increases in most areas FY 2019/2020 Budget Review

  7. FY 2019/2020 BudgetKey Activities - Drivers • Minimum Wage and Salary Labor increase • Residential Dining – 2.8% Contract Rate increase • $3.2M in Campus Contributions • $300K Additional Donations • Textbook Sales Reduction FY 2019/2020 Budget Review

  8. FY 2019/2020 Budget Key Activities Minimum Wage Administration • California Minimum Wage Increase • $13.00/hour on January 1,2020 (period 7) • 8.3% escalation from $12.00/hour • Tiered Increase for those between $13.50 - $15.50 • Re-baseline hourly Salary Grades • Estimated 6% increase • California Salary Exempt Law – 1/1/20 • 2X Minimum Wage - $54,080 FY 2019-2020 Budget Overview

  9. FY 2019/2020 Budget Key Activities – Labor Impact • $350K+ Minimum Wage Impact • Affects All Students and Part Time/Temp employees • $150K - 3% Salaried Pool Increase planned • Salaried and Full Time Hourly FY 2018/2019 Budget Review

  10. FY 2019/2020 BudgetKey Activities – Other Financial • $142,400 - Outpost Bond Interest Expense • Plus $90,000 Principal • Estimated 3.5% Investment Return • $400K Incentive Comp placeholder in G&A • PERS Minimum Unfunded Liability Payment • $441,024 Due July 2019 (Balance Sheet only) FY 2019/2020 Budget Review

  11. Campus CONTRIBUTIONSAllocated through out)

  12. FY 2019-2020 BudgetCampus Contribution Summary FY 2019/2020 Budget Review

  13. Campus ContributionsDonations & Partnership Detail FY 2019/2020 Budget Review

  14. Campus ContributionsReimbursed Services & Capital FY 2019/2020 Budget Review

  15. Financial summary and division OPERATING STATEMENTS(see Hand out)

  16. FY 2019/2020 Budget Summary Operating Statement FY 2019/2020 Budget Review

  17. FY 2019/2020 Budget Operating Statement Trend FY 2019/2020 Budget Review

  18. FY 2019/2020 Budget Divisional Operating Statement FY 2019/2020 Budget Review

  19. FY 2019/2020 BudgetGeneral & Administrative (G&A) • Contains Corporate Donations of $513,190 • Approval Action for items >$2,500 (See detail) • Include Japanese Garden & HFHM Chair • Contains Employee & Retiree Related Expense • $400,000 Incentive place holder (inclusive of tax) • $481,300 Medical Retiree Health Premiums FY 2019/2020 Budget Review

  20. FY 2019/2020 BudgetCorporate DonationsApproval Required >$2,500@ • All Other Donations in the $25-$1,500 Range • Jewels of the night, HFHM, Athletics, Alumni, Relay for Life, etc. • $97,500 Coke Sponsorship included in Athletics Contract • $134,808 Meal Plan donation – National Merit/Faculty in Residence • Part of Residential Dining Contract FY 2019/2020 Budget Review

  21. FY 2019/2020 BudgetBookstore/Computer Store FY 2019/2020 Budget Review • Sales Flat from Current Forecast at $14.9M • Traditional Textbook Sales down 10% • $5,481,451 Compared to $6,110,119 this year • Anticipated D1DA Digital Growth of $100K • Retail and Gradfair $’s increasing • Other Revenue Activities • Campus Print Shop Management • Amazon Locker • Cal Maritime Support

  22. FY 2019/2020 BudgetRetail Food Sales FY 2019/2020 Budget Review • Retail Dining/C-Stores Sales Flat at $10.8M • Incremental 4% growth over this year • Down from FY18/19 Budget • Business Remains Price/Cost Challenged • Large percentage of Minimum wage employees • High Credit Card fees and Facilities Cost • Completed Inventory System Implementation • Starbucks Remodeled – New Depreciation • Japanese Garden - new Business in Flux • Not Budgeted

  23. FY 2019/2020 Budget Residential Dining • 2.8% Meal Plan increase per Contract • Based on Higher Education Pricing Index (HEPI) • Anticipate continued full Res Hall occupancy • Planned Occupancy of 2,550 Residents • 2,600 Fall/2,500 Spring • Campus Contributions • $899,591- Housing Commission • $134,808K - Meal Donations FY 2019/2020 Budget Review

  24. FY 2019/2020 Budget Residential Dining Plan Rates FY 2019/2020 Budget Review

  25. FY 2019/2020 Budget Division 5-ID Card Office • Pass-Through program to Campus • No P&L Impact • Blackboard Contract renewal through CO • Current Year Billing still Pending • Relocating Server to Campus ITS • Moving to Campus Domain • Business Continuity/Disaster Recovery • Expanded use for Laundry & Door Locks FY 2019/2020 Budget Review

  26. APPROVAL REQUIRED (See Hand out) CAPITAL FUNDING

  27. FY 2019/2020 BudgetCapital Summary FY 2019/2020 Budget Review

  28. FY 2019/2020 Budget FY2018/2019 Capital Status • Action Item – Approval Required • Unbudgeted item(s) - $12,573 (to be expensed) • Carry Over - $26,135 (Reference only) • Current Year Planned Expenditures of $443K • Anticipate $7K balance for the year • Major Projects • Library Starbucks Completed • UDP Starbucks Interim refresh • UDP Sewer Emergency Repair • Bookstore A/C Deferred - No breakdown FY 2019/2020 Budget Review

  29. FY 2019/2020 Budget Capital Funding Request • ACTION ITEM • Requesting Capital funds of $821,200 • Approval Required* • See Memo (detail) • Mid Level Projects planned • Contingencies for • UDP Repair • Elevator Retrofit • Japanese Garden treated as donation FY 2019/2020 Budget Review

  30. Cash flow, assets and liabilities

  31. FY 2019/2020 Budget Cash Flow • Projecting Positive Cash flow - $640,929 • 3.5% Net Investment return factored in • Conservative Capital budget • Capital Investment less than Depreciation • Ongoing PERS Unfunded Liability Payments • $441,024 due July 2019 – Per Actuarial • Outpost Bond Principal & Interest ($232,400) • $90,000 Debt Payment • $142,400 Interest (In Operating Statement) FY 2019/2020 Budget Review

  32. FY 2019/2020 BudgetFYE Cash Flow Projection FY 2019/2020 Budget Review

  33. FY 2019/2020 BudgetCash/Investment Balance Trend FY 2019/2020 Budget Review

  34. FY 2019/2020 BudgetLong Term Liabilities • Long Term Liabilities of $11,963,785 (6/19 Est) • Anticipated Reduction • PERS Unfunded Liability - $5,964,920 • $441,024 Payment required in July 2019 • Moving to 20 Year Pay Down Terms (See PERS report) • SRB Principal (Outpost) -$3,280,957 • FY2019/2020 pay down $90K • Remaining Term to 2039 • Medical Post Retirement liability past its peak • Currently at $2,717,908 • VEBA Funding Plan Mitigating This Exposure Long Term FY 2019/2020 Budget Review

  35. FY2019/2020 BudgetLong Term Liabilities FY 2019/2020 Budget Review

  36. FY2019/2020 BudgetLong Term Liabilities FY 2019/2020 Budget Review

  37. FY 2019/2020 Budget VEBA Trust Status • Board Approved $4M investment - 2010 • Funding complete per plan • Initial Plan assumed $5.3M balance after 7 Years • Medical Costs have outpaced inflation • Actuarial assessment has us a year out • Current YE Balance estimated $5,550K • Projected FY19/20 holdings of $5,788K FY 2019/2020 Budget Review

  38. FY2019/2020 BudgetVEBA Trend FY 2019/2020 Budget Review

  39. FY2019/2020 BudgetLong Term Assets and Liabilities Comparison Outpost & Starbucks FAS106 Retiree Medical PERS GASB68 Reserve Plan VEBA Set Up Bookstore Bond Paid off Investment Portfolio FY 2019/2020 Budget Review

  40. Cash Designation & Funding Reserves

  41. FY2019/2020 Budget Reserve Planning • Per Reserve Policy accommodations needed for: • Working Capital • Annual Capital Replacement and Major Maintenance • Post-Retirement Medical • CalPERS Unfunded Liability • New Projects/Other • Accounting Standards Update – ASU 2016-14 • “Designating” funds for existing liabilities and future needs • Liquidity Reporting FY 2019/2020 Budget Review

  42. FY2019/2020 Budget Reserve Planning(Cont’d) • Adequate funds on hand for Midterm Support • Planned Positive Cash Flow • PERS Unfunded Liability largest debt/risk • Accrued Interest exceeds Operating ROI • VEBA funding (Off Balance Sheet) • Mitigates Long Term Retiree Medical Liability • Assumes no additional investment • No Facility Set Aside Funding in Place FY 2019/2020 Budget Review

  43. FY 2019/2020 BudgetReserve Recommendation • Recommend That Monies be Designated as Assets Without Donor Restrictions in the amount of $15,039,000 • $10,339,000 - Priority 1 • Committed and Incurred Liability • Non-Asset backed Liabilities • $4,700,000 - Priority 2 • Incurred Liability & Asset Backed • Designation subject to Holdings Limit • No available funds for Priority 3 • Estimated $35M for Future Repair/Replacement FY 2019/2020 Budget Review

  44. FY 2019/2020 BudgetReserve DesignationsApproval Required FY 2019/2020 Budget Review

  45. FY 2019/2020 BudgetReserve Matrix Build up FY 2019/2020 Budget Review

  46. FY 2019/2020 BudgetReserve DesignationsFuture Consideration FY 2019/2020 Budget Review

  47. FY2019/2020 Budget CalPERS Actuarial Update • Unfunded Accrued Liability (UAL) - $5,964,920 • Legacy employee participant plan • Shrinking participant funding pool ongoing • CalPERS GASB 68 Publications – March 2019 • Miscellaneous Risk Pool Measurement update • Measurement Date of June 30, 2018 • Baselines Liabilities and Assets for YE June 2019 • Public Agency Schedules • Employer Allocation for Components of Net Pension Liability FY 2019/2020 Budget Review

  48. FY2019/2020 Budget PERS Liability Reduction • Annual payments increasing to $700K • $441,024 – July 2019, $687,000 – July 2024 • Current schedule incurs $6.2M in interest • Discount rate of 7% • See Backup Slides 56-57 • CalPERS adopting a 20 year minimum schedule • Recommend a Pay-down Plan similar to VEBA FY 2019/2020 Budget Review

  49. FY 2019/2020 BudgetCalPERS UAL FundingAction For BOD Submittal • Proposing Several Funding profiles • Annual amounts are above and beyond the Mandated Annual Employer Contributions (Slide 56) • Considers $441,024 Payment Due July 2019 • UAL Pay-Down Options • $1M Initial Payment - $500K/Year for 7 years • $2M down, $500K for 6 years (Recommended) • $3M down, $500K for 3 years • Actuarial Will Address Ongoing Status FY 2019/2020 Budget Review

  50. Issues and concerns

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