The Regents of the University of California Financial Update January 2011

1. The Regents of the University of California Financial Update January 2011

2. Working to serve California and the nation every year UC Davis CONFERRING over 40,000 bachelor’s degrees and 3,800 PhDs CONDUCTING over $4 billion in research UC Davis Medical Center UC Berkeley UC Merced TRAINING 40% of all interns and residents statewide EMPLOYING over 180,000 Californians UCSF UCLA UCSF Medical Center UCLA Medical Center UC Santa Cruz HANDLING 3.7 million out- patient visits, 254,000 ER visits, and 142,000 in- patient admissions EDUCATING over 220,000 students UC Irvine UC Irvine Medical Center UC Santa Barbara GRADUATING 60% of all med school grads In California CREATING 2.3 million California jobs this decade GENERATING $4 billion in tax revenues UC Riverside UC San Diego UC San Diego Medical Center

3. Two-year University budget picture Add’l. State Funds, 65.4 Add’l. State Funds, 65.4 Debt Restructuring, 75.0

4. UC management has responded swiftly to budgetary challenges presented by reductions in State funding • 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 systemwidelayoffs, 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

5. “Working Smarter” towards administrative efficiencies • Keep the pipeline full on • three levels of change: • Campus restructuring • initiatives • Regional centers of • excellence • Systemwide efficiency • measures • Vision: 10 campuses using ONE administrative framework: • Common, integratedfinancial and payroll systems • Common, integratedtime & attendance/HR systems • Common, integratedextramural fund accounting • Common, integrateddata warehousing • Common, integratedasset management • Common, integratedstrategic investment program • Common, integratede-procurement • Common, integratedenergy solutions • Common, integratedapproach to ICR $500 million of positive fiscal impact in five years

6. CapEquip C3 (Cross-Campus Collaborations) STARs (Strategic Teaching Acquisition and Retention) UC Strategic Initiative Program (CAPEQUIP, C3, 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: • No-interest loans to fund regional centers of excellence and/or systemwide efficiency initiatives • Goal: Cut duplication and increase systems commonality • No-interest loans to fund lab renovations and lab equipment for star faculty recruits • Goal: Maintain competitive research and academic excellence • 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 • Strategic funds accumulated by the capital equipment segment would fund the interest costs of the other two segments

7. The Regents of the University of CaliforniaDebt Portfolio UC Credits * As of 12/1/10. Excludes State Lease Revenue Bonds and campus-originated leases.

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