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Findings & Comments on UC's 2001-2002 Annual Financial Report
The University's financial position is strong and well positioned with major financial strengths to meet any short-term obstacles, according to UC's 2001-2002 annual financial report.
Operating Revenues: Operating revenues increased $ 1.3 billion to $ 12.8 billion, or 10% over 2000-2001's $ 11.5 billion. All sources of operating revenues increased, including student tuition & fees (2.1%), grants & contracts (10%), medical centers (7%), educational enterprises (10%), auxiliary enterprises like parking, housing etc. (10.6%), DOE laboratories (19%) and other operating revenues (19%.)
Expenses: While expenditures are expenses, not all expenses are actual dollars spent. Total 2001-2002 expenses were $ 15.9 billion, $ 0.8 billion more than 2000-2001's $ 14.8 billion.
Capital Appropriations and Spending: State capital appropriations were $ 270 million but during 2001-2002 UC made $ 1.99 billion in capital expenditures (not expenses; see UC does know the difference between expenditures and expenses!) To reconcile spending nearly two billion on construction and improvements with service cuts, the annual financial report explains, "The required spending for capital assets is exceptional at this time in order to provide the facilities necessary to accommodate the current and future enrollment growth."
Nonoperating Revenues: Following GASB 35, the Governmental Accounting Standards Board's new rule for public universities' financial reporting, UC's 2001-2002 annual financial report accounts for nonoperating revenues separately from operating revenues. The single largest source of nonoperating revenues were State educational appropriations which increased to $ 3.1 billion, $ 122 million or 4.7% over 2000-2001's $ 2.9 billion.
Income: Revenues totaled $ 16 billion, $ 1.5 billion or 10.3% over 2000-2001's $ 14.5 billion. With $ 15.9 billion of expenses, 2000-2001's net income was $506 million. According to the annual financial report, "In 2002, the operating loss of $ 3.18 billion was more than offset by $ 3.68 billion of revenues and expenses classified as nonoperating. Revenue to support core activities exceeded the associated expenses by $ 505.7 million."
Net Assets: The annual financial report says, "The difference between assets and liabilities is net assets, representing a measure of the current financial condition of the University." Net assets "are the residual interest in the University's assets after all liabilities are deducted.' For 2001-2002, net assets were $ 15.25 billion, a $ 615 million or 4% increase from 2000-2001.
Unrestricted Net Assets: Available for any purpose the University chooses, unrestricted net assets were $ 4.45 billion, $ 238 million or 5.7% more than 2000-2001's $4.2 billion. Those associated with UC "core activities" (education, research, public service) grew by $ 42 million or 2.1% over 2000-2001's $2.1 billion.
Evidence the University's financial position is strong and well positioned with major financial strengths to meet any short-term obstacles, unrestricted net assets' growth is an embarrassment of riches for UC insisting on budget cuts. According to the annual financial report, there is no contradiction: "Although unrestricted net assets are not subject to externally imposed restrictions, substantially all of these net assets are restricted internally and are allocated for academic or research initiatives or programs, or for capital purposes."
But when CUE requested documentation in April 2002, University officials refused, then admitted having no documents that show UC's unrestricted net assets are restricted. Later, in a December 13, 2002 telephone conversation with me, UC finance officials conceded they didn't know how much of UC's unrestricted net assets were allegedly "internally restricted."
Comments: By any conventional accounting standard, 2001-2002 was another strong year for UC finances, something the University's annual financial report makes clear for readers. The same report anticipates the UC being more than able to meet any short-term financial challenges at the same time the University accelerates construction of new facilities. Despite spending billions on construction, UC continues accumulating unrestricted net assets, according to the annual financial report. The 2001-2002 annual financial report shows again that the University lacks, not the ability, but the will to pay for improved pay and benefits for CUE-represented employees -- and its obligations to students, staff and other Californians.