2019 Financial Health Final 020419 - Michigan State University · Power & Utilities Capital Renewal Notes Notes Notes Notes Total Resource Need: $450M‐$550M ... Initial phase of

Michigan State University Financial HealthAs of June 30, 2019

Board of TrusteesWinter 2020

1

Table of Contents

Summary and Overview

Current Status: Infographics

Current Status: Financial Framework

Current Status: Environmental Scan

Background Packet


2


MSU Financial Health | Summary and Overview 3

The value of MSU academic programs continues to appreciate at the state, national and international levels. Our reputation grows as a top‐100 global university, committed to student success, advancing Michigan communities, and research with global impact.

MSU formed private insurance captive for majority of insurance needs, sexual assault and traumatic brain injury risks outside of captive

Ongoing monitoring of MSU financial health; assets increased by approximately $150M in FY19, current bond rating at/exceeds Big Ten median, challenged by impact of legal settlement

OPEB liability reduced by over $350M, approximately 20% of FY18 total due to changes in actuarial formula; additional reduction possible due to Medicare Advantage

Auxiliary units, including Athletics, Residential & Hospitality Services, and the MSU Health Team monitor emerging local, regional, and national issues to inform long‐range strategic planning efforts

MSU sponsored awards and expenditures at record levels, MSU’s three‐year rate of change best in the Big Ten

Flat‐rate tuition structure introduced for 2019‐20 academic year, anticipated to reduce time‐to‐degree, limit student debt

Fall 2019 entering class amongst largest in history, included record level of domestic non‐residents, monitoring national demographic trends and international enrollment

Priorities in MSU’s long‐term financial framework support transformational efforts in academic quality, financial aid, teaching and laboratory facilities

Table of Contents





Background Packet


4


MSU Financial Health | Current Status: Infographics

State Appropriations Resource Availability Big Ten Residency Economic Outlook

Michigan ranks 40thnationally for ten‐year change (2009‐2019) in state appropriations funding, ‐5.2%

Funding at the national average of 12.2% would result in approximately $61M in additional funding for MSU

MSU exceeds the Big Ten average for resident undergraduate enrollment by 15%

By mimicking the Big Ten average, MSU could generate over $80M in tuition & fee revenue annually from non‐resident students

Forecasted Federal revenues anticipated to increase 4.5% and 5.5% in FY20 and FY21

Disposable income growth outpaces inflation estimate

5

MSU appropriations lag the Big Ten and Carnegie average by approximately $2,000 per student, reflecting an overall resource deficit of over $90M when compared to peers



Sponsored Awards Research Per FacultyFederal AwardsR&D Expenditures

MSU sponsored awards exceed $660M annually, an increase of 57% over ten years and 250% since 2000‐01

MSU sponsored expenditures exceeds $700M annually, ranking MSU 32nd nationally and 7th in the Big Ten, an increase of 6 and 3 places over three years

Federal sponsored awards approximate $470M, an increase of $230M over ten years

6

Sponsored awards per faculty member exceed $335K, an increase of approximately 67% over ten years



Endowment Annual GivingDonor Provided AidEndowment Performance

MSU total endowment market value exceeds $3B, 6th in the Big Ten

MSU outperforms the 1, 3, 5, and 10 year benchmark for investment returns

70% MSCI AWCI/ 30% Bgg BG Agg.

MSU lags the Big Ten average for donor provided financial aid by over $500 per student, equivalent to more than $23M in total resources

MSU ranks 11th in the Big Ten for annual giving (2018 VSE data)

Recent capital campaign exceed giving goal, $1.8B, from over 250K donors

7



MSU Bond Rating Ratio PerformanceComposite Financial IndexOutstanding Debt

8

MSU CFI values impacted by OPEB and legal settlement

MSU bond rating affirmed at AA2/Aa level in recent ratings review, exceeds/at Big Ten median

MSU outperforms Moody’s peers in 76% of ratings metrics

Outstanding debt approximates $1.9B, includes recent issuance for ISTB, STEM Teaching and Learning, legal settlement, etc.

When adjusted for OPEB and legal, values consistent with historical norms, reflecting strong financial health

Many financial ratios impaired due to OPEB and settlement accrual

FY20 OPEB accrual adjustment due to potential retiree health plan change may normalize ratio performance to peers

Table of Contents





Background Packet


9

10 Year Financial Framework: Recurring Resource Needs

Academic Competitiveness

10

Technology Infrastructure(Under Review)

Financial Aid Health Care

Notes Notes Notes Notes

Total Resource Need: Global Impact (1): $15M (complete)

Global Impact (2): $3M (FY21), TBD thereafter (Planning Process)Course Demand: TBD

Ongoing initiative, funding variable based on resource availability and prioritization

Initial phase of Global Impact Initiative provided $15M in recurring funding for 100 research‐intensive faculty

To date, approximately 90 faculty hired, start‐up and space needs ongoing

Initial $27M recurring phase concludes in FY22

Initial Deloitte study indicated approximately $27M in recurring needs

To date, recurring funding of $21M provided

$10M savings recovery and timing to be determined

Ongoing, variable by year

Completed capital campaign made progress towards goal, reliant on realization of deferred giving and endowment payout

Tuition waivers and grants targeted to increase domestic non‐resident enrollment

Continuously monitored

Increasing numbers of active employees and retirees drive costs

Potential savings for retirees may eases overall cost growth rate

Incorporate MSU Health Care, Inc. into service offerings for faculty and staff

FY19: $3.5MFY20: $6.5M FY21‐FY22: $3M (FY21), $3M (FY22)

FY20: $2MFY21‐FY25: Variable by plan

FY19: $2.5MFY20: $3.2M (Course demand)

FY21: $3M (Global Impact FY21),

Total Resource Need: $27M (Completed in FY22)

Total Resource Need: $23M donor aid$20M class composition

Total Resource Need: Difference between inflation and actual cost increases

Unit cost at or below 3%

FY21‐FY25: TBD

MSU Financial Health | University Operating Environment

Existing values largely consistent with previous drafts, update pending completion of university strategic planning effort

10 Year Financial Framework: Non‐Recurring Resource Needs

Critical Space Infrastructure

11

Technology Infrastructure(Under Review)

Power & Utilities Capital Renewal

Notes Notes Notes Notes

Total Resource Need: $450M‐$550M

Ongoing, project and resource dependent

ISTB/STEM backfill ‐ associated lab renovations appx $15M – funds allocated in FY20 and FY21

ICE CUBE funding $6M Potential future projects include:

Engineering, Plant Biology, Large Animal BME, Clinical Center

Initial projects funded, future needs and timing under review

HR/CRM replacement under review,

SIS replacement CRM, data center, ICER, network

upgrade, student success, travel, other projects funded to date

Explore alternate funding models

Initial phase of RICE natural gas engines

Long‐term HVAC replacement funding appx $7M annually

Broader plant review ongoing

Project funding and priorities determined annually based on risk assessment and available funds

Includes MRR (Fuel Acct.), Infrastructure Reserve, ECM, and Facility Reserve sources

Needs outpace available funding

FY16‐FY19: $84MFY20‐FY22: $40M+(SIS) FY21‐FY25: TBD

$48M – RICE (Funded)$16M – Boiler (Estimate) $21M – Water quality (Funded)$70M – HVAC replacement (Estimate Funded)

$110M – STEM/Innovation (funded)

$100M – ITSB (funded)$6.0M – Greenhouse match(pending)TBD – Multicultural Center (proposed)

Total Resource Need: $50M‐$125M+

Total Resource Need:$125M‐$200M+

Total Resource Need: $230M‐$330M+ general fund$120M‐$140M+ auxiliary units

FY19: $31.4MFY20: $23.8MFY21‐FY25: $40M‐$45M annual ‐ project and funding dependent



MSU Financial Health | University Operating Environment

Existing values largely consistent with previous drafts, update pending completion of university strategic planning effort

Table of Contents





Background Packet


12


MSU Financial Health | Current Status: Environmental Scan

#1 2‐10 11‐25

Supply Chain**African History* (2018)Curriculum & Instruction*Elementary Teacher Education* Secondary Teacher Education* Rehabilitation Counseling*Industrial/Organizational Psych* (2018) Nuclear Physics* (2019)

*Indicates graduate program**Indicates both undergraduate & graduate program

Higher Education Administration* Educational Administration & Supervision* Educational Psychology*Online Graduate Education*Education Policy*Criminology* Online Criminal Justice* (2018) Biological/Agricultural Engineering Production/Operations

AccountingManagementManagement Information Systems Online Business (excludes MBA)* (2018) Production/Operations* Undergraduate Business Program Graduate Education Schools*Special Education*Biological/Agricultural Engineering* Econometrics*Veterinary Medicine*Online Graduate Nursing* (2018)

University Rankings90

U.S. News and World ReportBest Global Universities, 2019 93

Times Higher Education (London)World University Rankings, 2019

National Rankings:MSU has 9 programs ranked #1 nationwide and a total of 30 undergraduate and graduate programs/schools ranked in the top 25 nationwide

11 Programs in the top 25 globally

13



National Economic Outlook

14

Federal revenue projected to increase by 4.5% and 5.5% in 2020 and 2021

Forecasted Chinese GDP growth approximates 5.8% in 2020 an 2021

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

2018 2019 2020 2021

Disposable Income Outpaces CPINational disposable income increased by 3.95% and 3.16% in 2018 and 2019, both in excess of CPI growth for the same two periods. Trend forecasted to continue in 2020 and 2021

U.S. GDP growth forecasted at 1.7% in 2020 and 2021

3,800

3,900

4,000

4,100

4,200

4,300

4,400

4,500

4,600

4,700

4,800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Michigan Payroll JobsMichigan lost approximately 859K jobs from Q2 2000 to Q3 2009. Since 2010, Michigan has added approximately 676K jobs, 80% of the loss from 2000 to 2009



State Economic Outlook

U.S. light vehicle sales forecasted slightly below 17m units, Detroit market share slightly below 41% ‐light trucks, a majority of Big Three sales add more economic value than sedans

Personal income growth estimated to exceed 3.5% annually in 2020 and 2021

State GFGP revenue estimated to increase 0.5% and 2.1% in 2020 and 2021 respectively

15



Projected High School Graduations

16

Total national high school graduates approximate 3.3M annually, anticipate 6% growth by 2029 over 2013 baseline

Predominance of growth in Western and Southern regions of the country, Midwest and Eastern regions forecasted to decline over period

Big Ten state – Michigan, Ohio, Illinois, Pennsylvania, Wisconsin all forecasted to decline through 2029

Michigan Public High School GraduatesPublic high school graduates in Michigan forecasted to decline by approximately 20% by 2029

110,682

88,680

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

150,000

Source: National Council for Education Statistics



International Enrollment

17

2018‐19 international enrollment approximates 872k, a decline of 3% from 2016‐17 peak (does not include OPT)

7 Big Ten schools among the top 25 nationally for international enrollment, MSU ranks 25th

Over 300k students study abroad from U.S. institutions annually

Source: Open Doors, 2019

Table of Contents





Background Packet Background Packet

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Background Packet: All Funds Activities

MSU Financial Health | Background Packet

General Fund $1.50B

$0.80B

BOT approved each June

Expendable Restricted

Auxiliary Activities

Designated

Amount

BOT approved grant‐by‐grant as received, endowment by

spending policy – MSUE/AgBioeach June

$0.45B Athletics BOT approved each June,

RHS each April

$0.30B Clinical and fee‐for‐service operations

differentially

Includes major instructional and administrative activities of the university

Includes sponsored activities and restricted endowment and gift accounts

Comprised primarily of Residential & Hospitality Services and Athletics

Comprised primarily of clinical operations and other activities

All funds activities also include the student loan, endowment (principal), plant fund, and retirement and insurance funds

ReviewSignificant All Funds Activities

19

Background Packet: All Funds Revenues


‐87%, Other Revenue 10%, University

Advancement

1%, Agbio/MSUE

197%, Investment Income

106%, Departmental Activities

‐2%, State Appropriations

49%, Auxiliary Activities

55%, Sponsored Programs

70%, Tuition and Fees

$2,872

$60,746

$64,429

$246,962

$282,912

$286,274

$411,632

$528,216

$867,905

‐$400,000 ‐$200,000 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000

Other Revenue

University Advancement

Agbio/MSUE

Investment Income

Departmental Activities

State Appropriations

Auxiliary Activities

Sponsored Programs

Tuition and Fees

2019

2009

2019 ALL FUNDS REVENUE: $2.8B 2009 ALL FUNDS REVENUE: $1.4B

MSU All Funds Revenue 2019‐2009 MSU All Funds Revenue Change 2019‐2009

20

Source: MSU Financial Statements

Background Packet: All Funds Expenditures


MSU All Funds Expense 2019‐2009 MSU All Funds Expense Change 2019‐2009

2019 ALL FUNDS EXPENSE: $2.8B 2009 ALL FUNDS EXPENSE: $1.4B

$57,635

$65,905

$73,431

$133,419

$135,552

$178,709

$178,729

$344,030

$362,462

$410,887

$783,859

$0 $250,000 $500,000 $750,000 $1,000,000

Student Support

Other

Financial Aid

Academc Support

Op/Main of Plant

Insitutional Support

Depreciation

Public Service

Auxiliary Enterprise

Research

Instruction

2019

2009

83%, Student Support 122%, Other

80%, Financial Aid

74%, Academc Support

‐14%, Op/Main of Plant

98%, Insitutional Support

97%, Depreciation

62%, Public Service

41%, Auxiliary Enterprise

57%, Research

42%, Instruction

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Background Packet: Appropriations


National Funding for Higher Education 2009‐2019

Illinois, 43.30%

Maryland, 25.51%Wisconsin, 21.77%

Nebraska, 20.48%Indiana, 11.59%

New Jersey, 8.57%Minnesota, 3.44%

Michigan, ‐5.17%Ohio, ‐8.01%

Iowa, ‐12.79%

Pennsylvania, ‐21.67%

‐40.00%

‐20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

Michigan ranks 40th nationally for change in appropriations funding ‐ 2009‐2019, ‐5.2%

From 2009‐2019 average funding for higher education appropriations increased 12.2 %

22

MSU appropriations funding equivalent to 1990‐91 in real dollars, lowest since prior to 1970‐71 when adjusting for inflation

Source: Grapevine Higher Education Survey

Background Packet: Peer Comparisons

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

$6,066


Appropriations – % of Revenue Appropriations – Per Student

MSU Value % of Revenue Trend (2008‐09)_ Big Ten MedianCarnegie Median

$281M 10%

MSU Value Per Student Trend (2008‐09)_ Big Ten MedianCarnegie Median

$281M $6.1k

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

10.17%

23

Source: IPEDS, 2018

Background Packet: Tuition & Fees

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

$18,719

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

31.38%


Tuition & Fees – % of Revenue Tuition & Fees – Per Student


$868M 31%


$868M $18.7k

24

Source: IPEDS, 2018

Background Packet: Appropriations & Tuition

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

$24,785


Appropriation and Tuition & Fees – % of Revenue Appropriation and Tuition & Fees – Per Student


$1,149M 20%


$1,149M $24.8k

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

41.54%

25

Source: IPEDS, 2018

Background Packet: Financial Aid


‐100% ‐50% 0% 50% 100% 150%

State of Michigan

Federal

MSU Non‐General Fund

Other Loans & External Awards

MSU General Fund

Financial Aid SummaryTotal support for financial aid grew 48.4% between 2008 and 2018, increasing from $473M to $701M over the period

Dollars in millions FY08 FY18

MSU General Fund $62.30 $147.40

Other Loans & External Awards $47.80 $77.00

MSU Non‐General Fund $33.90 $53.50

Federal $279.50 $417.40

State of Michigan $49.50 $6.40

22Approximate percentage of students receiving a Pell grant8,539 2017‐18

42 50Percentage of students graduating without debt, below state and national averages

Approximate percentage of students receiving a Federal grant16,397 2017‐18

26



MSU Value % of Tuition Trend (2008‐09)_ Big Ten MedianCarnegie Median

$76M 8.75%


$76M $1,639

Federal Financial Aid – % of Tuition & Fees Federal Financial Aid– $ Per Student

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

8.75%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

$1,639

27

Source: IPEDS, 2018




$21.5M 2.5%


$21.5M $464

Restricted Financial Aid – % of Tuition & Fees Restricted Financial Aid – $ Per Student

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

2.48%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

$464

28

Source: IPEDS, 2018


$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

$2,490

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

13.30%



$115.4M 13.3%


$115.4M $2,490

Unrestricted Financial Aid –% of Tuition & Fees

Unrestricted Financial Aid – $ Per Student

29

Source: IPEDS, 2018

Background Packet: Sponsored Programs


MSU Sponsored Awards History

$262,413,915

$421,000,000

$660,000,000

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

MSU sponsored awards approximate $660m annually, an increase of 57% since 2009‐10 and of over 250% since 2000‐01

MSU Federal awards exceed $470m, an increase of over 45% since 2009‐10 and of over 343% since 2000‐01

30

Source: MSU Office of Planning and Budgets



Sponsored Expenditures – % of Revenue Sponsored Expenditures – Per Faculty Member

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

20.02%


$553.8M 20%

MSU Value Per Faculty Trend (2008‐09)_ Big Ten MedianCarnegie Median

$553.8M $284.4K

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

MSU Big TenMin

Big TenMedian

Big TenMax

CarnegieMin

CarnegieMedian

CarnegieMax

$282,427

31

Source: IPEDS, 2018



‐

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2

8

17 21 2528

32 3437 39

44 47 51

78

Sponsored Expenditures – HERD R&D Survey

NSF HERD Expenditures and National Rank

MSU ranks 32nd nationally and 7thin the Big Ten for sponsored expenditures, an improvement of 6 places and 3 places respectively

MSU sponsored expenditures exceed $700M annually (HERD basis), an increase of 28% over three years, first in the Big Ten by five percentage points

32

Source: National Science Foundation Research and Development Expenditure Survey

Background Packet: Significant Auxiliary Enterprise


• Residence Hall house count reduction due to proliferation of East Lansing off‐campus private apartment development

• Maintain/repair aging residence hall and hotel facility plumbing and infrastructure

• Constrain operating expenditures to provide affordable options for students and guests

• Partnership and leadership on emerging initiatives – Grand Rapids Innovation Park and the Crescent Road Redevelopment (Spartan Village)

• Analysis of second‐year, on‐campus housing requirement

Operating Overview Financial Snapshot

FY19 Revenue $230M

FY19 Reserves $73M32% of operations

FY19 Debt Outstanding $334M

Residential & Hospitality Services

33




FY19 Revenue $139.7M

FY19 Reserves $40.9M29% of operations

FY19 Debt Outstanding $82.5M

Department of Athletics

34

• Ongoing investment and utilization of resources in infrastructure, personnel, operations and financial aid to remain competitive and in balance with B1G and national institutions while creating a successful academic, athletic, leadership and social culture.

• Take reasonable and appropriate measures to deliver a safe and protected environment for students and community.

• Potential impact of national issues associated with antitrust / NIL (name, image and likeness), concussion litigation, and Federal tax reform.

• Assure student‐athletes’ experiences are consistent with the MSU student body at‐large.

• Chief Diversity Officer to enhance diversity efforts throughout the department and coordinate with broader campus initiatives

• Balance higher education mission with market‐driven demands of intercollegiate athletics.




FY19 Revenue $103.7M

FY19 Reserves $13.6M*, ($2.3 restricted internally)13% of operations *Includes $5.3m MSU Health Care, Inc.

FY19 Debt Outstanding $0

MSU Health

• Funding of provider recruitments

• Capitalization of MSU Health Care, Inc.

• Student health care model

• Consideration of student insurance and fee‐based services

• Conceptual planning for potential facility

• Innovative services to better provide for students, faculty, and staff

• Better leverage existing systems, including EMR, to improve quality and efficiency

35

Background Packet: Credit Ratings

As of Nov 2019 Wisconsin, due to state governance, not rated as an institution

Return to OverviewMSU Financial Health | Background Packet

Long Term Credit Ratings

AAA

Aaa

Northwestern, Indiana, Purdue, Michigan

Indiana, Purdue, Michigan

AA+

Aa1*

Maryland

Maryland, Iowa, Minnesota, Nebraska,

Northwestern, Ohio State, Penn State

AA*

Aa2

Iowa (AA‐), Rutgers (A+), Illinois (A‐)

Rutgers (Aa3), Illinois (A1)

AA‐/A+/A/A‐

Aa3/A1

MSU, Minnesota, Nebraska, Ohio State, Penn

State

MSU

S&P Rating – *Big Ten Median AA

Moody’s Rating – *Big Ten Median Aa1

36

Background Packet: Credit Ratings

37

*Category includes: Wells Hall addition, Plant Science Expansion, Bio‐Engineering facility, Grand Rapids Research, Cyclotron office addition, Chemistry building enhancements, Power plant and utility distribution systems, Legal Settlement, and other operational improvements


Moody’s Investor Credit Ratings

MSU % at or Favorable to Median

Big Ten Moody's Publics

2018 2018

Financial Statistics (12 Measures) 42% (5) 75% (9)

Market Ratios (7 Measures) 57% (4) 71% (5)

Capital Ratios (13 Measures) 31% (4) 77% (10)

Balance Sheet Ratios (5 Measures) 80% (4) 100% (5)

Operating Ratios (11 Measures) 45% (5) 64% (7)

Contribution Ratios (6 Measures) 50% (3) 83% (5)

Total (54 Measures) 46% (25) 76% (41)

Based on FY 2018 financial statements, the most recent medians published by Moody’s

In 55% of the cases where MSU is adverse to the Big Ten median, State appropriations are a part of the calculation (38% for the Publics median)

If these instances were removed, MSU would rate favorable to the Big Ten median in 66% of the measures and Publics median in 84% of the measures

Moody’s uses a set of approximately 50 key measures organized into 6 sections to assess bond rating

Background Packet: General Revenue Debt

38

General Fund Projects* Millions

Long-Term Debt** $1,209.7

**Includes legal settlement ($491.8M)

Revenue Based Projects

Residential and Hospitality Services 334.2

NSCL/Facility for Rare Isotope Beams 83.3

Intercollegiate Athletics 62.1

Parking Operations and Violations 51.9

MSU College of Law 15.1

Wharton Center 12.7

Recycling 8.1

South Campus Anaerobic Digester 4.3

Executive Development Center 2.5

College of Vet Med 2.3

Donor Supported Projects

Secchia Center-CHM West MI 79.3

Broad Business College Complex Pavilion 31.7

Intercollegiate Athletics 16.6

Cook Hall 1.1

Total $1,914.9


Summary of General Revenue Debt (as of 06.30.19)$772M in new debt in FY19, includes funding for legal settlement, ISTB, STEM Teaching and Innovation Center, Music building addition, other

Credit rating sustained through issuance of new debt, significant capacity remains at Aa2 level, resources for additional debt service may be constrained

Debt coverage ratio adverse to peer norms

Background Packet: Operating Cash Pool

39MSU Financial Health | Background Packet

Liquidity – Operating Cash Pool (as of 06.30.19)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Target Actual Target Actual Target Actual

$199 $199

$381

$183

$1,500

Liquidity Pool

Cash & Short term investments

Liquidity Reserve

Intermediate term fixed income investments

Operating Fund TrustsLong term investments

n.a.

MSU cash pools monitored daily to ensure adequate resource flexibility should unforeseen events arise

MSU Liquidity Pool and Liquidity Reserve pool targeted to retain 30‐60 days of operating needs – amounts to approximately $200M ‐ $400M

* 30 days of operating cash is $199M** Balance includes $75M operating line of credit implemented in Oct 2013.

Liquidity Pool investments primarily managed by Payden & Rygel (same/next day liquidity); Liquidity Reserve allocated between Brandywine and Goldman Sachs; and operating funds trusts in MSU’s Common Investment Fund (generally $45M‐$70M available each quarter)

Source: MSU Treasury Office

Background Packet: Operating Reserves


Operations Reserve Balances (as of 06.30.19)

Working capital includes various operating reserves for unforeseen variance in tuition and other revenues

Reserves are subject to dynamic performance in investments, utilities and natural gas, and indirect cost recoveries respectively

Portions of reserves balances encumbered for capital and operations projects

*Net of amounts detailed for Liquidity Reserve, Cash Pool, Tuition Stabilization – Balance and future proceeds largely committed. FY18 balance adjusted to remove impact of temporary project funding. ** Net of $10M minimum balance

40


$0 $100,000,000 $200,000,000

General Fund Carryforward (Academic Units)

Research Reserve

Utility Reserve**

Tuition Stabilization Reserve

Cash Pool Reserve

Liquidity Reserve

Infrastructure Reserve*

$179,906,049

$15,938,802

$113,809,775

$10,000,000

$15,000,000

$45,000,000

$65,710,801

Background Packet: Investment Performance

41MSU Financial Health | Background Packet

Investment Performance (as of 06.30.19)

‐1.00%

1.00%

3.00%

5.00%

7.00%

9.00%

11.00%

13.00%

15.00%

1‐year 3‐years 5‐years 10‐years

7.90%

11.70%

6.60%

8.90%

CIF Total Return

Simple (70% MSCI ACWI/30% BBG BC Agg)

MSU Common Investment Fund outperforms benchmark indicator for 1, 3, 5, and 10 year rate of change

Annual endowment spending policy currently 4.4%

Common Investment Fund market value exceeds $3.0b

Source: MSU Investment Office

Background Packet: Peer Financial Performance


Big Ten Students, Revenues, and Net Assets

45,244

40,673

28,418

40,239

43,917

38,360

23,561

40,740

56,204

45,672 46,364 45,549

0

10,000

20,000

30,000

40,000

50,000

60,000

‐$1,000,000,000

‐$500,000,000

$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

$3,500,000,000

$4,000,000,000

University ofMichigan

Purdue University University ofIowa

IndianaUniversity

University ofMinnesota

University ofMaryland

University ofNebraska

University ofWisconsin

Ohio StateUniversity

University ofIllinois

Michigan StateUniversity

RutgersUniversity

Unrestricted Net Assets Tuition FTE EnrollmentSource: IPEDS, 2018

42

6.5

5.5

2.3

3.2

6.1

3.7

5.0

6.3 6.1

4.9

7.6

4.24.2

0

1

2

3

4

5

6

7

8

2011 2012 2013 2014 2015 2016 2017 2018 2019

Adjusted CFI (no legal, no OPEB)

Actual

Adjusted No OPEB

Actual

Background Packet: Composite Financial Index


Composite Financial Index

43

MSU CFI performance impacted by OPEB changes and legal settlement (2018)

2018 and 2019 CFI values, adjusted for the impact of OPEB and legal settlements consistent with historical norms, representative of strong financial health

Big Ten and Carnegie peers impacted differentially by OPEB accounting change, variable by institution and relationship with state


Documents

2019 Financial Health Final 020419 - Michigan State University · Power & Utilities Capital Renewal Notes Notes Notes Notes Total Resource Need: $450M‐$550M ... Initial phase of