The Academy Every Moment Investment Banking Concern In Addition To Questions Nearly Acre Funding
Monday, July 28, 2008
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In response to my lastly spider web log entry on President Yudof together with the electrical flow financing of the UC system, together with anonymous commenter wrote the following: “This ship is highly misleading. You are implying that UC takes contracts together with grants, puts the coin inwards STIP, therefore spends it elsewhere. This is only non accurate. STIP interest, non the master copy funds, tin give notice live spent elsewhere. What would yous take away hold them create alongside a twelvemonth of funding---keep it nether the mattress until it is spent?” In response to this response, I would similar to present how the UC together with other universities take away hold buy the farm investment banks.
I myself did non sympathise this organization until I met alongside a high-ranking UC official to attempt to figure out how the UC was able to transfer $1 billion from the Short-Term Investment Pool (STIP) to the retirement organization (UCRS). When I asked if the direction had borrowed the coin from the dissimilar accounts that concur grant funds, operating cash, nation funds, together with tuition dollars, I was informed that I am looking at it inwards the incorrect way. I was told that I should recollect of the academy equally a bank, together with precisely similar i time yous deposit coin inwards a savings account, it does non precisely sit down there, but it is invested inwards dissimilar things. This explanation reminded me of the famous scene from It’s a Wonderful Life, where Jimmy Stewart’s graphic symbol tells the people trying to withdraw their coin that their funds are non at that topographic point because they take away hold been lent out to assistance laid upwards their neighbor’s homes together with businesses.
I am non implying hither that the UC is doing something illegal; rather, my betoken is that the academy has much to a greater extent than flexibility alongside its funds than it likes to admit. For example, lastly summer, the academy suggested to the Regents the next fiscal strategies:
“• Transfer an additional $1 billion from the systemwide Short Term Investment Pool (STIP) into the Total Return Investment Pool (TRIP) to increment investment earnings;
• Distribute a ii pct extraordinary payout on eligible year-end 2010-11 balances of funds surgical physical care for equally endowments (FFEs);
• Distribute a ii pct extraordinary payout on eligible year-end 2010-11 balances of truthful endowments; and
• Draw downwards equally needed from the University’s employee/retiree healthcare reserve.”
The showtime strategy is to motility $1 billion of funds from low-risk securities to higher opportunity investments. Once again, private accounts are non reached into together with taxed; instead, a part of the pooled assets are transferred. The minute ii strategies create the same matter alongside the pooled endowments together with other funds that constituent equally endowments. Finally, the 4th strategy is to take away hold coin that is beingness held for retiree healthcare together with job it for other purposes. (This concluding motility should enhance precisely about concerns since retiree healthcare is non a vested right, together with the UC plans to trim the amount of healthcare it covers for retirees yesteryear making erstwhile employees pay to a greater extent than for their healthcare.)
What is therefore interesting virtually these fiscal transactions is that they create back upwards my contestation that the academy could job grant coin or medical revenue to back upwards things similar pedagogy if it saw this equally a priority. However, from the university’s perspective, spending coin on pedagogy agency that the funds precisely disappear, but if coin is used for other purposes, they could select inwards to a greater extent than coin inwards the future.
This financialized model has been hastened yesteryear the recent nation reductions of UC funding. In fact, I believe that the governor’s latest budget conception is the worst i ever for the UC because non solely does it lock inwards a long-term reduction of nation funding, but it likewise gives the UC direction to a greater extent than leeway to job nation funds inwards whatever way that they want. While precisely about at UCOP take away hold truly applauded this novel budget equally a positive gesture, the possible $300 meg increase, which would live reduced yesteryear $200 meg if the governor’s revenue enhancement inaugural does non pass, does zero to provide funding to the 2007-8 score of $3.2 billion. Instead, the UC would teach $2.5 billion, inwards the best-case scenario, but would take away hold to take away hold on millions of dollars of debt financing.
While the UC claims that the novel budget increases nation funding yesteryear 4%, it truly should live considered to live a 20% reduction from the yesteryear high. So why has UCOP reversed course of written report together with applauded something that they ever inwards the yesteryear take away hold attacked? Moreover, if the nation increment is considered to live 4%, does that hateful that tuition volition take away hold to buy the farm upwards 12% under the conception discussed lastly September? Also, since the nation does advise using $90 meg to fund the retirement of state-supported employees, does this hateful that the UC volition take away hold to follow whatever novel nation pension restrictions? Stay tuned.
I myself did non sympathise this organization until I met alongside a high-ranking UC official to attempt to figure out how the UC was able to transfer $1 billion from the Short-Term Investment Pool (STIP) to the retirement organization (UCRS). When I asked if the direction had borrowed the coin from the dissimilar accounts that concur grant funds, operating cash, nation funds, together with tuition dollars, I was informed that I am looking at it inwards the incorrect way. I was told that I should recollect of the academy equally a bank, together with precisely similar i time yous deposit coin inwards a savings account, it does non precisely sit down there, but it is invested inwards dissimilar things. This explanation reminded me of the famous scene from It’s a Wonderful Life, where Jimmy Stewart’s graphic symbol tells the people trying to withdraw their coin that their funds are non at that topographic point because they take away hold been lent out to assistance laid upwards their neighbor’s homes together with businesses.
I am non implying hither that the UC is doing something illegal; rather, my betoken is that the academy has much to a greater extent than flexibility alongside its funds than it likes to admit. For example, lastly summer, the academy suggested to the Regents the next fiscal strategies:
“• Transfer an additional $1 billion from the systemwide Short Term Investment Pool (STIP) into the Total Return Investment Pool (TRIP) to increment investment earnings;
• Distribute a ii pct extraordinary payout on eligible year-end 2010-11 balances of funds surgical physical care for equally endowments (FFEs);
• Distribute a ii pct extraordinary payout on eligible year-end 2010-11 balances of truthful endowments; and
• Draw downwards equally needed from the University’s employee/retiree healthcare reserve.”
The showtime strategy is to motility $1 billion of funds from low-risk securities to higher opportunity investments. Once again, private accounts are non reached into together with taxed; instead, a part of the pooled assets are transferred. The minute ii strategies create the same matter alongside the pooled endowments together with other funds that constituent equally endowments. Finally, the 4th strategy is to take away hold coin that is beingness held for retiree healthcare together with job it for other purposes. (This concluding motility should enhance precisely about concerns since retiree healthcare is non a vested right, together with the UC plans to trim the amount of healthcare it covers for retirees yesteryear making erstwhile employees pay to a greater extent than for their healthcare.)
What is therefore interesting virtually these fiscal transactions is that they create back upwards my contestation that the academy could job grant coin or medical revenue to back upwards things similar pedagogy if it saw this equally a priority. However, from the university’s perspective, spending coin on pedagogy agency that the funds precisely disappear, but if coin is used for other purposes, they could select inwards to a greater extent than coin inwards the future.
This financialized model has been hastened yesteryear the recent nation reductions of UC funding. In fact, I believe that the governor’s latest budget conception is the worst i ever for the UC because non solely does it lock inwards a long-term reduction of nation funding, but it likewise gives the UC direction to a greater extent than leeway to job nation funds inwards whatever way that they want. While precisely about at UCOP take away hold truly applauded this novel budget equally a positive gesture, the possible $300 meg increase, which would live reduced yesteryear $200 meg if the governor’s revenue enhancement inaugural does non pass, does zero to provide funding to the 2007-8 score of $3.2 billion. Instead, the UC would teach $2.5 billion, inwards the best-case scenario, but would take away hold to take away hold on millions of dollars of debt financing.
While the UC claims that the novel budget increases nation funding yesteryear 4%, it truly should live considered to live a 20% reduction from the yesteryear high. So why has UCOP reversed course of written report together with applauded something that they ever inwards the yesteryear take away hold attacked? Moreover, if the nation increment is considered to live 4%, does that hateful that tuition volition take away hold to buy the farm upwards 12% under the conception discussed lastly September? Also, since the nation does advise using $90 meg to fund the retirement of state-supported employees, does this hateful that the UC volition take away hold to follow whatever novel nation pension restrictions? Stay tuned.