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Davis, California

Thursday, May 30, 2024

UC, CSU to lend money to the state

Gov. Jerry Brown signed a bill on Aug. 1 that requires University of California (UC), California State University (CSU), California Community Colleges (CCC), the Judicial Council, as well as other agencies, to invest at least $500 million into the state, with the investments exceeding no more than $10 billion. Senate Bill 79 was introduced in early January in response to the state’s economic crisis.

The CSU system will invest $700 million, while the UC system will invest $1 billion.

“We came to the conclusion that it made financial sense to invest money in the format the state has outlined,” said Chief Financial Officer of the UC system, Peter Taylor. “Our job is to maximize returns for the University of California.”

In late September, the requested agencies will deposit money through a certificate of deposit, similar to the way one would deposit money in a bank, and until April 2013 they will be able to withdraw.

“The state pursued this bill because they saw this as using the money to help strengthen the cash flow situation in the current fiscal year,” said Director of Communications for the State Treasurer Tom Dresslar. “The UCs and CSUs will earn a premium return, in which based on the rate of return, they will get a bonus.”

According to Dresslar, this bill allows both parties to benefit and will most likely be a short-term deal.

With the current condition the market is in, the state asked the UC and CSU systems, as well as other agencies, for economic assistance so that it can meet its financial demand.

“We are positioning UC money quite properly because we already have money we planned to invest anyway,” Taylor said. “Some money, like insurance reserves, we won’t be needing for a couple of years, so we can invest in it a little longer out.”

In general, the UC and CSU system already had money saved and non-allocated. They are taking it out of those investments to place into the investment stated by the bill; therefore, there is less to worry about budget cuts and tuition increases.

“It is in our best interest to make sure the state is able to maintain its cash flow,” said CSU spokesperson Mike Uhlenkamp. “This is money used for short-term investments and we are a vehicle for the state of California to maintain its cash flow.”

Initially, the UC system did not agree with the terms outlined by the state.

“At first we said ‘thanks, but no thanks’ because the state wanted funds deposited through April 2013, but we wanted to deposit through October 2012,” Taylor said. “Since the UC is constitutionally autonomous, we don’t have to put a dime in [the bill] if it doesn’t make sense.”

According to Taylor, the bill was rectified in a way that gave a win-win situation.

“This gives us an investment vehicle that diversifies risk. A key to investing, in terms of limiting risk exposure, is to make sure you are appropriately diversified.”

Senate bill 79 will lock up the agencies’ money for approximately 15 months. In the case of the UC system, they will deposit money through October 2012 and there will be an automatic renewal for six months.

“We want the state to be vibrant financially. If this investment allows them to achieve a good financial status early, then it’s good for us,” Taylor said.

CLAIRE TAN can be reached at city@theaggie.org.


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