Finance & Investment Committee 5/10/19 Board of Directors – 5/17/19 FY 2019/2020 Budget Review Finance & Investment Committee 5/10/19 Board of Directors – 5/17/19 FY 2019/2020 Budget Review

FY 2019/2020 Budget Agenda Action Items General Assumptions/Key Drivers Campus Contributions Financial Summary and Statements Operating Statements (Detailed Hand Out) Capital Expense and Funding (Hand out) Cash Flow, Liabilities and Assets Reserves Issues/Recap FY 2019/2020 Budget Review

Action Items

FY 2019/2020 Budget Action Items Seeking Approval of: FY 2019/2020 Operating Budget Operating Contribution of $308,677 Reported Net Contribution of $888,677 Individual Corporate Donations in excess of $2,500 Capital Funding FY 2019/2020 Capital Request - $821,200 FY 2018/2019 Unbudgeted Expenditures -$12,573 $26,135 FY 2017/2018 Budgeted Carryover Reserve Funding Fund Designation in the amount of $15,039,000 CalPER Unfunded Liability Options See separate Donation Sheet. - Items included in G&A and some part of contracted donations. FY 2019/2020 Budget Review

General assumptions & key activities

FY 2019/2020 Budget General Assumptions Enrollment up 2.3% per Campus Forecast Executing to contracts in place Full Occupancy rate for Housing All known rate increases accounted for Annual insurance/contribution increases of 5-8% Health Insurance, Workers Comp, PERS, Liability, etc. Labor per California Law Campus Allocations per EO-1000, Utilities General price increases in most areas FY 2019/2020 Budget Review

FY 2019/2020 Budget Key Activities - Drivers Minimum Wage and Salary Labor increase Residential Dining – 2.8% Contract Rate increase $3.2M in Campus Contributions $300K Additional Donations Textbook Sales Reduction Textbooks down Year-over-Year. Digital conversion slow Sales 17/18 $6,857,625 18/19 Fcst $6,110,119 $ 747,506 10.9% 19/20 $5,481,451 $ 628,668 10.3% $1,376,174 20.1% Aggregate FY 2019/2020 Budget Review

FY 2019/2020 Budget Key Activities Minimum Wage Administration California Minimum Wage Increase $13.00/hour on January 1,2020 (period 7) 8.3% escalation from $12.00/hour Tiered Increase for those between $13.50 - $15.50 Re-baseline hourly Salary Grades Estimated 6% increase California Salary Exempt Law – 1/1/20 2X Minimum Wage - $54,080 FY 2019-2020 Budget Overview

FY 2019/2020 Budget Key Activities – Labor Impact $350K+ Minimum Wage Impact Affects All Students and Part Time/Temp employees $150K - 3% Salaried Pool Increase planned Salaried and Full Time Hourly Minimum Wage to $12.00 Escalation in future years. Jan 19 =$12.00 - Student Labor - $3,550,000 (295K hours @$12) 3% - Employee Key Staffing – IT tech but no Accounting Manager Replacement FY 2018/2019 Budget Review

FY 2019/2020 Budget Key Activities – Other Financial $142,400 - Outpost Bond Interest Expense Plus $90,000 Principal Estimated 3.5% Investment Return $400K Incentive Comp placeholder in G&A PERS Minimum Unfunded Liability Payment $441,024 Due July 2019 (Balance Sheet only) $450K investment $400K IC placeholder Post Retirement Liability projection will take its course FY 2019/2020 Budget Review

Campus CONTRIBUTIONS Allocated through out)

FY 2019-2020 Budget Campus Contribution Summary FY 2019/2020 Budget Review

Campus Contributions Donations & Partnership Detail FY 2019/2020 Budget Review

Campus Contributions Reimbursed Services & Capital FY 2019/2020 Budget Review

Financial summary and division OPERATING STATEMENTS (see Hand out)

FY 2019/2020 Budget Summary Operating Statement Forecast is based on March YTD Actuals and remaining budget w/adjustments Key activities include Min Wage increase Residential Dining Plan changes Flat enrollment Give/take investment differences Amazon Locker Program Physical Inventory slated for June Sales Forecast assumes consistent enrollment with ongoing business for Bookstore, C-Store/Cash food, 100%? Residential at 2,555 New contract with no price increase Declining Balance Plan eliminated: will pick back up some sales Limited Summer Residency programs Computer Store optimistic but minimum margin impact Textbooks in year-over-year decline Starbuck up for relicensing ID Card Pass Thru – No changes anticipated Margin Challenges Minimum wage impact on market Escalating wholesale Price Increase i.e. Food eroding margins Competition/Technology transition within Bookstore No pricing increase on Res Hall plan EXPENSE Minimum Wage Impact - Minimum/none Staffing replacement 2% labor pool increase - Beach on 2nd St continued Rent/Management reduction - Depreciation uptick due to major projects (Amazon, Accounting, Cameras). Pending Starbucks, Outpost Patio C&R Grad Merchandise Print Shop Management FY 2019/2020 Budget Review

FY 2019/2020 Budget Operating Statement Trend Forecast is based on March YTD Actuals and remaining budget w/adjustments Key activities include Min Wage increase Residential Dining Plan changes Flat enrollment Give/take investment differences Amazon Locker Program Physical Inventory slated for June Sales Forecast assumes consistent enrollment with ongoing business for Bookstore, C-Store/Cash food, 100%? Residential at 2,555 New contract with no price increase Declining Balance Plan eliminated: will pick back up some sales Limited Summer Residency programs Computer Store optimistic but minimum margin impact Textbooks in year-over-year decline Starbuck up for relicensing ID Card Pass Thru – No changes anticipated Margin Challenges Minimum wage impact on market Escalating wholesale Price Increase i.e. Food eroding margins Competition/Technology transition within Bookstore No pricing increase on Res Hall plan EXPENSE Minimum Wage Impact - Minimum/none Staffing replacement 2% labor pool increase - Beach on 2nd St continued Rent/Management reduction - Depreciation uptick due to major projects (Amazon, Accounting, Cameras). Pending Starbucks, Outpost Patio C&R Grad Merchandise Print Shop Management FY 2019/2020 Budget Review

FY 2019/2020 Budget Divisional Operating Statement Forecast based on March Actuals w/ PERS adjustments. Budget projection optimistic given Res Dining volume decline. Revised Division to match future reporting Separated C-Store from Bookstore – Moved to Retail Dining Director Combined Computer Store with Bookstore – Staffing synergy Reporting Retail Dining and Residential Dining separately FY 2019/2020 Budget Review

FY 2019/2020 Budget General & Administrative (G&A) Contains Corporate Donations of $513,190 Approval Action for items >$2,500 (See detail) Include Japanese Garden & HFHM Chair Contains Employee & Retiree Related Expense $400,000 Incentive place holder (inclusive of tax) $481,300 Medical Retiree Health Premiums EO-1000 Campus increase. VP allocations costs IT Port cost increase plus email, new Switches, and Network charges. Camera depreciation Ongoing benefit cost increase - Includes Herff-Jones Pass thru HR/IT/Accounting running lean with openings No Accounting Manager replacement FY 2019/2020 Budget Review

FY 2019/2020 Budget Corporate Donations Approval Required >$2,500@ Japanese Garden one time SMIF approved by BOD 4/20/18 -Excludes Textbook Scholarship Pass Thru Funds Herrf-Jones, US Foods The Rest of monies raised is directly paid to Foundation All Other Donations in the $25-$1,500 Range Jewels of the night, HFHM, Athletics, Alumni, Relay for Life, etc. $97,500 Coke Sponsorship included in Athletics Contract $134,808 Meal Plan donation – National Merit/Faculty in Residence Part of Residential Dining Contract FY 2019/2020 Budget Review

FY 2019/2020 Budget Bookstore/Computer Store Sales Flat from Current Forecast at $14.9M Traditional Textbook Sales down 10% $5,481,451 Compared to $6,110,119 this year Anticipated D1DA Digital Growth of $100K Retail and Gradfair $’s increasing Other Revenue Activities Campus Print Shop Management Amazon Locker Cal Maritime Support Printshop EO-1000 , $145K Amazon 5 year plan Facilities cost/compliance eroding anticipated revenues $175K , Depreciation $137K. Credit Card processing affiliated with specific POS Limited selection with who to go with FY 2019/2020 Budget Review

FY 2019/2020 Budget Retail Food Sales Retail Dining/C-Stores Sales Flat at $10.8M Incremental 4% growth over this year Down from FY18/19 Budget Business Remains Price/Cost Challenged Large percentage of Minimum wage employees High Credit Card fees and Facilities Cost Completed Inventory System Implementation Starbucks Remodeled – New Depreciation Japanese Garden - new Business in Flux Not Budgeted Market is limited but saturated FY 2019/2020 Budget Review

FY 2019/2020 Budget Residential Dining 2.8% Meal Plan increase per Contract Based on Higher Education Pricing Index (HEPI) Anticipate continued full Res Hall occupancy Planned Occupancy of 2,550 Residents 2,600 Fall/2,500 Spring Campus Contributions $899,591- Housing Commission $134,808K - Meal Donations Anticipated full occupancy around 2,550 Ave 2018 Fall/2019 Spring 2,552/2,502 Standard Pay. 2651/2601 Total Large staffing of min wage employees - Shops Contributes Faculty (12) and NM (14) Scholar Plans (up to) FY 2019/2020 Budget Review

FY 2019/2020 Budget Residential Dining Plan Rates New Agreement - Declining Balance Eliminated after 16/17 - Similar Flex Offering - Large staffing of min wage employees - Shops Contributes Faculty (12) and NM (14) Scholar Plans (up to) FY 2019/2020 Budget Review

FY 2019/2020 Budget Division 5-ID Card Office Pass-Through program to Campus No P&L Impact Blackboard Contract renewal through CO Current Year Billing still Pending Relocating Server to Campus ITS Moving to Campus Domain Business Continuity/Disaster Recovery Expanded use for Laundry & Door Locks FY 2019/2020 Budget Review

CAPITAL FUNDING APPROVAL REQUIRED (See Hand out)

FY 2019/2020 Budget Capital Summary FY 2019/2020 Budget Review

FY 2019/2020 Budget FY2018/2019 Capital Status Action Item – Approval Required Unbudgeted item(s) - $12,573 (to be expensed) Carry Over - $26,135 (Reference only) Current Year Planned Expenditures of $443K Anticipate $7K balance for the year Major Projects Library Starbucks Completed UDP Starbucks Interim refresh UDP Sewer Emergency Repair Bookstore A/C Deferred - No breakdown - See memos FY 2019/2020 Budget Review

FY 2019/2020 Budget Capital Funding Request ACTION ITEM Requesting Capital funds of $821,200 Approval Required* See Memo (detail) Mid Level Projects planned Contingencies for UDP Repair Elevator Retrofit Japanese Garden treated as donation See Memo FY 2019/2020 Budget Review

Cash flow, assets and liabilities

FY 2019/2020 Budget Cash Flow Projecting Positive Cash flow - $640,929 3.5% Net Investment return factored in Conservative Capital budget Capital Investment less than Depreciation Ongoing PERS Unfunded Liability Payments $441,024 due July 2019 – Per Actuarial Outpost Bond Principal & Interest ($232,400) $90,000 Debt Payment $142,400 Interest (In Operating Statement) FAS 106 Audit in process for year-end FY 2019/2020 Budget Review

FY 2019/2020 Budget FYE Cash Flow Projection Cash flow Anticipated subject to Capital Spending FY 2019/2020 Budget Review

FY 2019/2020 Budget Cash/Investment Balance Trend Cash/Investments benefitting from Investments - Excludes VEBA – Off Balance sheet FY 2019/2020 Budget Review

FY 2019/2020 Budget Long Term Liabilities Long Term Liabilities of $11,963,785 (6/19 Est) Anticipated Reduction PERS Unfunded Liability - $5,964,920 $441,024 Payment required in July 2019 Moving to 20 Year Pay Down Terms (See PERS report) SRB Principal (Outpost) -$3,280,957 FY2019/2020 pay down $90K Remaining Term to 2039 Medical Post Retirement liability past its peak Currently at $2,717,908 VEBA Funding Plan Mitigating This Exposure Long Term Bond is $3.3M FY 2019/2020 Budget Review

FY2019/2020 Budget Long Term Liabilities Post Retirement Liability will be abated by VEBA long term PERS moving to a 20 year pay down schedule with an assumed 7% rate FY 2019/2020 Budget Review

FY2019/2020 Budget Long Term Liabilities FY 2019/2020 Budget Review

FY 2019/2020 Budget VEBA Trust Status Board Approved $4M investment - 2010 Funding complete per plan Initial Plan assumed $5.3M balance after 7 Years Medical Costs have outpaced inflation Actuarial assessment has us a year out Current YE Balance estimated $5,550K Projected FY19/20 holdings of $5,788K FAS 106 Audit in process for year-end FY 2019/2020 Budget Review

FY2019/2020 Budget VEBA Trend Post Retirement Liability will be abated by VEBA long term Dollar Cost Ave but offset by lower returns FY 2019/2020 Budget Review

FY2019/2020 Budget Long Term Assets and Liabilities Comparison Outpost & Starbucks FAS106 Retiree Medical PERS GASB68 Reserve Plan VEBA Set Up Bookstore Bond Paid off Investment Portfolio Addressed Key Liabilities Excludes Short Term Liabilities No Reserves against long term facility needs Operating leveraged mode PERS Liability at 7% Discount Rate Need to set aside reserves for rebuilding FY 2019/2020 Budget Review

Cash Designation & Funding Reserves

FY2019/2020 Budget Reserve Planning Per Reserve Policy accommodations needed for: Working Capital Annual Capital Replacement and Major Maintenance Post-Retirement Medical CalPERS Unfunded Liability New Projects/Other Accounting Standards Update – ASU 2016-14 “Designating” funds for existing liabilities and future needs Liquidity Reporting See Policy for Controller reporting requirements and thresholds. Working Capital targeted at 8% of Operating expenses including G&A FY 2019/2020 Budget Review

FY2019/2020 Budget Reserve Planning(Cont’d) Adequate funds on hand for Midterm Support Planned Positive Cash Flow PERS Unfunded Liability largest debt/risk Accrued Interest exceeds Operating ROI VEBA funding (Off Balance Sheet) Mitigates Long Term Retiree Medical Liability Assumes no additional investment No Facility Set Aside Funding in Place See Policy for Controller reporting requirements and thresholds. Working Capital targeted at 8% of expenses = $2.7M Reserve Funding Opportunities are: Beach Card – Student funds Alumni Center/Catering Kitchen Designate/Grow funds for early Bond payoff – 2 year assessment Pay down PERS Unfunded Liability Develop long term plan for UDP Renovation FY 2019/2020 Budget Review

FY 2019/2020 Budget Reserve Recommendation Recommend That Monies be Designated as Assets Without Donor Restrictions in the amount of $15,039,000 $10,339,000 - Priority 1 Committed and Incurred Liability Non-Asset backed Liabilities $4,700,000 - Priority 2 Incurred Liability & Asset Backed Designation subject to Holdings Limit No available funds for Priority 3 Estimated $35M for Future Repair/Replacement FY 2019/2020 Budget Review

FY 2019/2020 Budget Reserve Designations Approval Required FY 2019/2020 Budget Review

FY 2019/2020 Budget Reserve Matrix Build up Per Reserve Policy definitions/Requirements we’ve satisfied the need for Operating Statement items. Beach Club Deposits $350K$650K. Paying as we go for all: Facilities/Capital Replacement & Major Repair Funding accommodated through depreciation Vacation/Holiday payout - Unrestricted. Ongoing accrual/Pay-out Unemployment Insurance (UIT) held with CSURMA Post Medical current year premiums being paid through Operating Statement - Overall liability is being addressed through VEBA and future returns on investment. SMIF held at Wells Fargo already in a separate account – Not restricted or designated but isolated FY 2019/2020 Budget Review

FY 2019/2020 Budget Reserve Designations Future Consideration FY 2019/2020 Budget Review

FY2019/2020 Budget CalPERS Actuarial Update Unfunded Accrued Liability (UAL) - $5,964,920 Legacy employee participant plan Shrinking participant funding pool ongoing CalPERS GASB 68 Publications – March 2019 Miscellaneous Risk Pool Measurement update Measurement Date of June 30, 2018 Baselines Liabilities and Assets for YE June 2019 Public Agency Schedules Employer Allocation for Components of Net Pension Liability FY 2019/2020 Budget Review

FY2019/2020 Budget PERS Liability Reduction Annual payments increasing to $700K $441,024 – July 2019, $687,000 – July 2024 Current schedule incurs $6.2M in interest Discount rate of 7% See Backup Slides 56-57 CalPERS adopting a 20 year minimum schedule Recommend a Pay-down Plan similar to VEBA FY 2019/2020 Budget Review

FY 2019/2020 Budget CalPERS UAL Funding Action For BOD Submittal Proposing Several Funding profiles Annual amounts are above and beyond the Mandated Annual Employer Contributions (Slide 56) Considers $441,024 Payment Due July 2019 UAL Pay-Down Options $1M Initial Payment - $500K/Year for 7 years $2M down, $500K for 6 years (Recommended) $3M down, $500K for 3 years Actuarial Will Address Ongoing Status FY 2019/2020 Budget Review

Issues and concerns

FY 2019/2020 Budget Issues and Concerns Ongoing Wage and Compliance Impact CA minimum wage trend to $15/hour by 2022 Retail Foods Limited growth opportunity Market Saturation prevails without a Master Food Plan Textbook Sales/Digital Transition Campus effort to increase Sell-Thru Aging Facilities/High Maintenance Costs Major Capital/Repair Costs Pending with no ROI No Reserves Available to Fund PERS based on optimistic fund returns FY 2019/2020 Budget Review

FY 2019/2020 Budget Issues and Concerns (Cont’d) Credit Card fees Consider Minimum $ Charge or Beach Card option PERS unfunded liability and Investment Rate What is the right amount of Campus Donations and to whom? Desired Reserves in excess of Funds PERS based on optimistic fund returns FY 2019/2020 Budget Review

FY 2019/2020 Budget Summary Wrap-up Good Financial shape heading into FY2019/20 Adequate funding and reserves in place Short Term Positive Cash Flow anticipated Continued Shift in Product Lines Challenging but Realistic targets set Accounted for Labor increases and Contract Rates FY 2019/2020 Budget Review

Hidden Presentation Slides Back Up Files Hidden Presentation Slides FY 2019/2020 Budget Review

FY 2019/2020 Budget Financial Details (Hand-outs) Financial Detail Back-up Hidden Slides for Audit Back-up See Hand Outs FY2019/2020 Annual Operating Statements History and Forecast by Division FY2019/2020 Additional Capital Expenditure Memo FY2019/2020 Capital Budget Request Enrollment History PERS Liability Payment Table Extract Do FY 2019/2020 Budget Review

CSULB Enrollment Done 2019-2020 Budget Overview

PERS Unfunded Liability Funding (Excludes PEPRA) Done FY 2019/2020 Budget Review

PERS Unfunded Liability Payment Done FY 2019/2020 Budget Review