1. Financial Analysis of California State University, Maritime Howard Bunsis Professor of Accounting, Eastern Michigan University Chair, AAUP Collective Bargaining Congress March 2014 1

2. 2 Financial Condition of Cal Maritime – Ratio Analysis

3. Three main topics: CMA is financially in very good shape looking at reserves, cash flows and revenues In spite of that, they are spending their money on things other than instruction and faculty. CMA has enough money for equity 3, increase in cruise salaries, increase in international program salaries, putting money into ship’s ventilation system, and other items.

4. Cal Maritime Net Asset Detail Source: CSU Audited Financial Statements 4 The first two categories of net assets do not tell us anything about the financial health or flexibility of CSUM The latter two categories – expendable and unrestricted, tell us something, as they are the two components of reserves

5. Cal Maritime Reserves Source: CSU Audited financial Statements 5

6. Cal Maritime Reserves in Context 6 For reserves, we need context: How large is $24.8 Million? We compare reserves to total expenses, creating the primary reserve ratio, which is defined as reserves over total expenses. Total expenses is a proxy for the size of the university The increase from 2012 to 2013 was due to increase in funds for the capital PA project Many also analyze the ratio using just unrestricted reserves in the numerator, which the last row reports What is a good primary reserve ratio? See next slide Furlough Period 2009-10

7. Primary Reserve Ratio in Context 7

8. Data Behind Cash Flows Sources: CSU Audited Statements and IPEDS 8

9. Cash Flow Ratio in Context 9

10. Discussion of Cash Flows The two strongest factors in concluding that Cal Maritime is in strong financial position are the reserves and cash flows. Operating cash flows considers: – All cash in, from the state, tuition, grants, contracts, – Less all cash out, to employees, benefits, vendors, utilities In 2013, CSUM had over $7.3 million in operating cash flows; this is a large surplus in the context of the size of the institution. In years prior to 2012, cash flows have been strong as well. The down year was 2009, which is expected. The method used to estimate cash flows in 2009 and 2011 was very conservative, and likely under-estimated operating cash flows in those years. Bottom line: The administration is generating significant excess operating cash flows every year, and we will see that the small amount of additional compensation requested for TSGB is well within the surpluses being generated. 10

11. What Do We Learn from the Ratios? The ratios tell us that up through 2013, Cal Maritime is in solid financial condition – and in better condition than the CSU System as a whole. This conclusion is based on solid reserves and very strong cash flows. Does this mean the administration should spend the reserves? No. Reserves are there for a rainy day, and there is a minimum level of reserves that should be kept (primary reserve ratio of 20%). Still, any claims that there is no money, or that we must make future cuts, are dubious at best. We will soon analyze what is happening going forward; but there definitely are sufficient resources for new projects and initiatives, as well as additional compensation for TSGB activities 11

12. 12 Cal Maritime Revenue Analysis

13. Total Cal Maritime Revenues Over Time Source: CSU Audited Financial Statements 13 Large increase in 2013 was mostly due to a large increase in tuition revenue

14. Percentage Change in State Appropriation: CSU System vs. Cal Maritime Source: CSU Audited Financial Statements 14 The changes for the entire system were more negative than for CSUM Over the long term (2008 to 2013), the change for Maritime is actually positive, versus -30% for the system as a whole

15. 15 Priorities of the Administration: Are They Being True to the Core Academic Mission?

16. CSUM Expense Distribution Source: OUS Audited Financial Statements 16 Not even $1 of every $3 goes to instruction The percent devoted to instruction has gone down over time, including a large drop from 2012 to 2013

17. Cal Maritime Total Salaries and Benefits in Context: Source: IPEDS (Integrated Postsecondary Education Data System of the US Dept. of Education) IPEDS data is only available through 2012 17 For Cal Maritime, personnel costs are 53% of total expenses, down from 63% just 5 years ago There has been a much larger increase in benefits costs than in salary costs

18. Comparison of Top CSUM Administrative Salaries Over Time Source: http://www.sacbee.com/statepay/#req=employee%2Ftop%2Fyear%3D2013 18 In 2012, 13 administrators made more than $100,000 (the number would likely have been 15 if positions were filled all year) In 2013, 18 administrators made more than $100,000

19. Number of Employees, FTE Basis Source: http://www.calstate.edu/budget/final-budget-summaries/ 19 Number of management employees over the number of academic employees. We will compare this to the other CSU institutions It is not appropriate that this ratio is increasing over time

20. Enrollment Details: By Major 07-13 Source: hJp://www.csum.edu/web/registrar/enrollmentp://www.c.edu/web/rgistrar/enrollment 20 Fall 2007Fall 2008Fall 2009Fall 2010Fall 2011Fall 2012Fall 2013 Business Administration 836768101116137142 Facilities Engineering Tech 34292517222947 Global Studies & Maritime Aff 77107102112102112127 Marine Engineering Technology 157141155166165199193 Marine Transportation 310331328324318312323 Mechanical Engineering H License Track 131135144114133155206 Mechanical Engineering H Unlicense Track 0002131 7 Undeclared 35112211 Undeclared (Cruise) 06500000 Total 8278768238578899761,046 Changes, Fall 2007 to Fall 2013 NumberPercent % of Total, Fall 13 Business Administration 5971% 14% Marine Transportation is the largest major ME grew largest in # Business grew largest in % Facilities Engineering Tech 1338% 4% Global Studies & Maritime Aff 5065% 12% Marine Engineering Technology 3623% 18% Marine Transportation 134% 31% Mechanical Engineering H License Track 7557% 20% All Other (27) 1% Total Change From 2007 to 2013 219+26%

21. Instructional Salaries and Benefits Compared to Total Expenses per IPEDS That is right: Only 19.6 cents of every dollar goes to pay people who teach class When the 2013 IPEDS data gets reported in April of 2014. we will see if this 19.6% actually got lower 21 20082009201020112012 Instruction Salaries + Benefits 8,577,5058,527,5087,786,0248,998,1958,174,271 Total Cal Maritime Expenses 32,344,93335,056,84234,398,50640,485,66241,755,000 Instruction Salaries + Benefits as a % of Total Cal Maritime Expenses 26.5%24.3%22.6%22.2%19.6%

22. Percentage Change in the Number of Employees by Category: 2007-08 to 2013-14 Source: http://www.calstate.edu/budget/final-budget-summaries/ 22

23. Ratio of Management Employees to Academic Employees, All CSU Institutions Source: http://www.calstate.edu/budget/final-budget-summaries/ 23

24. Data For Ratio of Management Employees to Academic Employees Source: http://www.calstate.edu/budget/final-budget-summaries/ 24 Maritime is by far the smallest institution, and the ratio is going to be higher However, the number of upper level administrators seems high even for the size of Maritime; Stanislaus has only 16 more admins, but has 325 more academic instructors

25. Cal Maritime 2013 Faculty Salaries vs. Peers- Levels Sources: AAUP Salary Survey and IPEDS 25 Very few of the comparable institutions reported instructor and lecturer salaries; historically, that data has not been reliable, as different institutions use different definitions for those categories Ferris State and Galveston data is for the entire university

26. Cal Maritime Faculty Salaries vs. Peers - Changes from 2008 to 2013 Sources: AAUP Salary Survey and IPEDS 26

27. Discussion of Faculty Salaries In terms of levels, salaries for Cal Maritime faculty have not increased much over time. The associate professor salary in 2008 may be high, but Associates has not seen large increases over the last few years In terms of peers, Cal Maritime faculty are now middle of the pack, after having been significantly ahead of these peers just a few years ago. Given the cost of living in this area, and general inflation, faculty salaries have not done well over the last several years In general, efforts should be made to move faculty salaries to an appropriate place versus peers, and consider the cost of living generally and the cost of living in California versus other states. The resources exist for this to happen. 27

28. See The Report www.calfac.org\calmaritime

29. Conclusions 29 Priorities of the Administration Appropriation and enrollment in 2014 and 2015 are up for the CSU System, and state tax revenues are higher Despite a huge decline in the state appropriation, reserves and cash flows are very solid. Any claim of financial hardship are not supported by the evidence – CSUM is NOT BROKE! The number of Cal Maritime administrators has increased, especially when compared to faculty Pay for faculty is lagging peers The Financial Condition of CSU System and the State of CA Financial Condition of Cal Maritime