Year In Review February 24, 2010 Roger L. Anderson Executive - PowerPoint PPT Presentation

Year In Review February 24, 2010 Roger L. Anderson Executive Director NJEFA Building Futures for New Jersey and its Higher Education Community

Events of 2008 • Lehman files for bankruptcy • First African-American • Bank of America agrees to President elected • JP Morgan and Fed buy Merrill Lynch bail out Bear Stearns • Goldman and Morgan • Moody’s assigns • US places Fannie Mae and Stanley convert to bank negative outlook Freddie Mac into conservatorship • Bond Insurer holding companies to US higher downgrades begin education for • US Government • Wells Fargo agrees first time takes over IndyMac to buy Wachovia Oct 08 Dec 08 Jan 08 Mar 08 May 08 July 08 Sep 08 Feb 08 April 08 Aug 08 • Reserve Fund Jun 08 Nov 08 Jan 09 “breaks the buck” • Fed forces AIG • Dawn of US • $700 Billion into liquidation recession • UBS exits municipal federal rescue securities business • Washington Mutual is taken plan approved over by JPMorgan Chase • Auction-Rate securities • Commonfund ST Fund market collapses closed by Wachovia Source: Public Financial Management, Inc.

2009 Transactions Public Institutions • Montclair State University $27,545,000 • University of Medicine and Dentistry of NJ $258,075,000 • Kean University $179,380,000 Private Institutions • Princeton Theological Seminary $14,435,000 • Seton Hall University (2 transactions) $11,326,289

Montclair State University Clove Road Residence Source: Montclair State University

National Municipal Bond Volume Source: Thomson Financial

Higher Education Volume 40,000,000 35,000,000 30,000,000 ($000) 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Sources: Public Financial Management, Inc.; The Bond Buyer

NJEFA Issuance Overview By Par Amount By Number of Issues (in Million $) * Includes transactions issued to date in 2010

Financing Calendar - 2010 Completed: The College of New Jersey 1/14/2010 $44,500,000 – academic building Princeton University 1/28/2010 $250,000,000 – several projects Princeton Theological Seminary 2/11/2010 $68,785,000 – student housing Pending: Passaic County Community College March 2010 $11.5 million – academic building New Jersey City University May 2010 $40 million – renovations, improvements and refunding Drew University TBD $10 million – refunding and various capital improvements

Results 9 Restructurings Closed • 6 selected fixed-rate refundings • 1 wrapped existing VRDBs with a LOC • 1 did a letter of credit refunding • 1 combination put bond and fixed-rate bonds refunding

Market Comparisons 12/31/2007 12/31/2008 12/31/2009 13,264.82 8,776.39 10,428.05 Dow Jones 5.0% 7.4% 10.0% Unemployment Rate Home Price Index 200.67 162.09 158.49 (Case Shiller) 86.11 60.94 80.02 Oil 4.02% 2.21% 3.84% Treasury 10yr 4.32 5.04 4.15 MMD 30yr 3.42 0.90 0.25 SIFMA Source: Bloomberg Financial

Annual Endowment Investment Returns % 2 5 % 2 0 % 2 0 % 1 8 % 1 7 % 1 7 % 1 5 % 1 5 % 1 6 % 1 3 % 1 1 % 1 1 % 1 0 % 9 % 5 % 3 % 0 % 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 -4 % -3 % -5 % -6 % -1 0 % -1 5 % -1 9 % -2 0 % -2 5 % Source: Moody’s Investors Service; NACUBO Endowment Study

Largest Endowments Most Immediately Affected 10 50% 9 8.7 40% 8 40% 7 6 30% 5 19% 4 20% 3.7 3 9% 2 10% 5% 1.7 1 0.7 0 0% Aaa Aa A Baa Expendable Financial Resources to Debt (Left scale) Endow ment Spending as % of Operating Revenue (Right scale) Source: Moody’s Investors Service

Endowment and Gift Performance $30,000 30% Moody's 20% $25,000 Estimated FY 2009 YTD 10% $20,000 0% $15,000 -10% $10,000 -20% $5,000 -30% $0 -40% 9 0 1 2 3 4 5 6 7 8 9 0 9 0 0 0 0 0 0 0 0 0 9 0 0 0 0 0 0 0 0 0 0 2 1 2 2 2 2 2 2 2 2 2 Y Y Y Y Y Y Y Y Y Y D F F F F F F F F F F T Y Median Gift Revenue (Large) Median Gift Revenue (Small) NACUBO Endowment Return (Left scale) (Right scale) (Left scale) * Moody’s rated institutions Source: Moody’s Investors Service

State Expenditures Fall Nationally Source: Moody’s Investors Service

Moody’s US Higher Education Outlook - 2009 Critical Risk Factors • Increased pressure on tuition and financial aid • Impact of investment losses on operations and philanthropy • Illiquidity of balance sheets • Volatility of debt markets and debt structures Source: Moody’s Investors Service

Short Term Pressures Ease • Management action helps soften credit/financial impact • Budget reductions • Base budgets, furloughs, layoffs, early retirement packages • Capital spending cuts and delays Source: Moody’s Investors Service

American Recovery and Reinvestment Act • State Fiscal Stabilization Fund • NJ’s share - $1.3 billion to restore state aid to school districts and public colleges and universities

American Recovery and Reinvestment Act • College Affordability Spending - $31 billion • Pell Grant program - $17 billion • Federal Work-Study program - $200 million • American Opportunity Tax Credit - $13.8 billion • Research Funding Through Federal Agencies - $16 billion • National Institutes of Health - $10 billion • National Science Foundation - $3 billion • Energy Department - $2 billion

Build America Bonds • 35% Federal interest subsidy on taxable bonds for governmental issuers • 100% of bond proceeds must go to new projects • Authorization expires December 31, 2010

“In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a pathway to opportunity – it is a pre-requisite.” Address to the Joint Session of Congress of the United States of America President Barack Obama February 24, 2009

Long-Term Challenges � Excellence � Capacity � Affordability

“When the nation and the world emerge from this recession, the competitive knowledge-based global economy will continue to demand more college-educated workers.” “The Challenge to States: Preserving College Access and Affordability in a Time of Crisis” The National Center for Public Policy and Higher Education March 2009

4 Pillars of the Knowledge Economy Pillar Indicator Economic and institutional regime • Tariff and non-tariff barriers • Regulatory quality • Rule of law Education and skill of population • Adult literacy rate • Gross secondary enrollment rate • Gross tertiary enrollment rate Information infrastructure • Telephones per 1,000 people • Computers per 1,000 people • Internet users per 1,000 people Innovation system • Royalty payments and receipts, US$ per person • Technical journal articles per million people • Patents granted to nationals by the U.S. Patent and Trademark Office per million people Source: World Bank

Current Economic Performance U.S. Source: World Bank

“Higher Education goes hand in hand with NJ’s long-term economic viability. Giving our students and workers the skills they need to be competitive in today’s emerging industries will ensure both New Jersey’s economic growth and job creation.” “Stopping the Brain Drain: Connecting Higher Education with New Industry” Christie for Governor July 28, 2009

College Participation U.S. population of 18-24 year olds 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 7 0 3 6 9 2 5 8 1 4 7 0 3 6 9 6 7 7 7 7 8 8 8 9 9 0 0 0 9 9 9 9 9 9 9 9 9 9 9 0 0 0 1 1 1 1 1 1 1 1 1 1 1 2 2 2 Percent Enrolled in College Source: U.S. Census Bureau, 2006

Steady Demand for College Actual and Projected NJ High School Graduates Sources: NJ Association of State Colleges and Universities; National Center for Education Statistics, September 2008

NJ Enrollment: Degrees Conferred 2000-2009 Total Degrees/ Total Enrollments Certificates 2000 335,930 52,579 2001 346,277 53,205 2002 361,757 55,866 2003 372,696 58,277 2004 379,447 61,428 379,686 64,007 2005 2006 385,612 65,105 2007 398,169 66,364 410,193 69,357 2008 2009* 429,871 71,749 93,941 19,170 Cumulative Increase (27.96%) (36.45%) * Preliminary Total Enrollment Source: New Jersey Commission on Higher Education

Education, Earnings and Tax Payments Sources: The College Board; U.S. Census Bureau, 2006; Internal Revenue Service, 2006; McIntyre et al., 2003

Responding to Demand Capacity – New Jersey Trails States with Similar Populations Sources: NJ Association of State Colleges and Universities; 2008-2009 Chronicle of Higher Education Almanac

NJEFA Financing Expansion 2000-2009 4,000 3,500 3,000 $1,943,055,000 (Millions) $1,428,965,891 2,500 2,000 1,500 $1,832,747,745 $1,941,964,040 1,000 $416,230,000 500 $773,625,000 0 Public Institutions Private Institutions State-Supported Programs New Money Refunding