ML18179A506

Mcclellan Nuclear Research Center Financial Qualification Report University of California Davis

ML18179A506
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Site:	University of California-Davis
Issue date:	06/06/2018
From:	McClellan Nuclear Research Center
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MCCLELLAN NUCLEAR RESEARCH CENTER FINANCIAL QUALIFICATION REPORT UNIVERSITY OF CALIFORNIA DAVIS LICENSE No. R-130 DOCKET No. 50-607 June 6th 2018 1

Contents

1. Introduction ..................................................................................................................................... 3

2. Annual Funding and Operating Expenditures .................................................................................. 3

3. Decommissioning Report ................................................................................................................. 4 3.1. Decommissioning Cost Estimate ...................................................................................... 4 3.1.1. UCD/MNRC Decommissioning Cost as based on 2015 Dade Moeller Study................. 4 3.1.2. Comparison with Recent Representative Decommissioning Projects............................4 3.1.3. Discussion of Costs ........................................................................................................ 5 3.1.4. 2018 UCD/MNRC Reactor Decommissioning Estimate: ................................................ 6 3.2. Funding Method ............................................................................................................................7 3.3. Adjustment of Decommissioning Cost Estimate ............................................................................7

4. References ........................................................................................................................................ 8 University of California Annual Financial Report 2017 Statement of Intent (SOI) Regarding Decommissioning Funding for the UC Davis McClellan Nuclear Research Center and 2.0 MW TRIGA Reactor Delegations of Authority 2

1. INTRODUCTION This Financial Qualifications Report is submitted pursuant to the requirements of 10 CFR 50.33, 10CFR 50.71, and 10 CFR 50.75. Pursuant to 10 CFR 50.33(f)(2), none of the provisions of 10 CFR 50.33(d) apply.

The applicant is a government institution of the State of California. Pursuant to 10 CFR50.71(b), a copy of the most recent financial statement for University of California Davis is appended to this report.

Please reference Attachment 1, University of California Davis Annual Financial Report 2017.

2. ANNUAL FUNDING AND OPERATING EXPENDITURES Pursuant to 10 CFR 50.33(f)(2), the estimated annual funding (Sources) and expenditures (Uses) for the first 5-year period after the projected license renewal are given in Table 1. As indicated below, the projected annual sources and uses levels are equal.

1 Table 1-McClellan Nuclear Research Center Projected Annual Sources and Uses Percent SOURCES & USES OF FUNDS 2018-19 2019-20 2020-21 2021-22 2022-23 Change Sources Indirect Cost Recovery $ 30,000 $ 35,000 $ 3,000 $ 3,000 $ 3,000 0.0%

Contracts & Grants $ 250,000 $ 250,000 $ - $ - $ - n/a Self Supporting Activities - Income & Recharges $ 410,000 $ 420,000 $ 430,000 $ 440,000 $ 450,000 2.3%

University Augmented Resources:

Gifts & Endowment $ 776,000 $ 800,000 $ 824,000 $ 849,000 $ 874,500 3.0%

Other Fund Types $ 170,000 $ 173,000 $ 170,000 $ 170,000 $ 170,000 0.0%

Total Sources $ 1,636,000 $ 1,678,000 $ 1,427,000 $ 1,462,000 $ 1,497,500 2.4%

Uses Personnel $ 986,000 $ 1,016,000 $ 1,047,000 $ 1,079,000 $ 1,111,500 3.0%

Operating and F&A Cost $ 400,000 $ 412,000 $ 380,000 $ 383,000 $ 386,000 0.8%

Contracts & Grants $ 250,000 $ 250,000 $ - $ - $ - n/a Total Sources of Funds $ 1,636,000 $ 1,678,000 $ 1,427,000 $ 1,462,000 $ 1,497,500 2.4%

1 Personnel budget estimate includes salaries and wages for all facility administrative, reactor operators and research staff, and graduate students.

Bases and Assumptions:

A. Budget figures above represent fiscal year projections (July 1st thru June 30th) over a 5-year period with projected increases estimated at 2.4% annual rate of inflation.

B. Funding and expenditures for research development and experimental capabilities has been included in these budget estimates.

3

3. DECOMMISSIONING REPORT Pursuant to 10 CFR 50.33(k) and 10 CFR 50.75(d), the following is a decommissioning report containing the following:

1) Cost estimate for facility decommissioning.

2) Indication of method used to provide funding assurance for decommissioning.

3) A means of periodically adjusting the cost estimate and associated funding level over the life of the facility.

3.1. Decommissioning Cost Estimate 3.1.1. UCD/MNRC Decommissioning Cost based on 2015 Dade Moeller Study A study was conducted in 2015 for the University of California Davis by Dade Moeller and Associates.

This study largely derived its cost estimate based on modifying individual line item costs of the University of Illinois Urbana-Champlain (UIUC) TRIGA reactor decommissioning. This was done as the UIUC reactor was one of the most recent TRIGA reactors of comparable maximum power rating to the UCD/MNRC reactor.

3.1.2. Comparison with Recent Representative Decommissioning Projects Per NUREG 1537 Part 1 Guideline for Preparing and Reviewing Applications for the Licensing if Non-Power Reactors - Format and Content Section 15.3[3], as an additional basis for estimating the decommissioning costs of the UCD/MNRC Reactor, actual recent decommissioning costs from two representative reactor facilities are considered:

1) The Ford Reactor at the University of Michigan, decommissioning completed in 2015, at an actual cost of $14.4 million. The 2 MW reactor structure and associated experimental facilities were decommissioned and removed, but the reactor building remained in place. The bulk of the deconstruction activity and low level radioactive waste shipments occurred in 2007.

2) The PULSTAR Reactor Facility at SUNY Buffalo, decommissioning completed in 2015, at an actual cost of $14.1 million. The entire reactor facility, including the 2 MW reactor structure, containment building, and associated administrative building was decommissioned and removed. The bulk of the deconstruction activity and low level radioactive waste shipments occurred in 2014.

The two reactors referenced resided in states that were not members of a radioactive waste compact at the time the facilities were decommissioned. The low level radioactive waste from the deconstruction and decommissioning of these facilities was shipped to the LLW disposal facility in Clive, Utah. This would also be the case for the UCD/MNRC reactor, as the State of California is also not currently part of 4

a waste compact. Applying the methodology of NUREG-1307[2] and using the known costs of the two representative reactor facility decommissioning efforts as bases, cost estimates for decommissioning these facilities in 2018 dollars are given in Table 2 below.

Table 2 - Estimated 2018 Decommissioning costs for two representative research reactors Reactor Primary Year of Total Labor Energy Waste Estimated 2016 Corrected 2018 Facility Deconstruction Actual Adjusted Adjusted Burial Decommissioning Decommissioning Cost LX EX Adjusted RX Cost1 Cost2 Ford 2007 $14.4 M 1.192 0.796 1.317 $16,800,000 $17,460,000 Reactor Buffalo 2014 $14.1 M 1.047 0.892 1.011 $14,400,000 $14,970,000 PULSTAR 1: The estimated decommissioning cost is corrected from the primary year of deconstruction to 2016 based on the formulas of NUREG-1307 Section 3[1] and applying the labor, energy, and waste burial correction factors as given.

2: The Corrected 2017 Decommissioning Cost is calculated by applying an Organization for Economic Cooperation and Development (OECD) projected 2017 U.S. inflation factor of 1.9% and projected 2018 U.S. inflation factor 2.0%[4].

3.1.3. Discussion of Costs Out of the two cases studied, the decommissioning of the Ford Reactor is considered the most representative relative to the MNRC reactor (even though it was not a TRIGA reactor) based on the following factors. It is important to note, the MNRC is a highly specialized facility that has no direct analog among other research reactors.

1) The MNRC staff adjusted the original cost estimate of the Dade Moeller study to increase the direct costs associated with decommissioning the MNRC reactor and reactor building to what the they felt was more appropriate. This was done for several reasons. The Dade Moeller study based decommissioning estimates by scaling up the costs of decommissioning of the UIUC TRIGA reactor. While the core of the MNRC is similar to the UIUC reactor, the rest of the facility is substantially more complex than the UIUC reactor facility. The increased contingency factor places MNRC decommissioning cost estimates more in line with the Ford Reactor actual decommissioning costs. It is believed, this is the most appropriate recent comparison because the Ford reactor was a highly utilized 2 MW reactor with associated facilities more complex than typical pedestal style TRIGA reactors (like at UIUC). A 25% contingency is included per the requirement.

2) The Ford reactor facility and the MNRC facility contain a large number of complex radioactive beamlines embedded in concrete. These embedded items require a large amount of resources to remove.

3) Much of the cost overrun at the Ford Reactor was a result of unanticipated radioactive contamination (from primary water) in the soil under the reactor. It is thought that no primary water from the MNRC reactor has leaked into the soil under the MNRC reactor.

5

4) Decommissioning of the MNRC will likely require the removal of more radioactive concrete than the Ford reactor (10,500 cubic feet). This additional cost is difficult to quantify as the extent of slightly activated concrete in the MNRCs massive neutron radiography bays is unknown at this time. This additional cost could offset the Ford reactors cost overrun from the unexpected soil contamination.

5) Overall square footage of the facilities is nearly identical.

6) The decommissioning of the Ford Reactor at the University of Michigan did not include the removal of the reactor building. Significant additional costs were incurred given the logistics of deconstructing the reactor facility without removing the surrounding building. This cost will likely offset the cost of demolishing the very large amount of non-activated concrete (relative to the Ford reactor) at MNRC during reactor building demolition.

3.1.4. 2018 UCD/MNRC Reactor Decommissioning Estimate:

Given the discussion above, it is thought that the decommissioning cost (in 2018 dollars) for the UCD/MNRC TRIGA reactor would be bounded by the $24.9 Million estimate given below.

Table 3 - Estimated 2018 Decommissioning costs for UCD/MNRC Reactor Year of Total Uninflated Corrected 2018 Estimate Cost Decommissioning Cost Decommissioning Costs 2015 $16,850,000 $17,760,000 University Staffing Cost 2017 $6,920,000 $7,130,000 The modified Dade Moeller estimate was determined to be $16.85 million in 2015 dollars including project management costs. Applying an Organization for Economic Cooperation and Development (OECD) average projected annual U.S. inflation estimate of 2.0% [4] from 2015 to 2018 dollars yields an estimated MNRC facility decommissioning cost of $17.8 million in 2018 dollars. A 25% contingency factor per NRC requirements is included in the cost estimate. This estimate assumes that the University of California Davis will utilize the DECON method of decommissioning, removing and disposing of all radioactive waste offsite. Based on the decommissioning timeline of the Ford reactor (if no delays had been encountered), a minimum UCD/MNRC staffing cost estimate during decommissioning was made.

This estimate includes essential utilities and services (e.g. phone, internet, climate control, etc.) required during the decommissioning process. This staffing cost was calculated to be $6.92 million in 2017 dollars. Using a 3% cost escalation, the 2018 UCD/MNRC staffing cost is expected to be $7.13 million.

This estimate also includes a 3% escalation per year during the duration of the decommissioning. The total decommissioning cost is therefore expected to $24.9 million.

Cost includes all building demolishment on the 2.4 acre MNRC site, but not free release from the State of California as it is not known at this time if the University will retain the property or if the property would be transferred to the surrounding McClellan Business Park. Unlike other University research reactors, the MNRC was transferred from the Department of Defense (DoD) to the University. The cost 6

of remediation of the MNRC site from DoD operations (e.g. jet fuel, hexavalent chromium, etc.) is not included in the cost estimate as this clean up would be the responsibility of the United States.

3.2. Funding Method Pursuant to 10 CFR 50.75(e)(1)(iv), the University of California Davis intends to use a Statement of Intent (SOI) as the method to provide decommissioning funding assurance. Please reference Attachment 2:

Statement of Intent (SOI) regarding Decommissioning Funding for the MNRC Reactor Facility at the University of California Davis, dated May 25th 2018.

3.3. Adjustment of Decommissioning Cost Estimate The 2018 Decommissioning cost estimate for the UCD/MNRC Reactor Facility is $24.9 million as detailed in section 3.1.4 above. This estimate will be updated periodically as required using the methodology described in NUREG 1307[1] and detailed below:

From NUREG 1307 Section 3: Estimated Cost (Year X) = (2018 $ Cost)*(ALX + BEX + CBX)

Where: 2018 Cost = $24.9 million A = The labor fraction which is the percent or portion of the 2018 cost attributable to labor, materials, and services (0.65).

B = The energy fraction which is a percent or portion of the 2018 energy and radioactive waste transportation (0.13).

C = The burial fraction which is the percentage or fraction of 2018 cost attributable to radioactive waste burial/disposition (0.22).

LX = The labor, materials, and services cost escalation from January 2018 to the latest month of Year X for which Producer Price Indexes (PPI) data are available.

EX = The energy and waste transportation cost escalation from January 2018 to the latest month of Year X for which Consumer Price Indexes data are avaialble.

BX = The low-level waste (LLW) burial cost escalation from January 2018 to the last month of Year X for which data is available. As the State of California is not affiliated with a waste compact BX will be selected accordingly and assuming PWR values.

LX, EX, and BX will be calculated in accordance with the guidance given in NUREG-1307 as needed in order to estimate decommissioning costs beyond 2018.

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4. REFERENCES 1 Report on Waste Burial Charges; Changes in Decommissioning Waste Disposal Costs at Low-Level Waste Burial Facilities, NUREG-1307, REV. 15, U.S. Nuclear Regulatory Commission, January 2013; https://www.nrc.gov/docs/ML1302/ML13023A030.pdf 2 Guideline for Preparing and Reviewing Applications for the Licensing of Non-Power Reactors- Format and Content, NUREG 1537 Part 1, U.S. Nuclear Regulatory Commission, February 1996; https://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr1537 3 Organization for Economic Cooperation and Development (OECD) 2017 and 2018 U.S. Inflation; https://data.oecd.org/price/inflation-forecast.htm 4 2016 Bureau of Labor Statistics Labor and Producer Price Index; http://www.bls.gov/data/

8 University of California Annual Financial Report 2017 9

annual report 2017 From the Chancellor In making my rounds as the new chancellor, I have heard many alumni and others describe UC Davis as kind of a sleeping giant a powerful institution that has yet to show the full extent of its power.

This report shows that the giant is waking up.

Whether its our record fundraising, our mens and womens basketball teams making campus history, our unmatched achievements in agricultural, animal and veterinary sciences, or our overall ranking as one of the top public research universities in the nation, UC Davis is unmistakably on the rise.

Increasingly, our university makes headlines on the frontlines of todays humanitarian crises in health care, public health, global hunger, water scarcity, immigration, climate change, poverty and environmental degradation.

Increasingly, UC Davis propels social mobility across California and the nation, graduating large numbers of students from underrepresented ethnic groups and from families with no previous college degrees.

People are stunned when they learn about UC Davis growing accomplishments our groundbreaking research in so many fields, our contributions to prosperity in the Sacramento region, our empowerment of students to do good in the world.

They move from merely thinking well of UC Davis to wanting to actively contribute to our successes.

In these pages, you will see a giant rising to the challenge of making our world a better place.

Gary S. May Chancellor

A New Chancellor, a New Era for UC Davis My goal is to make us one of the handful of universities thats on the tip of the tongue when you talk about the nations great public research universities and we are not far from that now.

Gary S. May, upon his investiture as seventh chancellor of UC Davis, October 27, 2017

Rankings 1 3 1 7 1 6 1st worldwide in veterinary medicine and plant and animal sciences (QS World University Rankings; U.S. News &

3rd nationally among top colleges doing the most for low-income students (The New York Times 1st worldwide for campus sustainability practices (GreenMetric World University Ranking) 7th worldwide in environment/ecology (U.S. News & World Report) 1st nationally and second worldwide in agriculture (QS World University Rankings and U.S.

6th nationally overall for public universities (Wall Street Journal/Times Higher Education)

World Report) College Access Index) News & World Report)

UC Davis by the Numbers Financial Aid Campus Populations Students (FALL 2017) Staff (FALL 2016)

GRADE POINT AVERAGE FULL TIME STAFF 44% 71% 3.99 (Enrolled freshmen) 9,058 Staff 8,214 Clinical staff HEAD COUNT STUDENT EMPLOYEES 30,212 Undergraduate 9,690 PELL GRANTS FINANCIAL AID 4,580 Graduate 44 percent of California resident undergraduates In 2016-17, 71 percent of undergraduates received received Pell Grants in 2015-16. financial aid, averaging $21,389 per award. 1,226 Professional Faculty Each year UC Davis has more recipients than 1,362 Health science 4,736 Faculty and other academic positions in the entire Ivy League.

991 Medical interns and residents 38,371 Total student population Alumni (FALL 2016)

DEMOGRAPHICS 250,000+ Living alumni with degrees 47% 57%

Degrees (Awarded 2016-17) 25% 59% 7,856 Bachelors LOW DEBT COVERED TUITION AND FEES 1,950 Graduate and professional 47 percent of undergraduates completing 57 percent of California resident undergraduates degrees in 2015-16 accrued no debt while at UC Davis. Those who graduated with received enough gift aid to have systemwide tuition and fees completely covered Underrepresented Women 9,806 Total degrees awarded debt averaged $19,276 much lower than in 2015-16. minorities the national average of $30,156.

UC Davis admitted 41,299 applicants for fall 2017, with gains among low-income and first-generation students and underrepresented minorities.

44%

New undergraduates 600k Community service 31%

Undergraduates who are hours completed by students, admitted who first-generation faculty and staff are underrepresented minorities We Move Forward, Together We are a community united in times of celebration and challenge. We break down barriers to advancement, advocate on behalf of the underserved and inspire the next generation. We strive for empathy, equity and inclusivity to achieve meaningful change.

We are a community in which all are valued and supported for the good of all.

UC Davis strides A pioneer in the Our Keller Pathway Students at the The renovated Some 400 faculty toward gender parity in use of telemedicine Fellowship gives women, UC Davis Immigration Memorial Union, now are sharing stories medicine, with women for underserved cross-disciplinary Law Clinic are ensuring home to the Veterans of inspiration and comprising 45 percent communities, UC Davis researchers and the rights of immigrants Services Office, persistence at the First-of surgical residents saves patients an other underrepresented regardless of legal includes a new display Generation Faculty and fellows, and with average of 278 driving university-based status through honoring the 135 project website, a recruitment of female miles, $156 in travel entrepreneurs a education, preparation Aggies who made the resource for 44 percent trainees in male- costs and 4 hours4.62963e-5 days <br />0.00111 hours <br />6.613757e-6 weeks <br />1.522e-6 months <br /> foundation for developing of deportation ultimate sacrifice. of undergraduates who dominated fields of of time per consultation. their business ideas. defense cases and are first-generation neurological, orthopaedic representation. students.

and trauma surgery.

Alexander Forrest, assistant professor of 294 Inventions civil and environmental 135 engineering, led a deployment of underwater robots in Antarctica and the Arctic to help predict how and when Copyright licenses polar ice shelves collapse.

108 14 License agreements Startups founded 170 Patent applications filed Innovation for Good At UC Davis, we innovate not only through research, but also by nurturing ambition and smart partnerships.

We put tools and know-how in the hands of entrepreneurs so beneficial technologies can move out of the lab and into the world faster with a lighter footprint, a lower cost and less reliance on resources like water and energy.

This innovation acceleration from underwater robots that give us a new perspective on climate change to the development of a therapeutic enzyme is addressing Zhou Yu, assistant Combining expertise in A stem cell therapy UC Davis scientists Justin Siegel, co-founder Electrical and computer professor of computer engineering and animal for chronic oral are the first to of UC Davis spin-off engineers developed the challenges that hit us at home and around the world. science, was named to science, researchers inflammatory disease watch individual steps PvP Biologics and a novel, high-frequency Forbes 30 Under 30: are testing new cooling in cats developed in the replication of assistant professor of electronic chip Science list for her work technologies for dairy at the UC Davis a single DNA molecule chemistry, biochemistry potentially capable developing algorithms cows that reduce Veterinary Institute for opening new ways and molecular medicine, of transmitting tens that enable software energy and water use. Regenerative Cures of thinking about co-created a therapeutic of gigabits of data to adapt to users, such was licensed by VetCell this life-determining enzyme using synthetic per second, bringing as a social chatbot for Therapeutics with process. DNA for the treatment of us closer to next-Amazons Echo platform. plans to commercialize celiac disease. generation technology.

treatment.

PHOTO: DAMIEN GUIHEN/UNIVERSITY OF TASMANIA

55 68,321 30 The Jan Shrem and Maria Manetti Shrem Museum of Art serves as a hub of creativity for thinkers, makers and Guggenheim Fellows Visitors to the Manetti Faculty members innovators, with spaces dedicated to both Shrem Museum of Art in its of the American exhibits and student inaugural year Academy of Arts education. and Sciences A Champion of Curiosity A vibrant and exciting community of thinkers, artists and writers, UC Davis UC Davis historian Lucky Brand CEO Seth Sanders, professor Through the Teaching champions curiosity-driven research, criticism and knowledge making. Andrés Reséndez Carlos Alberini of religious studies, is California partnership, continues to earn and family endowed leading a project to UC Davis is helping For example, the inaugural season of the Ground and Field Theatre Festival accolades for the Alberini Family produce open-access transform K-12 his history of Native Speaker Series in translations of the history-social science in the College of Letters and Science brought together directors, playwrights, American enslavement, Design at UC Davis. Dead Sea Scrolls, education with scholars and theater artists for a month to produce plays and musicals that The Other Slavery, a 2,000-year-old development of free, winning a 2017 collection of Aramaic online curricula and explore the urgent need for sustainability in our world. California Book Award and Hebrew texts teaching resources.

and 2017 Bancroft Prize. including the oldest biblical manuscripts.

Our Mellon Public Scholars Program each year pairs graduate students with community organizations to put their humanities training and research to work for the public good.

PHOTO OF MISSION SAN BUENAVENTURA, TRACEY STORER PAPERS, D-110/SPECIAL COLLECTIONS, UC DAVIS LIBRARY

715 With an eye on medical school, top graduating senior and University Medal recipient Srujan Kopparapu earned degrees in psychology Undergraduates who and biochemistry and presented at the molecular biology in UC Davis Undergraduate three years while taking Research, Scholarship on research, internships and clinical experiences.

and Creative Activities Conference 10K 4K Internships Business leaders facilitated by the educated through the Internship and Graduate School of Career Center in Management a year 40 Countries where students gain an international perspective through UC Davis Study Abroad programs Education Wide Open each year A UC Davis education is a promise of opportunity that benefits our students and society alike. Just ask 2017 graduate Srujan Kopparapu, a student in the University Honors Program who dove into experiential learning opportunities here: internships in a microbiology lab and at the UC Davis Medical Centers ER, a student biomedical engineering competition, and presentations at the Undergraduate Research, Scholarship and Creative Activities Conference, among others.

Now Kopparapu is taking the next steps toward The College of Biological The Coastal and Marine The new Introduction The public Undergraduates can The new Native a career in a neural-related field such as neurosurgery Sciences acquisition Sciences Institute to Beer and Brewing is collaborating with strengthen their American Academic of a rare lattice light- and the Bodega online course gives scientists to address writing skills at the Student Success Center or neurology. At UC Davis, were fulfilling our promise sheet microscope will Marine Laboratory won students all over the environmental issues Student Academic and Center for Chicanx so future leaders like Kopparapu can fulfill their dreams. drive discoveries that a $3 million National world access to this such as local water Success Centers new and Latinx Academic transform the way Science Foundation unique class and quality and decreasing Writing Studio, which Student Success offer students learn science. award to train students preserves the legacy butterfly populations features a collaborative academic support in from mostly tribal and of Charlie Bamforth, through the School writing space community environments rural coastal towns Anheuser-Busch of Educations new and writing specialists. to help students on integrating policy Endowed Professor of Center for Community persist and graduate.

and science. Brewing Science. and Citizen Science.

10,000+

Pounds of Student Farm produce donated to the ASUCD Pantry and Fruit and Veggie Up!

program 148 Active patents in the College of Agricultural and Advancing Agriculture Environmental Sciences As the top university in the country and second in the world in agriculture, UC Davis continues to address 2.3K Acres devoted to agricultural global challenges of food security, sustainability research and safety in remarkable ways. Whether its finding and teaching answers that mutually benefit the environment and food producers in California, the invention of a low-cost tool that African farmers can use to fight food loss or making significant connections between nutrition and human health, we continue to apply our expertise and leadership to the most pressing challenges in food.

Juan Medrano and other UC Davis researchers released the first public genome sequence for Coffea arabica, which will help develop high-quality, disease-resistant coffee varieties UC Davis is helping A study co-produced The USDA has awarded Good fats are not Animal cognition expert Health researchers adaptable to climate fight food loss in Africa by UC Davis shows a $4.5 million grant to created equal, says Kristina Horbacks at UC Davis have change.

with the low-cost that California Central the UC Davis Public food chemist Ameer research on pig discovered how dietary DryCard invention, a Valley rice fields Strawberry Breeding Taha, who is exploring personalities is helping fiber helps intestinal moisture-sensing tool managed as floodplains Program and connections between the pork industry adapt health, identifying farmers can use to during winter can its partners to improve excess linoleic acid to new market and a potential therapeutic reduce mold and toxins create surrogate disease resistance and and ailments such as legislative demands for target for rebalancing in dried food storage. wetland habitat for sustainable production. chronic inflammation group housing. beneficial and harmful native fish. and headaches. gut microbiota.

33 Counties served by UC Davis Health Members of the UC Davis Hospital Child Life team make a splash with

$3.4B a patient during the Duck Dash, an event benefiting the UC Davis Childrens Hospital. The hospital ranks among the nations best in five pediatric specialties Annual economic (U.S. News & World Report). output generated by UC Davis Health in the Sacramento region and Northern California

$3M Patient travel costs saved by use of telemedicine at UC Davis Health over 18 years Bold Health Care You need to be bold to transform health care.

Thats why UC Davis Health is making bold strides in research, technology, patient care, partnerships and education and bringing together the most progressive, curious minds in medicine and nursing. Being bold is getting us closer to solving critical public health problems like diabetes. Its saving lives in utero. And its improving chronic disease care with personalized health information A UC Davis-led team UC Davis Sacramento UC Davis physicians Fetal surgeon Shinjiro Researchers discovered Betty Irene Moore won a $1.2 million grant campus became gave life-saving kidney Hirose (center), shown a possible route Hall, home to the Betty accessible by smartphone. Being bold is how to explore the use of the home of the new transplants to more with Fetal Care for regenerating insulin- Irene Moore School of personalized mobile UC Firearm Violence than 400 people in 2016, and Treatment Center producing beta cells, Nursing, opened on the were creating a healthier world. health data to improve Prevention Research making it the highest- colleagues Diana Farmer brightening prospects UC Davis Sacramento chronic disease Center, led by Garen volume program and David Schrimmer, for better treatment campus, supporting management and care. Wintemute, emergency of its kind in the nation. completed UC Davis or cures for interprofessional health medicine professor Childrens Hospitals Type I diabetes. sciences education with and authority on the first open fetal surgery collaborative learning epidemiology for spina bifida spaces and state-of-of firearm violence. 10 weeks before birth, the-art simulation suites.

a procedure offered at only a dozen medical centers nationwide.

10 Centers and institutes at UC Davis dedicated to solving critical issues with a One Health approach 1K Unique viruses in animals and humans detected What Connects Us All by the UC Davis-led PREDICT pandemic-prevention project 30 Countries with The answers to global health lie at the nexus of humans, animals and the environment. We have experts in all of these fields. Our doctors, veterinarians, engineers and scientists are working together in novel partnerships with UC Davis and ways to untangle this web of interdependent life. Our connections USAID to prevent between species viruses to spina bifida are leading to innovations pandemics that help conserve, protect and advance the health of all.

Viruses rely on host cells Researchers have School of Veterinary A collaborative study by The SeaDoc Society to reproduce, but detected a herpes virus Medicine researchers the One Health Institute is working to preserve they also show social in wild mountain found that disinfectants gives us an edge in southern resident Darla and Spanky, behavior, interacting gorillas similar to the in some common preventing pandemics, killer whales, salmon, bulldog puppies with with other viruses by Epstein-Barr virus household products finding that bats are the rockfish and pinto spina bifida, were the competing, cooperating in humans, findings like toothpaste major animal host abalone all first to be successfully and even cheating that could aid gorilla and shampoo for coronaviruses, which threatened by urban treated with stem cell to succeed. A new conservation and de-energize human cause SARS and MERS. growth in the Pacific therapy and surgery, behavioral approach knowledge of human cells and cause Northwest.

thanks to a UC Davis to studying viruses could disease. reproductive harm in veterinary and medical lead to new vaccines lab animals.

school team.

and treatment strategies for infectious diseases.

To Conserve and Protect Climate change is the environmental challenge of our lifetime. A global leader in climate science, UC Davis is taking this challenge head on. Climate change is UC Davis hosted a UN Marine reserves may Researchers are a major factor in lake Sustainable Development help commercial developing a genetic Were connecting research and education to policy and action in air health, says the latest Goals conference to fishermen catch more test to help ranchers Tahoe State of the Lake explore how universities of the profitable fish, breed cattle that prefer quality, energy conservation, water management and food sustainability. Report. It found could work together while also helping hillside grazing. This an increase in dying to help African nations to sustain the change could improve Were studying how climate change is affecting species on land trees and algae access clean energy West Coast groundfish the sustainability of and at sea, and finding ways to help humans and animals adapt to the growth and a decline and water and sustain fishery, says a Californias 38 million in lake clarity. food production. UC Davis-led study. acres of rangeland.

changes to come. Were also digging up solutions in unexpected places, from hillsides to the soil right under our feet.

114 Department of 8

LEED-certified 22K Trees and plants Environmental Science Platinum buildings in the 18 gardens and Policy experts who at UC Davis at the UC Davis combine the natural Arboretum, a and social sciences living laboratory to find sustainable for faculty environmental solutions and students UC Davis alumna Alexis Robertson and her husband, Gillies, regularly rotate sheep grazing on their Capay Valley ranch to optimize grass growth, which captures the greenhouse gas carbon dioxide and stores it in the soil.

Sporting Scholars When the Aggie men joined the NCAAs Big Dance for 1.7M Viewers of the 4 100K 14 Teams earning Community service Womens varsity the first time in school history, journalists and sports fans nationwide became enchanted not only with UC Davis Cinderella story, but also with our players backstories UC Davis vs. 2017 NCAA Public hours completed sports supported their talents, their sacrifices, their brains and their hearts.

University of Kansas Recognition by UC Davis student- by the Marya Awards for their athletes in 2016-17 Welch fundraising These are points of commonality shared by student-NCAA tournament game on TNT outstanding initiative launched athletes across all 23 of our NCAA teams. Their aptitude academic in August achievements for excellence and perseverance extends beyond the court, field or pool to the classroom and the community which is why weve been enchanted all along.

Aggie softball, womens The womens basketball Former running back Mens water polo tennis, mens golf team advanced to and assistant coach captured its first After defeating and mens tennis the third round of the Dan Hawkins returned Western Water UC Irvine in the Big West posted perfect 1,000 National Invitation to his alma mater to Polo Association Conference tournament, scores for multiyear Tournament with become the programs championship since the Aggies earned their Academic Progress victories over Utah 17th head football 1997, earning a spot in first berth in the NCAA Rate. Additionally, eight and Colorado State, coach. Previously the National Collegiate Div. I Mens Basketball teams compiled the after clinching the Big a studio analyst for Championship in Tournament. They highest APRs in their West Conference title. ESPNs college football Berkeley. The success claimed a 67-63 victory respective conferences: It was the best Div. I coverage, Hawkins is of the program also over North Carolina football, mens golf, national postseason in perhaps best known helped result in the Central in the First Four mens soccer, mens Aggie history. for transforming first endowed coaching round, advancing to the tennis, softball, Boise State into a position, with head round of 64.

womens basketball, Division I Football coach Daniel Leysons womens tennis and Bowl Subdivision position being renamed womens water polo. powerhouse in the the Child And Meisel early 2000s. Families Director of Mens Water Polo.

36,000 Donors Faculty join in a quartet for the Sept. 22, 2016 dedication of the Ann E. Pitzer Center.

Guest pianist Alice Takemoto is the sister of Grace Noda.

$250M Grace and her husband, Grant, were the first major donors to the center. The lobby is named in their honor.

Raised Another Record-Breaking Fundraising Year Thanks to the commitment of our supporters, UC Davis once again had a record-breaking philanthropic year. The university raised

$250 million, the largest donation total raised in a single fiscal year in the universitys 109-year history, bringing significant support for student scholarships, capital projects, scientific research and more.

This success builds upon the momentum of the previous fiscal years $226 million record-breaking total.

There were nearly Ken Grossman of Sierra A $2.6 million gift from The Betty Irene Moore Mohini Jain, 36,000 donors to the Nevada Brewing Co. the estate of Robert School of Nursing at philanthropist, retired university, up almost and his wife, H. Putnam will establish UC Davis launched a teacher and longtime 2,300 donors from Katie Gonser, presented the Robert H. Putnam new Family Caregiving Davis resident, made 2015-16. This increase a $2 million gift to Endowed Chair Institute with a a $1.5 million gift is due, in part, to the support the universitys in Bipolar Disorders $5 million grant from the to advance the study universitys first Give renowned brewing Research and the Gordon and Betty of Jainism, one Day, themed Every science program. Dwight Swaback M.D. Moore Foundation. of the worlds most Aggie Counts: Together Bipolar Disorders revered and ancient We Add Up, a Research Fund. philosophies.

29-hour event that helped UC Davis achieve record performance for annual giving this fiscal year.

UC DAVIS FOUNDATION MEMBERSHIP 2017-18 CAL AGGIE ALUMNI ASSOCIATION 2017-18 BOARD OF DIRECTORS THE UC DAVIS FOUNDATION is governed by the volunteer Board of Executive Trustees, who are distinguished THE VOLUNTEER CAL AGGIE ALUMNI ASSOCIATION BOARD OF DIRECTORS advances the associations leaders in their fields. The board marshals philanthropic support and stewards private gifts to the university, mission: To enrich the lives of alumni, students, families and friends worldwide, and develop lifelong furthering UC Davis mission and global impact. The board works with academic leaders and advancement ambassadors for UC Davis.

staff to achieve the foundations goals.

BOARD MEMBERS EXECUTIVE TRUSTEES DEBBY STEGURA 79 MOLLY FLUET 09 MOLLY MROWKA 93 BRUCE W. BELL 85 JONCARLO MARK, MBA 00 MOHINI JAIN President STACIE HARTUNG FRERICHS 01 ALGIE MOSLEY 96 Chair Finance and Investment Committee Chair Nominating and Governance Committee WILLIAM COCHRAN 73, CRED. 74 SANDRA FRYE-LUCAS, PHD 03 KARLA STEVENSON 93 Vice Chair Vice President/President Elect ANU JOHL SINGH 04 SCOTT STEVENSON 92 BRUCE G. WEST 71, M.S. 73 MAY SEEMAN, MBA 89 Vice Chair Finance and Investment Committee Vice Chair GIACOMO MARINI SCOTT JUDSON 09, J.D. 12 KYLE TRINOSKY 05, MBA 12 NEPTALY AGUILERA 73 Stewardship Committee Chair ALEX KANG 09 FREDERICK TAVERNER 87 MICHAEL CHILD 76 DARRYL L. GOSS 83 BRIDGET BUGBEE 13 PAUL KEEFER 89 RON VAN DE POL 72 Immediate Past Chair Global Campaign Leadership Council Chair JANE ROSENBERG 79 DIANE CARLSON BIGGS 81 RON MAROKO, JD 86 JON WEINER 85 Stewardship Committee Vice Chair ALEX CHAN 01 JACK MARIANI 69 DAVID W. PEARSON 84 CHARLES MELTON 08 Audit Committee Chair Global Campaign Leadership Council MARGARET M. LAPIZ 89 BRIAN EBBERT 92 JILL MILLER 97 Vice Chair At-Large Executive Trustee DAVID J. LOURY, PH.D. 79 Audit Committee Vice Chair CECELIA LAKATOS SULLIVAN 83 ADVISORS TO THE BOARD Nominating and Governance Committee Chair GARY S. MAY RAMAK SIADATAN 99, MBA 06 SAMANTHA TESHIMA 18 TRUSTEES Chancellor Past President President, SAA (Student Alumni Association)

GUY BENSTEAD 81 RUDY KADLUB 71, ED.D. 72 GENE E. PENDERGAST, JR. 61 SHAUN B. KEISTER, PH.D. BRUCE W. BELL 85 FREDERICK L. CANNON 78 GLENYS M. KAYE SANDRA I. REDENBACH 72, CRED 73 Vice Chancellor, Chair, UC Davis Foundation ROY TAGGUEG TK CHIANG 87 BARBARA J. KERR SANDRA L. REED, M.D. 85 Development and Alumni Relations President, GSA BILL JOSTOCK President, UC Davis Foundation (Graduate Student Association)

JEFFREY CHILD 82 EIVIND G. LANGE, III 77 EARL F. RENNISON 88 President, Aggie Parent and Family Programs DANIEL A. CORFEE 87 JAMES T. LIM, J.D. 98 JAMES N. SEIBER, PH.D. RICHARD R. ENGEL 90, CRED. 91 JOSH DALAVAI 18 EAMONN F. DOLAN 83 SUSAN MAYER 80 PATRICK J. SHERWOOD 87 Assistant Vice Chancellor, Alumni Relations President, ASUCD BRUCE C. EDWARDS 60 JOHN A. MCKINSEY, J.D. 99 ANTHONY R. STONE, M.D. and Executive Director (Associated Students, UC Davis)

JAMES P. FINCH 89 DEBORAH J. NEFF 76 JEFFREY TRAUM 85 MICHAEL E. GILSON 73 CHARLES C. NICHOLS 83 AND 84 CAROL WALL 63, M.A. 65, PH.D. 71 ROGER HALUALANI 89, MBA 91 CAROL E. PARKER HENRY WIRZ 73 STUDENT GOVERNMENT (ASUCD)

ADVISORS KEVIN M. BACON 72 BERT FEUSS 84 ROBERT E. MURPHY 63 LEADERS OF THE ASSOCIATED STUDENTS, UNIVERSITY OF CALIFORNIA, DAVIS, represent student interests CRAIG R. DANDURAND, J.D. 97 GREGORY S. HOUCK 83 TOM P. PALECEK 99 and oversee the creation and administration of services that enrich student experiences on campus.

STEVE ENOS 82 PARKER A. LEE 76 GABE SANTOS ANDY FAGAN, M.A. 84 STEPHEN MEISEL ALAN M. TAYLOR, PH.D. EXECUTIVE JOSH DALAVAI ADILLA JAMALUDIN JIN ZHANG EX-OFFICIO EXECUTIVE TRUSTEES President Vice President Controller SHAUN B. KEISTER, PH.D. TANIA WALDEN KELLY RATLIFF SENATORS Vice Chancellor, Development and Alumni Treasurer and Chief Financial Officer, Interim Lead, Finance, Operations and SHANIAH BRANSON KHADEJA IBRAHIM MARCOS RODRIGUEZ Relations UC Davis Foundation Administration President, UC Davis Foundation Chief Operating Officer, Development and ANDREAS GODDERIS GAVENJIT KAUR YAJAIRA SIGALA DEBBY STEGURA 79 Alumni Relations PAUL J. PROKOP President, CAAA Board of Directors MICHAEL GOFMAN JESSE KULLAR JAKE SEDGLEY Associate Vice Chancellor, School and Unit GARY S. MAY Programs DANNY HALAWI BRYAN PEREZ RAHI SURYAWANSHI Chancellor RACHAEL E. GOODHUE, PH.D.

Chair, Academic Senate JUDICIAL RYAN GARDNER Chair, Judicial Council

Financials at a Glance Depreciation/interest expense/other 6%

2016-17 Revenues and Expenditures Medical center 39%

UC Davis revenues come from many sources. About 81 percent are designated for or restricted to specific purposes, such as research support, auxiliary services such as housing, and the UC Davis Medical Center.

Most of the funding for teaching comes from unrestricted state funds and student tuition.

2016-17 Expenditures*

$4.9 billion Instruction and academic support 25%

Institutional support 3%

Medical center 44%

Operation and maintenance 2%

Public service 2%

State unrestricted 8%

2016-17 Revenues*

$4.9 billion Auxiliary 2%

Student services and financial aid 9% Research 12%

State designated and restricted 1%

Student fees 4%

Tuition 11%

$250

$226 Federal Pell Grants 1%

$749 $753 $704 $786 $760 $783

$684 $184

$149 $166

$132 Gifts, endowments, interest, other 5% Indirect cost

$118 recovery 3%

Sales and service, auxiliary 12%

Grants and contracts 11% 11 12 13 14 15 16 17 11 12 13 14 15 16 17 Extramural Research Funding Philanthropy FY 2011-17 (millions) FY 2011-17 (millions)

• Scholarship allowance is reported as an expenditure in student services and financial aid. For financial reporting purposes, scholarship allowance is reported as a reduction to student tuition and fee revenue.

2017 Financial Report Managements Discussion and Analysis University of California, Davis The objective of Managements Discussion and statements - the statements of net position, the UC Davis is one of ten campuses of the University with six professional schools. The Davis campus Analysis (MD&A) is to give readers an overview statements of revenues, expenses, and changes of California (the University), which, as one has undergraduate colleges of Agricultural and of the financial position and operating activities in net position, and the statements of cash flows of the largest and most acclaimed institutions Environmental Sciences, Biological Sciences, of the University of California, Davis (UC Davis - encompass the UC Davis Campus and its of higher learning in the world, is dedicated to Engineering, and Letters and Science. Graduate or the Campus) for the year ended June 30, discretely presented component, the UC Davis excellence in teaching, research, healthcare and Studies administers graduate study and research 2017, with selected comparative information for Foundation (the Foundation). However, the public service. In addition to the ten campuses, in all schools and colleges. Professional studies the year ended June 30, 2016. This discussion MD&A and the notes to the financial statements the University encompasses five medical centers, are offered in the schools of Education, Law, should be read in conjunction with the financial focus on the Campus, which includes the four law schools and a statewide Division of Management, Medicine, Nursing and Veterinary statements and the notes to the financial Medical Center. Information related to the UC Agriculture and Natural Resources. The University Medicine.

statements. Davis Foundation can be found in its separately is also involved in the operation and management Located off campus are numerous laboratories, issued financial statements. Information related of three national laboratories for the U.S.

UC Davis financial report, while not separately extension centers and facilities, including the UC to activities and balances centrally managed by Department of Energy.

audited, is prepared from the official University Davis Medical Center in Sacramento, the Tahoe the Office of the President can be found in the of California records and accounts which are In 1905, the California Legislature approved Environmental Research Center in Lake Tahoe, separately issued financial statements for the maintained in accordance with the standards the establishment of a state agriculture school. the Veterinary Medicine Teaching and Research University of California.

prescribed by the Governmental Accounting Three years later, in 1908, the University Farm Center in Tulare, and Bodega Marine Laboratory Standards Board (GASB). The three primary School opened in Davis as a branch of UC at Bodega Bay.

Berkeley. In 1959 the UC Regents designated UC Davis as an independent general campus of the University. Currently, UC Davis offers a full range of undergraduate and graduate programs, along

UC Davis Net Financial Position The major components of the statement of UC Davis Assets and The Regents of the University of California (the The University implemented new accounting net position, compared to the prior year are as Deferred Outflows of Resources Regents) utilizes asset allocation strategies that policies for retiree health benefits. These follows: are intended to optimize investment returns over UC Davis total assets grew by $372 million in changes in accounting policies are designed to time in accordance with investment objectives (in millions of dollars) 2017 to over $6.5 billion. The increase in 2017 improve transparency by requiring recognition and at acceptable levels of risk. The rates of RESTATED was primarily related to an increase in cash and of the net retiree health benefits liability in the return on the University investment pools for 2017 2016 CHANGE investment balances and continued reinvestment financial statements. This standard requires the years ended June 30, 2017 and 2016 are as ASSETS in facilities.

recognition of retiree health benefit expense Cash and investments $2,500 $2,225 $275 follows:

Campus cash and investments, which are held using a systematic method, designed to match Accounts receivable, (shown as a percentage) net 517 496 21 at the Universitys Office of the President, are the cost of retiree health benefits with service RESTATED Capital assets, net 3,298 3,225 73 principally carried in three investment pools; the 2017 2016 periods for eligible employees. Financial Other assets 210 207 3 Short Term Investment Pool (STIP), the Total GEP 15.1% (3.5)%

information for 2016 has been restated to TOTAL ASSETS 6,525 6,153 372 Return Investment Pool (TRIP) and the General STIP 1.3 1.3 retroactively apply these new accounting DEFERRED Endowment Pool (GEP). Cash for operations policies. TRIP 7.7 0.3 OUTFLOWS OF and bond proceeds for construction expenditures RESOURCES 841 1,481 (640)

The statement of net position presents the are invested in STIP. UC Davis uses STIP to LIABILITIES financial position of UC Davis at the end of meet operational liquidity needs. TRIP allows Debt, including Accounts receivable include amounts due from the year. It displays all of the Campus assets, the Campus to maximize the return on long-term commercial paper 1,767 1,642 125 state and federal government agencies, local deferred outflows, liabilities and deferred capital by taking advantage of the economies Pension related and private grants and contracts, receivables inflows. The difference between assets, obligations 2,147 2,632 (485) of scale of investing in a large pool across a associated with patient care at the medical center deferred outflows, liabilities and deferred inflows Net retiree benefits broad range of asset classes. TRIP is managed and from others. Receivables are reported net liability 2,888 3,280 (392) is net position, representing a measure of the to a total return objective and is intended to of bad debt allowances. Accounts receivable current fiscal condition of the Campus. Other liabilities 889 949 (60) supplement STIP. As a result of continued low increased by $21 million from $496 million TOTAL LIABILITIES 7,691 8,503 (812)

STIP interest rates, the Campus continues to in 2016 to $517 million in 2017. Receivables Certain reclassifications have been made to the DEFERRED INFLOWS use TRIP to enhance investment returns, while fluctuate based on the timing of collections. State prior year balances to conform to classifications OF RESOURCES 979 561 418 still maintaining sufficient funds in STIP to and federal grants and contracts receivables used in the current year financial statement NET POSITION meet operational liquidity needs. The GEP is a increased by $1 million, medical center presentation. Net investment in capital assets 1,663 1,641 22 balanced portfolio and the primary investment receivables increased by $5 million, while other Restricted: vehicle for individual endowments and funds receivables, including educational activities and nonexpendable 121 119 2 functioning as endowments. local and private grants and contracts, increased Restricted:

expendable 730 670 60 by $15 million.

Unrestricted (3,818) (3,860) 42 TOTAL NET POSITION ($1,304) ($1,430) $126 34 UC Davis Financial Report 2016-17 35

Capital assets includes land, infrastructure, Other assets include deferred charges, pledges In August 2016, Medical Center Pooled Revenue The Campus has a financial responsibility for buildings and improvements, software, intangible receivable, notes and mortgages receivable, Bonds totaling $342 million were issued to pension benefits associated with its defined assets, equipment, library collections and investments in joint ventures and inventories and finance and refinance certain facilities and benefit plans and for retiree health benefits.

construction in progress. As has been the case totaled $210 million and $207 million for 2017 and projects of the Medical Center. Proceeds, The Campus had pension related obligations in recent years, the required spending for capital 2016, respectively. including a net bond premium of $48 million, of $2.1 billion and $2.6 billion in 2017 and 2016, assets continues to increase. The net increase were used to pay for project construction, respectively. The decrease in net pension Losses on debt refundings and certain changes in the cost of capital assets was $256 million in issuance costs and refinance the previously liability for 2017 is primarily driven by higher in the net pension and net retiree health benefits 2017, consisting of capital expenditures of $313 outstanding Medical Center Pooled Revenue than expected investment returns on the UCRP liabilities are reported as deferred outflows million offset by $57 million of capital assets Bonds totaling $265 million. investment portfolio. The increase in net pension of resources. In 2017, deferred outflows of disposed of during the year in the normal course liability for 2016 was primarily driven by lower resources decreased due to higher than expected In 2016, General Revenue Bonds totaling $73 of doing business. Capital expenditures in 2016 than expected investment returns on the UCRP investment returns in the University of California million and Limited Project Revenue Bonds were $296 million and disposals were $71 million. investment portfolio. UCRPs total investment Retirement Plan (UCRP) portfolio. totaling $7 million were issued to finance and During 2017, capitalized costs for completed rate of return was positive 14.5 percent in 2017 refinance certain facilities and projects of the construction projects were $284 million. The and negative 2.0 percent in 2016. The discount Campus. Proceeds, including a bond premium largest capitalized projects were the Health rate used to estimate the net pension liability was of $13 million were used to pay for project Sciences Education Building for $48 million, UC Davis Liabilities and Deferred 7.25 percent in both 2017 and 2016.

construction, issuance costs and refinance Tercero Student Housing Phase 4 for $54 million, Inflows of Resources previously outstanding debt of $14 million. The Campus 2016 financial statements have the School of Veterinary Medicines Student In 2017, UC Davis total liabilities and deferred been restated as a result of adopting new Services and Administrative building for $26 inflows of resources decreased by $394 million The Universitys General Revenue Bond ratings accounting standards for retiree health benefits.

million, the Jan Shrem and Maria Manetti Shrem to $8.7 billion as compared to $9.1 billion in 2016. are currently affirmed at Aa2, AA and AA by The Campus net retiree health benefits liability Museum of Art for $29 million, and the Memorial The decrease in 2017 was primarily related to Moodys Investors Service, Standard & Poors was $2.9 billion, and $3.3 billion, in 2017 and Union Renewal Project for $23 million. Projects the decrease in liabilities for pension and retiree and Fitch, respectively, all with stable outlooks.

2016, respectively. The University funds the under construction, net of the cost of those health benefits. The Universitys Limited Project Revenue Bonds retiree health benefits through the University projects completed and reclassified during 2017 and Medical Center Pooled Revenue Bonds Capital expenditures are financed from a variety of California Retiree Health Benefit Trust to buildings and improvements or equipment, are currently affirmed at Aa3, AA- and AA- by of sources including equity contributions, federal (UCRHBT) based on a projection of benefits on totaled $178 million. Moodys Investors Service, Standard & Poors and and state support, revenue bonds and leases. a pay-as-you-go basis and the assets in the trust Fitch, respectively, all with stable outlooks.

Accumulated depreciation and amortization UC Davis debt increased by $125 million in 2017 are not sufficient to fund retiree health benefits.

increased from $3.1 billion in 2016 to $3.2 billion to $1.8 billion, with a $29 million increase in Commercial paper is used as interim financing for Therefore, the Bond Buyer 20-year tax-exempt in 2017. Depreciation and amortization expense commercial paper and an increase in bonds of construction projects and equipment financing. general obligations municipal bond index rate for the year was $231 million and the accumulated $96 million. Net commercial paper borrowings increased is used to discount the retiree health benefit depreciation on assets sold or disposed of $29 million in 2017 from $44 million in 2016 to liabilities. The changes in net retiree health In 2017, General Revenue Bonds totaling $36 $73 million in 2017 primarily due to new funding during the year was $47 million. Generally, all benefits liability have been primarily driven by the million, including a bond premium of $5 million of $73 million offset by transfers out of interim of the disposals were for assets that were fully changes in discount rates used to estimate the were issued to finance certain construction financing to permanent funding of $44 million.

depreciated or had reached the end of their retiree health benefit liability. The discount rates projects of the Campus.

useful life. as of June 30, 2017 and 2016 were 3.58 percent and 2.85 percent, respectively.

36 UC Davis Financial Report 2016-17 37

Other liabilities, including accounts payable, UC Davis Net Position Restricted expendable net position of $730 UC Davis Results of Operations accrued salaries and benefits, unearned revenue, Net position represents the residual interest in million, at June 30, 2017, is subject to externally The statement of revenues, expenses and pollution remediation and federal refundable UC Davis assets and deferred outflows after imposed restrictions governing their use. Net changes in net position is a presentation of loans decreased from $949 million in 2016 to all liabilities and deferred inflows are deducted. position may be spent only in accordance with the Campus operating results, and indicates

$889 million in 2017. Other liabilities fluctuate Net position was restated for 2016 as a result of the restrictions placed upon them and may whether the financial condition has improved based on the timing of payments. adopting new accounting rules. UC Davis net include endowment income and gains, subject or deteriorated. In accordance with the position at the end of 2017 was negative $1.3 to UC Davis spending policy; support received Governmental Accounting Standards Board Deferred inflows of resources are related to the billion, increasing by $126 million from 2016. Net from gifts, appropriations, grants or contracts for (GASB) requirements, certain significant Campus service concession arrangements and position is reported in the following categories: specific programs or capital projects; trustee held revenues relied upon and budgeted for certain changes in the net pension and net retiree net investment in capital assets; restricted, investments; or other third party receipts. The fundamental operational support of the core health benefits liabilities. Deferred inflows of nonexpendable; restricted, expendable; and increases or decreases in restricted, expendable instructional mission of UC Davis are required to resources in 2017 increased by $418 million due unrestricted. funds are principally due to unrealized be recorded as nonoperating revenues, including to the increase in the discount rate for estimating appreciation or depreciation, respectively in the state educational appropriations, private gifts and the net retiree health benefit liability. The portion of net position invested in capital fair value of investments related to restricted gifts investment income. Results of operations for 2016 assets, net of accumulated depreciation and and funds functioning as endowments. have been restated as a result of adopting new the related outstanding debt used to finance Under generally accepted accounting principles, accounting policies for retiree health benefits.

the acquisition, construction or improvement of net position that is not subject to externally Summarized on the next page are the operating these capital assets increased by $22 million from imposed restrictions governing its use must be results for 2017 and 2016, blending the GASB

$1,641 million in 2016 to $1,663 million in 2017 as a classified as unrestricted for financial reporting reporting requirements and UC Davis view of result of net capital asset additions and new debt purposes. Although unrestricted net position is core operations:

issuances offset by principal debt repayments.

The Campus continues to invest in its physical not subject to externally imposed restrictions, facilities to support the growth at UC Davis. substantially all of UC Davis reserves are designated for academic and research initiatives Restricted nonexpendable net position includes or programs, or for capital purposes. As of June the corpus of UC Davis permanent endowments 30, 2017, the Campus unrestricted net position and the estimated fair value of charitable is a deficit, primarily due to obligations for remainder trusts. UC Davis endowments and pension and retiree health benefits exceeding the other restricted nonexpendable net position Campus assets available to pay such obligations.

increased by $2 million from $119 million in 2016 The decrease in the deficit from 2016 to 2017 to $121 million in 2017 principally due to the is primarily due to decreases in the Campus receipt of new gifts. pension related obligations and net retiree health benefit liability.

38 UC Davis Financial Report 2016-17 39

OPERATING RESULTS FOR 2017 AND 2016 (in millions of dollars)

RESTATED YEAR ENDED JUNE 30, 2017 YEAR ENDED JUNE 30, 2016 NON NON OPERATING OPERATING TOTAL OPERATING OPERATING TOTAL CHANGE Revenues Supporting Core Activities Revenues to support UC Davis core activities of REVENUES The following chart provides a breakdown of more than $4.7 billion, including those classified Student tuition and fees, net $571 $571 $527 $527 $44 revenues supporting core activities for the fiscal as nonoperating revenues, increased by $342 State educational appropriations $432 432 $412 412 20 years ended June 30, 2017 and 2016: million from 2016 to 2017. UC Davis has very Grants and contracts, net 689 52 741 693 52 745 (4) diversified sources of revenue. State of California Sales and services: educational appropriations, in conjunction with Medical center, net 2,147 2,147 1,935 1,935 212 (in millions of dollars) 2017 2016 (RESTATED) student tuition and fees, are the core components Other, net 543 543 498 498 45 that support the instructional mission of Private gifts 85 85 74 74 11 the Campus. Grants and contracts provide

$571 Student tuition opportunities for undergraduate and graduate Investment income, net 46 46 46 46 0 and fees, net Other revenues, net 103 21 124 96 14 110 14

$527 students to participate in dynamic research REVENUES SUPPORTING projects alongside some of the most prominent CORE ACTIVITIES $4,053 $636 $4,689 $3,749 $598 $4,347 $342 researchers in the country. Gifts to UC Davis allow State $432 EXPENSES educational crucial flexibility to faculty for support of their Salaries and wages $2,194 $2,194 $2,046 $2,046 $148 appropriations $412 fundamental activities or new academic initiatives Pension benefits 302 302 421 421 (119) as well as support scholarships and capital Retiree health benefits 240 240 289 289 (49) projects. Sales and services revenue includes

$741 Other employee benefits 472 472 451 451 21 Grants and the medical center, educational activities from contracts, net $745 Scholarships and fellowships 88 88 89 89 (1) academic departments, primarily the veterinary Utilities 38 38 35 35 3 and medical schools, and auxiliary enterprises Supplies and materials 474 474 458 458 16 Sales and such as student housing, the bookstore, food

$2,147 services - service operations and parking.

Depreciation and amortization 231 231 221 221 10 medical center,

$1,935 Interest expense $55 55 $65 65 (10) net Net student tuition and fees revenue grew from Other expenses 638 8 646 628 8 636 10 $527 million in 2016 to $571 million in 2017, an EXPENSES ASSOCIATED WITH Sales and $543 increase of $44 million. These fees are net of CORE ACTIVITIES $4,677 $63 $4,740 $4,638 $73 $4,711 $29 services - scholarship allowances of $147 million in 2017 INCOME (LOSS) FROM other, net $498 CORE ACTIVITIES ($624) $573 ($51) ($889) $525 ($364) $313 and $139 million in 2016. The increase in tuition OTHER NONOPERATING ACTIVITIES and fee revenue over the past several years Net appreciation (depreciation) in fair $85 is primarily due to enrollment growth coupled Private gifts, value of investments $123 ($54) $177 net with modest tuition and fee increases for certain

$74 INCOME (LOSS) BEFORE OTHER student groups. Consistent with past practices, CHANGES IN NET POSITION $72 ($418) $490 a portion of the revenue generated from certain OTHER CHANGES IN NET POSITION

$46 student tuition and fee increases is used for Capital gifts and grants $10 $10 $0 Investment income, net financial aid to mitigate the impact of tuition and Permanent endowments 2 2 0 $46 fee increases on students with financial need.

Other changes in net position 42 17 25 INCREASE (DECREASE) IN NET POSITION $126 ($389) $515 $124 Other revenues, NET POSITION net

$110 Beginning of year, as previously stated $(1,430) $1,597 $(3,027)

Cumulative effect of accounting changes (2,638) 2,638 BEGINNING OF YEAR, AS RESTATED ($1,430) ($1,041) ($389)

NET POSITION END OF YEAR ($1,304) ($1,430) $126 40 UC Davis Financial Report 2016-17 41

In 2017, total enrollment, consisting of Revenue from federal, state, private and local Revenue from the UC Davis Medical Center, Investment income for the year of $46 million undergraduate, graduate and professional grants and contracts decreased by $4 million to educational activities and auxiliary enterprises consisted of $9 million from the University of students, grew by nearly 3.6 percent. Mandatory $741 million in 2017 from $745 million in 2016. of $2.7 billion increased by $257 million, or 11 Californias Short Term Investment Pool (STIP),

tuition rates for California residents was not Federal grant and contract revenue, including percent, from 2016. UC Davis Medical Center $17 million from the University of Californias Total changed in 2017 and 2016. Nonresident facilities and administration cost recovery of revenue increased by $212 million over the prior Return Investment Pool (TRIP) and $20 million supplemental tuition was increased by 8 percent $93 million and direct expenditures of $356 year to over $2.1 billion in 2017. The revenue from endowments. Investment income in 2016 for undergraduate national and international million, increased by $6 million to $449 million. growth is primarily due to increased third-party totaled $46 million consisting of $7 million from students. Professional degree supplemental Expiring federal grants and federal budget cuts settlements and higher volumes and complexity STIP, $21 million from TRIP and $18 million from tuition varies by discipline and certain tuition rate have slowed the Universitys growth in federal of patient cases. Revenue from educational endowments.

increases were approved for 2017. grants and contracts. This revenue represents activities, primarily medical professional fees and Other revenues for 2017 of $124 million included support from a variety of agencies including auxiliary enterprises, net of related allowances, State of California educational appropriations $2 million in federal interest subsidies and $19 the Department of Health and Human Services, increased by $45 million or 9 percent reflecting to UC Davis were $432 million in 2017 and $412 million of other revenues that are reported as

$214 million; the Department of Education, $63 an expanded patient base and improved million in 2016. The University budget framework nonoperating revenue and $103 million of other million; the National Science Foundation, $46 collections.

agreed to in 2015 with the governor called for revenue reported as operating revenue. Other million; and the Department of Agriculture, $30 base budget adjustments of 4 percent annually Gifts may be made directly to UC Davis or operating revenues grew $7 million, or 7 percent, million. State grants (including special research over the next four years, through 2019. The through the UC Davis Foundation for the benefit to $103 million in 2017. The growth is primarily appropriations) decreased $15 million, or 10 framework also called for no tuition increases in of the Campus. UC Davis private gifts for due to higher intercampus revenue of $2 million percent, to $132 million in 2017. The decrease in 2017 and 2016, with tuition increases generally operating purposes increased from $74 million and increased enrollment and rates in the student revenue is primarily attributed to the completion pegged to the rate of inflation beginning in 2018. in 2016 to $85 million in 2017. The increase was health insurance plans.

of the South Valley Animal Health Laboratory The student service fee increased 5 percent in primarily related to new gifts including: $3 million award in Tulare which was awarded over a 3 year 2017 and 2016, with the customary one-third of for the Robert and Margrit Mondavi Center, period to support a capital project, with the peak the increase being directed to financial aid. The $2 million for the Veterinary Medical Teaching revenues being recognized in 2016. Private and framework also acknowledged the Universitys Hospital building fund, and $2 million for the Jan local contracts and grants increased by $5 million plan to increase undergraduate nonresident Shrem and Maria Manetti Shrem Museum.

primarily due to new awards received from the supplemental tuition by up to 8 percent for City of Davis.

2017 and 2016 and 5 percent thereafter.

The framework recognized the increases in professional degree supplemental tuition approved by the Regents in November 2014 for existing and new programs and called for no increases in law school tuition through 2019.

42 UC Davis Financial Report 2016-17 43

Expenses Associated with EXPENSES ASSOCIATED During 2017, supplies and materials costs Other Nonoperating Activities Core Activities WITH CORE ACTIVITIES increased $16 million, from $458 million in 2016 UC Davis other nonoperating activities, to $474 million in 2017. The largest increase consisting of net appreciation or depreciation The chart to the right provides a breakdown of occurred at the medical center due to higher in the fair value of investments, are noncash expenses associated with core activities for the (in millions of dollars) 2017 2016 (RESTATED) patient volumes and inflationary pressure on transactions and, therefore, are not available to fiscal years ended June 30, 2017 and 2016.

the costs for medical supplies and laboratory support operating expenses. In 2017, UC Davis UC Davis expenses associated with core $2,194 instruments and higher costs for general Salaries recognized net appreciation in the fair value of activities for 2017, including those classified as and wages supplies necessary to support increased medical

$2,046 investments of $123 million compared to net nonoperating expenses, were $4.7 billion in 2017 patient volumes. The Campus continues to find depreciation of $54 million in 2016. The Campus and 2016. Approximately 68 percent UC Davis opportunities to manage the costs of supplies investment portfolio experienced positive returns expenses are related to salaries and benefits for $302 and materials.

Pension in the equity markets in 2017 as compared to the over 24,000 full time equivalent employees of UC benefits

$421 Other operating expenses increased by $10 negative net returns experienced in 2016.

Davis.

million, from $628 million in 2016 to $638 million Salaries and wages increased $148 million or in 2017. The increase is primarily due to increases 7 percent in 2017. The increase is primarily $240 Retiree health in space and equipment rentals and repairs and attributable to approved merit increases, benefits Other Changes in Net Position

$289 maintenance. Other nonoperating expenses, contractual rate increases for represented which includes the loss on disposal of capital Other changes in net position are generally not and academic staff, as well as an increase in assets, were $8 million in 2017 and 2016. available to support the Campus operations in consolidated headcount of approximately 3 Other employee $472 the current year. Capital gifts and grants may only beneifts In accordance with the GASB reporting be used for the purchase or construction of the percent. Employee benefits, excluding pension $451 standards, operating losses were $624 million specified capital assets. Only income earned from and post-retirement health care benefits, in 2017 and $889 million in 2016. The operating gifts of permanent endowments is available in increased by 5 percent in 2017 due to higher

$88 losses were partially offset by $573 million and future years to support the specified program.

health insurance costs. Pension expense Scholarships and fellowships $525 million of net nonoperating revenues in decreased by $119 million or 28 percent due to $89 2017 and 2016, respectively. Although these better than expected investment returns. Retiree amounts are classified as nonoperating for health expense decreased by $49 million or 17 financial reporting purposes they are considered percent due to the higher discount rate in 2017. $38 Utilities as support for the core operating activities of UC The Campus places a high priority on student $35 Davis. Expenses associated with core activities financial aid as part of its commitment to in 2017 and 2016 exceeded revenue available to affordability and access. Scholarships and support core activities by $51 million and $364 Supplies and $474 fellowships representing payments of financial million, respectively.

materials aid made directly to students and reported as $458 operating expenses were $88 million in 2017, a decrease of $1 million, or 1 percent, from 2016. $231 Scholarship allowances, representing financial Depreciation and amortization

$221 aid and fee waivers awarded by UC Davis, also forms of financial aid, increased from $175 million in 2016 to $188 million in 2017, an increase of $55 Interest

$13 million. On a combined basis, total reported expense $65 financial aid to students grew from $264 million in 2016 to $276 million in 2017, an increase of $12 million or 4 percent. $646 Other expenses

$636 44 UC Davis Financial Report 2016-17 45

UC Davis Cash Flows UC Davis cash increased by $104 million from Looking Forward The UC Davis campus remains highly competitive The statement of cash flows presents detailed $630 million in 2016 to $734 million in 2017. The University of California is part of a world in attracting federal grants and contracts information about the cash activity of the Substantially all of UC Davis cash is invested in center of learning, known for generating a steady revenue, with fluctuations in the awards received institution during the year. The statement is STIP managed by the Chief Investment Officer of stream of talent, knowledge and social benefits, closely paralleling trends in the budgets of divided into four parts. The first part represents the Regents and considered demand deposits. and has always been at the center of Californias federal research granting agencies. More than operating cash flows and shows the net cash The increase in cash is primarily due to the capacity to innovate. The excellence of its half of the Campus federal research revenue used in operating activities. The second section increase in the Medical Centers cash balance of programs attracts the best students, leverages comes from two agencies, the Department of reflects cash flows from noncapital financing $163 million. hundreds of millions of dollars in state, federal Health and Human Services, primarily through activities and includes cash received for state and private funding and promotes discovery of the National Institutes of Health, and the In 2017, cash of $301 million was used for educational appropriations, gifts received for new knowledge that fuels economic growth. National Science Foundation. Other agencies operating activities, offset by $631 million in noncapital purposes, intercampus transfers and that figure prominently in the Campus awards cash provided by noncapital financing activities. The budget framework agreed to with the for activities other than those for operating, are the Department of Education, Department Cash used in capital and related financing governor provides the University with base investing and capital financing purposes. The of Defense, Department of State and the activities totaled $225 million in 2017, primarily budget adjustments of up to 4 percent annually third section reflects the cash flows from capital Department of Agriculture.

the result of capital assets acquired during the through 2019. The framework also called for and related financing activities and includes year and principal and interest paid on debt In July 2017, the Regents approved increasing modest tuition increases, generally pegged cash used for the acquisition and construction and capital leases. Net cash used in investing the University contribution rate for UCRP to 15 to the rate of inflation beginning in 2018, of capital and related items. The fourth section activities totaled $1 million in 2017. The cash percent (from 14 percent) effective July 1, 2018.

with approximately one-third of the increase summarizes cash flows from investing activities expended for investing activities included net The University funds retiree health benefits on a directed to financial aid. The Student Services and illustrates the purchases, proceeds and investment income of $46 million offset by net pay-as-you-go basis.

Fee is expected to continue to be increased by interest received from investing activities. purchases of investments exceeding proceeds 5 percent annually with the customary one- Although the Medical Center demonstrated A summary comparison of cash flows for 2017 by $47 million. third of the increase being directed to financial positive operating margins in 2017, financial and 2016 is as follows: aid. Fifty percent of the remaining revenue and regional market competition, along with generated from the increase will be used to the added costs and responsibilities related to enhance student mental health services and functioning as an academic institution continue (in millions of dollars) the remaining 50 percent will be distributed to to be challenges facing this organization. The RESTATED support other student services programs. The demand for health care services and the cost of 2017 2016 CHANGE framework also acknowledged the Universitys providing them continue to increase significantly.

CASH PROVIDED BY (USED IN): plan to increase nonresident supplemental tuition In addition to the rising costs of salaries, benefits Operating activities ($301) ($298) ($3) by up to 8 percent in 2016 and 2017 and up to 5 and medical supplies faced by hospitals across Noncapital financing activities 631 573 58 percent each year thereafter. The Regents are the state, along with the costs of maintaining Capital and related financing activities (225) (309) 84 expected to approve varying annual increases and upgrading facilities, the Medical Center Investing activities (1) (102) 101 to professional degree supplemental tuition for also faces additional costs associated with new NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 104 (136) 240 all professional programs except law, which will technologies, biomedical research, the education Cash and cash equivalents, beginning of the year 630 766 (136) not be eligible for increases until 2019 under and training of health care professionals and the the terms of an agreement with the Governor. In care for a disproportionate share of the medically CASH AND CASH EQUIVALENTS, END OF THE YEAR $734 $630 $104 addition to these funding elements, the budget underserved in California. Other than Medicare framework includes a number of performance- and Medi-Cal (Californias Medicaid Program),

related provisions. The state budget for 2018 also health insurance payments do not recognize includes one-time funds of $169 million for UCRP. the added cost of teaching in their payment to 46 UC Davis Financial Report 2016-17 47

University of California, Davis STATEMENTS OF NET POSITION AT JUNE 30, 2017 AND 2016 (in thousands of dollars)

UC DAVIS UC DAVIS FOUNDATION RESTATED academic medical centers. The growth in costs Cautionary Note Regarding 2017 2016 2017 2016 of publicly funded programs and health care Forward-Looking Statements ASSETS reform will likely continue to reduce rates or limit Cash and cash equivalents $733,951 $629,882 $14,761 $18,097 Certain information provided by UC Davis, payment growth, placing downward pressure Short term investments 105,588 14,364 including written as outlined above or oral Investments held by trustees 1,668 1,663 on operating results for the UC Davis Medical statements made by its representatives, may Accounts receivable, net 517,399 495,618 Center.

contain forward-looking statements as defined Pledges receivable, net 1,328 2,635 6,393 22,908 The Campus must have a balanced array of many in the Private Securities Litigation Reform Act of Notes and mortgages receivable, net 10,393 10,233 categories of facilities to meet its education, 1995. All statements other than statements of Inventories 41,199 37,216 historical facts which address activities, events Other current assets 64,103 62,033 research and public service goals and continues CURRENT ASSETS 1,475,629 1,253,644 21,154 41,005 to assess long-term capital requirements. Support or developments that UC Davis expects or Investments 1,655,219 1,576,096 412,092 338,123 for the Campus capital program is expected to be anticipates will or may occur in the future contain Investments held by trustees 3,263 3,260 provided from a combination of sources, including forward-looking information.

Pledges receivable, net 1,439 1,244 26,631 9,343 the state of California, external financing, gifts Notes and mortgages receivable, net 73,254 74,294 In reviewing such information it should be kept and other sources. Capital assets, net 3,298,211 3,225,128 in mind that actual results may differ materially Other noncurrent assets 18,194 18,837 Additional UC Davis budget information can be from those projected or suggested in such NONCURRENT ASSETS 5,049,580 4,898,859 438,723 347,466 found at http://budget.ucdavis.edu. Additional forward-looking information. This forward-looking TOTAL ASSETS 6,525,209 6,152,503 459,877 388,471 University of California budget information can information is based upon various factors and DEFERRED OUTFLOWS OF RESOURCES 841,162 1,481,115 be found at http://universityofcalifornia.edu/news/ was derived using various assumptions. UC Davis LIABILITIES budget/welcome.html. Additional information does not undertake to update forward-looking Accounts payable 167,905 164,646 concerning state budget matters and the states information contained in this report or elsewhere Accrued salaries and benefits 117,893 185,287 financial condition may be found on the State to reflect actual results, changes in assumptions Unearned revenue 152,480 131,605 Commercial paper 72,507 43,876 of California Department of Finance website at: or changes in other factors affecting such Current portion of long-term debt 155,895 156,843 http://www.dof.ca.gov. forward-looking information.

Funds held for others 720 682 Other current liabilities 248,294 271,816 CURRENT LIABILITIES 914,974 954,073 720 682 Federal refundable loans 59,902 58,086 Obligations under life income agreements 5,323 5,205 Long-term debt 1,538,305 1,441,361 Net pension liability 1,581,020 2,128,418 Pension payable to the University 566,321 503,269 Net retiree health benefits liability 2,887,576 3,280,085 Other noncurrent liabilities 142,994 137,935 384 339 NONCURRENT LIABILITIES 6,776,118 7,549,154 5,707 5,544 TOTAL LIABILITIES 7,691,092 8,503,227 6,427 6,226 DEFERRED INFLOWS OF RESOURCES 979,426 560,840 NET POSITION Net investment in capital assets 1,663,155 1,640,537 Restricted:

Nonexpendable:

Endowments and gifts 121,212 118,923 245,988 218,394 Expendable:

Endowments and gifts 549,702 483,328 205,347 161,639 Other, including loans, capital projects, endowment income, debt service and appropriations 180,216 186,590 Unrestricted (3,818,432) (3,859,827) 2,115 2,212 TOTAL NET POSITION ($1,304,147) ($1,430,449) $453,450 $382,245 See accompanying Notes to Financial Statements.

48 UC Davis Financial Report 2016-17 49

University of California, Davis University of California, Davis STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2017 AND 2016 YEARS ENDED JUNE 30, 2017 AND 2016 (in thousands of dollars) (in thousands of dollars)

UC DAVIS UC DAVIS FOUNDATION UC DAVIS UC DAVIS FOUNDATION RESTATED RESTATED 2017 2016 2017 2016 2017 2016 2017 2016 OPERATING REVENUES CASH FLOWS FROM OPERATING ACTIVITIES Student tuition and fees, net $571,058 $526,931 Student tuition and fees $564,797 $526,562 Grants and contracts, net: Grants and contracts 696,694 663,516 Federal 396,905 391,549 Medical center 2,144,037 1,906,322 State 131,982 146,606 Educational activities 441,591 408,917 Private 141,431 143,188 Auxiliary enterprises 98,302 96,298 Local 18,208 11,516 Collection of loans from students and employees 12,696 13,470 Sales and services: Campus foundation private gifts $32,872 $14,303 Medical center, net 2,147,374 1,935,274 Payments to employees (2,241,424) (2,055,615)

Educational activities, net 444,969 402,167 Payments to suppliers and utilities (1,129,307) (1,034,908)

Auxiliary enterprises, net 97,569 96,290 Payments for benefits (847,043) (761,976)

Campus foundation private gifts $37,532 $31,400 Payments for scholarships and fellowships (88,371) (89,308)

Other operating revenues, net 103,361 96,277 800 76 Loans issued to students and employees (12,620) (15,205)

TOTAL OPERATING REVENUES 4,052,857 3,749,798 38,332 31,476 Payments to campus and beneficiaries (40,063) (33,590)

OPERATING EXPENSES Other receipts 59,744 43,781 555 (194)

Salaries and wages 2,193,578 2,045,962 NET CASH USED IN OPERATING ACTIVITIES (300,904) (298,146) (6,636) (19,481)

Pension benefits 301,796 420,988 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Retiree health benefits 239,773 289,405 State educational appropriations 430,808 410,784 Other employee benefits 472,202 450,761 Federal Pell Grants 52,102 51,558 Scholarships and fellowships 88,371 89,308 State hospital fee grants 2,583 5,567 Utilities 37,731 35,334 Gifts received for other than capital purposes:

Supplies and materials 473,984 457,921 Private gifts for endowment purposes 2,380 2,059 21,874 10,697 Depreciation and amortization 230,530 220,563 Other private gifts 85,901 75,678 Campus foundation grants 40,063 33,590 Other receipts (payments) 56,843 27,225 Other operating expenses 639,029 628,415 249 270 NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 630,617 572,871 21,874 10,697 TOTAL OPERATING EXPENSES 4,676,994 4,638,657 40,312 33,860 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES OPERATING LOSS (624,137) (888,859) (1,980) (2,384) Commercial paper financing:

NONOPERATING REVENUES (EXPENSES) Proceeds from issuance 72,712 76,190 State educational appropriations 432,363 412,356 Payments of principal (44,081) (54,618)

Build America Bonds federal interest subsidies 1,749 1,749 Interest paid (160) (137)

Federal Pell grants 52,098 51,621 State capital appropriations (51)

Private gifts, net 84,789 74,314 Build America Bonds federal interest subsidies 1,749 1,750 Investment income, net 46,472 46,077 2,551 2,475 Capital gifts and grants 32 Net appreciation (depreciation) in fair value of investments 122,916 (54,051) 43,409 (14,673) Proceeds from debt issuance 432,253 93,198 Interest expense (55,388) (65,159) Proceeds from the sale of capital assets 367 1,737 Loss on disposal of capital assets (8,194) (8,089) Purchase of capital assets (294,110) (284,281)

Other nonoperating revenues (expenses) 19,168 12,747 Refinancing or prepayment of outstanding debt (251,587) (13,765)

NET NONOPERATING REVENUES (EXPENSES) 695,973 471,565 45,960 (12,198) Principal paid on debt and capital leases (76,884) (58,210)

INCOME (LOSS) BEFORE OTHER CHANGES IN NET POSITION 71,836 (417,294) 43,980 (14,582) Interest paid on debt and capital leases (65,055) (70,468)

OTHER CHANGES IN NET POSITION NET CASH USED IN CAPITAL AND RELATED FINANCING ACTIVITIES (224,796) (308,623) - -

Capital gifts and grants, net 9,894 9,519 CASH FLOWS FROM INVESTING ACTIVITIES Permanent endowments 2,380 2,059 27,225 12,473 Proceeds from sales and maturities of investments 414,165 136,797 27,218 17,570 Other changes in net position 42,192 16,868 Purchases of investments (461,599) (283,446) (48,343) (13,891)

OTHER CHANGES IN NET POSITION 54,466 28,446 27,225 12,473 Investment income, net of investment expenses 46,586 44,561 2,551 2,476 INCREASE (DECREASE) IN NET POSITION 126,302 (388,848) 71,205 (2,109) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (848) (102,088) (18,574) 6,155 NET POSITION NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 104,069 (135,986) (3,336) (2,629)

Beginning of year, as previously reported (1,430,449) 1,596,562 382,245 384,354 Cash and cash equivalents, beginning of year 629,882 765,868 18,097 20,726 Cumulative effect of accounting changes (2,638,163) CASH AND CASH EQUIVALENTS, END OF YEAR $733,951 $629,882 $14,761 $18,097 END OF YEAR ($1,304,147) ($1,430,449) $453,450 $382,245 See accompanying Notes to Financial Statements.

See accompanying Notes to Financial Statements.

50 UC Davis Financial Report 2016-17 51

University of California, Davis STATEMENTS OF CASH FLOWS CONTINUED YEARS ENDED JUNE 30, 2017 AND 2016 (in thousands of dollars)

UC DAVIS UC DAVIS FOUNDATION RESTATED 2017 2016 2017 2016 University of California, Davis The financial data of the Associated Students of UC Davis (ASUCD) for the years ending June 30, RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH USED IN OPERATING ACTIVITIES NOTES TO FINANCIAL 2017 and 2016 has been included in the primary Operating loss ($624,137) ($888,859) ($1,980) ($2,384) STATEMENTS financial reporting entity because the Regents have Adjustments to reconcile operating loss to net cash used in operating activities: YEARS ENDED JUNE 30, 2017 AND 2016 certain fiduciary responsibilities for this organization.

Depreciation and amortization expense 230,530 220,563 Organizations that are not significant or for which UC Loss on impairment of capital assets 1,384 1,742 ORGANIZATION Davis is not financially accountable, such as the alumni Noncash gifts (3,887) (3,744) The University of California (the University) was organization, are not included in the reporting entity.

Allowance for doubtful accounts 6,373 (16,702) (190) 375 founded in 1868 as a public, state-supported institution. The UC Davis Foundation (the Foundation) is a Changes in assets and liabilities: The California State Constitution provides that the nonprofit, public-benefit corporation organized for the Receivables, net (25,837) (25,338) (583) (13,732) University shall be a public trust administered by purpose of accepting and administering the full range Investments held by trustees (5) (2) the corporation, The Regents of the University of private contributions for the Campus. The economic Inventories (3,983) (3,358) of California, which is vested with full powers of resources received or held by the Foundation are Deferred charges (2,889) (8,261) organization and government, subject only to such entirely for the benefit of the Campus. Because of the legislative control necessary to ensure the security nature and significance of their relationship with UC Other assets 1,462 4,499 of its funds and compliance with certain statutory Davis, including their ongoing financial support, the Accounts payable 3,262 21,228 4 4 and administrative requirements. The majority of Foundation is reported under Governmental Accounting Accrued salaries and benefits (67,394) (22,331) the 26-member independent governing board (the Standards Board (GASB) requirements as a discretely Unearned revenue 20,875 (1,967)

Regents) is appointed by the governor and approved presented component unit of UC Davis.

Net pension liability (61,669) 81,195 by the state Senate. Various University programs Net retiree health benefits liability 175,436 228,121 and capital outlay projects are funded through

SUMMARY

OF SIGNIFICANT Other liabilities 45,688 111,324 appropriations from the states annual Budget Act.

NET CASH USED IN OPERATING ACTIVITIES ($300,904) ($298,146) ($6,636) ($19,481) The Universitys financial statements are discretely ACCOUNTING POLICIES SUPPLEMENTAL NONCASH ACTVITIES presented in the states basic financial statements as a The financial statements have been prepared in Capital assets acquired through capital leases $2,574 component unit. accordance with accounting principles generally Capital assets acquired with liability at year-end 22,352 $20,666 accepted in the United States of America, using the The University of California, Davis (UC Davis or the Gifts of capital assets 10,391 9,487 economic resources measurement focus and the accrual Campus) is one of the ten campuses, five medical Other noncash gifts $8,721 $4,571 basis of accounting. The University follows accounting centers and three national laboratories that constitute See accompanying Notes to Financial Statements.

principles issued by the GASB.

the University of California. Founded in 1908 as the University Farm, UC Davis has emerged as an GASB Statement No. 75, Accounting and Financial acknowledged international leader in agriculture, Reporting for Postemployment Benefits Other Than veterinary medicine, biological, biotechnological Pensions, was implemented by the University as of July and environmental sciences and is gaining similar 1, 2016. This Statement revises existing standards for recognition for excellence in the arts, humanities, social measuring and reporting retiree health benefits provided sciences, engineering, health sciences, education, law by the University to its employees. This Statement and management. requires recognition of a liability equal to the net retiree health benefit liability, which is measured as the total retiree health benefits liability, less the amount of the FINANCIAL REPORTING ENTITY UCRHBTs fiduciary net position. The total retiree health The UC Davis financial statements included in this benefits liability is determined based upon discounting annual financial report present the combined activities projected benefit payments based on claims costs, of the Davis campus, including the UC Davis Medical the benefit terms and legal agreements existing at the Center. The University of California system is subject to UCRHBTs fiscal year end. Projected benefit payments an annual audit of the consolidated financial statements are required to be discounted using a single rate that which includes UC Davis. The financial statements for reflects the expected rate of return on investments, to UC Davis have not been separately audited.

the extent that plan assets are available to pay benefits, and a tax-exempt, high-quality municipal bond rate when plan assets are not available.

52 UC Davis Financial Report 2016-17 53

The Statement requires that most changes in the net retiree health benefits liability be included in retiree health Interest income is reported as non-operating revenue in ACCOUNTS RECEIVABLE, NET. Accounts receivable, benefits expense in the period of change. the statements of revenues, expenses and changes in net of allowance for uncollectible amounts, includes net position. reimbursements due from state and federal sponsors To implement Statement No. 75, UC Davis recorded its pro rata share of the Universitys net retiree health benefits of externally funded research, patient billings, accrued liability and restated the 2016 financial statements for purposes of presenting comparative information as of and for the Additional information on cash and cash equivalents income on investments held by the University, and other year ended June 30, 2017. The effects of reporting Statement No. 75 in the Universitys financial statements as of and can be obtained from the Universitys 2016-2017 Annual receivables. Other receivables include local government for the year ended June 30, 2016 were as follows: Financial Report.

and private grants and contracts, educational activities, INVESTMENTS. Investments are measured and and amounts due from students and employees.

(in thousands of dollars) recorded at fair value. The Campus investments PLEDGES RECEIVABLE, NET. Unconditional pledges of YEAR ENDING JUNE 30, 2016 consist of investments in the UC Regents Total Return private gifts, net of allowance for uncollectible amounts, AS PREVIOUSLY EFFECT OF ADOPTION OF AS RESTATED Investment Pool (TRIP) and General Endowment are recorded as pledges receivable and revenue in REPORTED STATEMENT NO. 75 Pool (GEP). The basis of determining the fair value the year pledged at the net present value of expected STATEMENT OF NET POSITION of pooled funds or mutual funds is determined as the cash flows. Conditional pledges, including all pledges of Deferred outflows of resources $779,548 $701,567 $1,481,115 number of units held in the pool multiplied by the price endowments and intentions to pledge, are recognized per unit share, computed on the last day of the month.

Net retiree health benefits liability - 3,280,085 3,280,085 as receivables and revenues when the specified Securities are generally valued at the last sale price on Total liabilities 5,223,142 3,280,085 8,503,227 conditions are met. Receivables and contribution the last business day of the fiscal year, as quoted on a Deferred inflows of resources 273,074 287,766 560,840 revenue associated with externally held investment recognized exchange or by utilizing an industry standard Unrestricted (993,543) (2,866,284) (3,859,827) trusts are not reflected in the accompanying financial pricing service, when available. Securities for which no statements. UC Davis recognizes contribution revenue Total net position $1,435,835 ($2,866,284) ($1,430,449) sale was reported as of the close of the last business when all eligibility requirements have been met.

STATEMENT OF REVENUES, EXPENSES AND day of the fiscal year are valued at the quoted bid price CHANGES IN NET POSITION of a dealer who regularly trades in the security being NOTES AND MORTGAGES RECEIVABLE, NET. Loans Retiree health benefits $48,331 $241,074 $289,405 valued. Certain securities may be valued on a basis of a to students, net of allowance for uncollectible amounts, Other employee benefits 464,480 (13,719) 450,761 price provided by a single source. are provided from federal student loan programs and from other University sources. Home mortgage loans, Total operating expenses 4,404,289 234,368 4,638,657 Investment transactions are recorded on the date the primarily to faculty, are provided from the Universitys Operating loss (657,587) (231,272) (888,859) securities are purchased or sold (trade date). Realized Short Term Investment Pool and from other University gains or losses are recorded as the difference between Operating loss before other changes in net (189,173) (228,121) (417,294) sources. Mortgage loans provided by the Short Term position the proceeds from the sale and the average cost of Investment Pool are classified as investments, and loans Change in net position (160,727) (228,121) (388,848) the investment sold. Dividend income is recorded on provided by other sources are classified as mortgages the ex-dividend date and interest income is accrued as Cumulative effect of restatements - (2,638,163) (2,638,163) receivable in the statements of net position.

earned. Gifts of securities are recorded at estimated fair Net position, end of year $1,435,835 ($2,866,284) ($1,430,449) value at the date of donation. INVENTORIES. Inventories for the Campus, consisting primarily of supplies and merchandise for resale, are Additional information on investments can be obtained In December 2015, the GASB issued Statement No. 78, Pensions Provided Through Certain Multiple-Employer Defined valued at cost, typically determined under the first-in-from the Universitys 2016-2017 Annual Financial Report.

Benefit Pension Plans, effective for the Universitys fiscal year beginning July 1, 2016. This Statement amends the scope first-out (FIFO) or weighted average method, which is and applicability of Statement No. 68, Accounting and Financial Reporting for Pensions an Amendment of GASB FUNDS HELD BY TRUSTEES. The UC Davis campus has not in excess of net realizable value. Inventories for the Statement No. 27, to exclude pensions provided to employees of state or local governmental employers through cost- been named the irrevocable beneficiary for charitable medical center consist primarily of pharmaceuticals and sharing, multiple-employer defined benefit pension plans that are not state or local governmental pension plans. This remainder trusts for which the Campus is not the trustee. medical supplies and are stated on a FIFO basis at the Statement establishes requirements for recognition and measurement of pension expense, expenditures and liabilities; Upon maturity of each trust, the remainder of the trust lower of cost or market.

note disclosures; and required supplementary information. Implementation of Statement No. 78 had no impact on the corpus will be transferred to the Campus. These funds CAPITAL ASSETS, NET. Land, infrastructure, financial statements. cannot be sold, disbursed or consumed until a specified buildings and improvements, software, intangible number of years have passed or a specific event has The adoption of Statements No. 75 and 78 did not result in any adjustments to the financial statements of the campus assets, equipment, libraries and collections and occurred. The Campus is also an income beneficiary foundations or UCRS. special collections are recorded at cost at the date of certain trusts where the assets are invested and The significant accounting policies of UC Davis are as follows: of acquisition or estimated fair value at the date of administered by outside trustees.

donation in the case of gifts. Estimates of fair value CASH AND CASH EQUIVALENTS. All University operating entities maximize the returns on their cash balances by Consistent with UC Davis recognition policy for pledges involve assumptions and estimation methods that are investing in a Short Term Investment Pool (STIP) managed by the Chief Investment Officer of the Regents. The of endowments, receivables and contribution revenue uncertain and, therefore, the estimates could differ Regents are responsible for managing the Universitys STIP and establishing the investment policy, which is carried out associated with these trusts are not reflected in the from actual value. Intangible assets include easements, by the Chief Investment Officer of the Regents. accompanying financial statements. The Campus land rights, trademarks, patents and other similar Substantially all of UC Davis cash is deposited into STIP, and all UC Davis deposits into STIP are considered demand recognizes contribution revenue when all eligibility arrangements. Capital leases are recorded at the lower deposits except for certain deposits held for construction. None of these amounts are insured by the Federal Deposit requirements have been met. of the fair market value of the asset or the present Insurance Corporation. value of future minimum lease payments. Significant 54 Notes to Financial Statements UC Davis Financial Report 2016-17 55

additions, replacements, major repairs, and renovations Rate increases for use of the facilities are subject to DEFERRED OUTFLOWS OF RESOURCES AND Expenses are charged to either restricted or to infrastructure and buildings are capitalized if the cost certain constraints and ownership of the facilities reverts DEFERRED INFLOWS OF RESOURCES. Deferred unrestricted net position based upon a variety of is $35,000 or more and if they have a useful life of more to the Campus upon expiration of the ground lease. The outflows of resources and deferred inflows of resources factors, including consideration of prior and future than one year. Minor renovations that do not meet the facilities are reported as capital assets by the Campus represent a consumption and acquisition of net position revenue sources, the type of expense incurred, UC criteria for capitalization are charged to operations. when placed in service, and a corresponding deferred that applies to a future period, respectively. UC Davis Davis budgetary policies surrounding the various Equipment with a cost of $5,000 or more and a useful inflow of resources is reported. The Campus has not classifies gains on refunding of debt as deferred revenue sources or whether the expense is a recurring life of more than one year is capitalized. Incremental provided guarantees on financing obtained by the third inflows of resources and losses as deferred outflows of cost.

costs, including salaries and employee benefits, directly parties under these arrangements. resources and amortizes such amounts as a component REVENUES AND EXPENSES. Operating revenues related to the acquisition, development and installation of interest expense over the remaining life of the old INVESTMENT IN JOINT VENTURES. Certain medical of UC Davis include receipts from student tuition of major capital projects are included in the cost of the debt, or the new debt, whichever is shorter.

centers, including the UC Davis Medical Center, have and fees, grants and contracts for specific operating capital assets. All land, library collections, and special Payments received or to be received by UC Davis entered into joint-venture arrangements with various activities, and sales and services from the medical collections costs are capitalized. from service concession arrangements are reported as third-party entities that include home health services, center, educational activities and auxiliary enterprises.

Depreciation is calculated using the straight-line cancer center operations and a health maintenance deferred inflows of resources. Operating expenses incurred in conducting the method over the estimated economic life of the asset. organization. Investments in these joint ventures are Changes in net pension liability not included in pension programs and services of UC Davis are presented in the Equipment under capital leases is amortized over the recorded using the equity method and are classified as expense are reported as deferred outflows of resources statements of revenues, expenses and changes in net estimated useful life of the equipment. Leasehold noncurrent assets in the statements of net position. At or deferred inflows of resources. Employer contributions position as operating activities.

improvements are amortized using the straight-line June 30, 2017 the investment in joint ventures for the subsequent to the measurement date of the net pension Certain significant revenues relied upon and budgeted method over the shorter of the life of the applicable UC Davis Medical Center was $18.2 million. liability are reported as deferred outflows of resources. for fundamental operational support of the core lease or the economic life of the asset.

UNEARNED REVENUE. Unearned revenue primarily instructional mission of UC Davis are mandated by NET POSITION. Net position is required to be classified Estimated economic lives are generally as follows: includes amounts received from grant and contract for accounting and reporting purposes into the the GASB standards to be reported as nonoperating sponsors that have not been earned under the terms of following categories: revenues, including state educational appropriations, YEARS the agreement and other revenue billed in advance of certain federal grants for student financial aid, private Infrastructure 25 the event, such as student tuition and fees for housing NET INVESTMENT IN CAPITAL ASSETS. This gifts and investment income, since the GASB does not Buildings and improvements 15-33 and dining services. category includes all of UC Davis capital assets, net consider them to be related to the principal operating of accumulated depreciation, reduced by outstanding activities of UC Davis.

Equipment 2-20 REFUNDABLE FEDERAL LOANS. Certain loans to debt attributable to the acquisition, construction or Computer software 3-7 students are administered by UC Davis with funding improvement of those assets. Nonoperating revenues and expenses include state primarily supported by the federal government. UC financing appropriations, state hospital fee program Intangible assets 40 - Indefinite Davis statement of net position includes both the notes RESTRICTED. UC Davis classifies the net position grants, Build America Bonds federal interest subsidies, Library books and collections 15 - Indefinite resulting from transactions with purpose restrictions receivable and the related federal refundable loan Federal Pell grants, private gifts for other than capital liability representing federal capital contributions owed as restricted net position until the resources are purposes, investment income, net appreciation or Capital assets acquired through federal grants and upon termination of the program. used for the required purpose or for as long as the depreciation in the fair value of investments, interest contracts where the federal government retains a provider requires the resources to remain intact. expense, and loss on the disposal of capital assets.

BOND PREMIUM. The premium received in the issuance reversionary interest are capitalized and depreciated. of long-term debt is recorded as a component of long- NONEXPENDABLE. The net position subject to State capital appropriations, capital gifts and grants and Inexhaustible capital assets, such as land and special term debt and is amortized as a reduction to interest externally imposed restrictions, which must be gifts for endowment purposes are classified as other collections that are protected, preserved and held for expense over the term of the related long-term debt. retained in perpetuity by UC Davis, is classified changes in net position.

public exhibition, education or research, including art, as nonexpendable net position. This includes UC POLLUTION REMEDIATION OBLIGATIONS. Upon an STUDENT TUITION AND FEES. Substantially all of the museum, scientific and rare book collections, are not Davis permanent endowment funds.

obligating event, UC Davis estimates the components student tuition and fees provide for current operations depreciated. of any expected pollution remediation costs and EXPENDABLE. The net position whose use by UC of UC Davis.

Interest on borrowings to finance facilities is capitalized recoveries from third parties. The costs, estimated using Davis is subject to externally imposed restrictions that can be fulfilled by actions of UC Davis pursuant UC Davis recognizes certain scholarship allowances during construction, net of any investment income the expected cash flow technique, are accrued as a to those restrictions, or that expire by the passage as the difference between the stated charge for tuition earned on tax-exempt borrowings during the temporary liability. Pollution remediation liabilities generally involve of time, are classified as expendable net position. and fees, housing and dining charges, recreational investment of project-related borrowings. groundwater, soil and sediment contamination at certain center and other fees, and the amount that is paid by sites where state and other regulatory agencies have UNRESTRICTED. The net position that is not subject SERVICE CONCESSION ARRANGEMENTS. UC Davis the student, as well as third parties making payments indicated that the Campus is among the responsible to externally imposed restrictions governing their has entered into service concession arrangements on behalf of the student. Payments of financial aid made parties. The liabilities are revalued annually and may use is classified as unrestricted net position. UC with third parties for student housing and certain other directly to students are classified as scholarship and increase or decrease the cost of recovery from third Davis unrestricted net position may be designated faculty and student services. Under these arrangements, fellowship expenses.

parties, if any, as a result of additional information that for specific purposes by management or the the Campus enters into ground leases with third parties refines the estimates, or from payments made from Regents. Substantially, all of UC Davis unrestricted at minimal or no cost, and gives the third party the right revenue sources that support the activity. There were net position is allocated for academic and research to construct, operate and maintain a facility, primarily for no expected recoveries at June 30, 2017 and 2016 initiatives or programs, for capital programs or for the benefit of students and faculty at competitive rates.

reducing the pollution remediation liability. other purposes.

56 Notes to Financial Statements UC Davis Financial Report 2016-17 57

Scholarship allowances recorded as an offset to well as estimated retroactive adjustments under PENSION PAYABLE TO UNIVERSITY. Additional indentures) and to use that cash at its discretion. UC revenues in the statements of revenues, expenses and reimbursement agreements with third-party payors. deposits in UCRP have been made using University Davis records revenue and expense transactions where changes in net position for the years ended June 30 are Laws and regulations governing Medicare and Medi-Cal resources to make up the gap between the approved direct and incremental economic benefits are received as follows: are complex and subject to interpretation. Retroactive contribution rates and the required contributions based by the Campus.

adjustments are accrued on an estimated basis in the on the Regents funding policy. These deposits, carried (in thousands of dollars) Certain revenues and expenses are allocated from period the related services are rendered and adjusted as internal loans by the University, are being repaid by the University to UC Davis. Allocated revenues in future periods as final settlements are determined. It the Campus, plus accrued interest, over a thirty-year 2017 2016 and expenses reported in the statements of is reasonably possible that estimated amounts accrued period through a supplemental pension assessment.

Student tuition and fees $146,508 $139,220 revenues, expenses and changes in net position are could change significantly based upon settlement, or as The Campus share of the internal loans has been managements best estimates of UC Davis arms-length Auxiliary enterprises 27,410 23,501 additional information becomes available. determined based upon their proportionate share of receipt and payment of such amounts.

Other operating revenues 13,611 12,625 covered compensation for the fiscal year. Supplemental NET PENSION LIABILITY. The University of California pension assessments are reported as pension expense COMPENSATED ABSENCES. UC Davis accrues annual Retirement Plan (UCRP) provides retirement benefits SCHOLARSHIP ALLOWANCES $187,529 $175,346 by the Campus. Additional deposits in UCRP by the leave, including employer-related costs, for employees to retired employees of UC Davis. UC Davis is required University, and changes in the Campus share of the at rates based upon length of service and job to contribute to UCRP at a rate set by the Regents.

internal loans, are reported as other changes in net classification and compensatory time based upon job STATE APPROPRIATIONS. The state of California Net pension liability includes the Campus share of position. classification and hours worked.

provides appropriations to the University on an the Universitys net pension liability for UCRP. The Campus share of net pension liability, deferred inflows RETIREE HEALTH BENEFITS AND LIABILITY. The ENDOWMENT SPENDING. Under provisions of California annual basis and UC Davis receives an allocation of resources, deferred outflows of resources and University provides retiree health benefits to retired law, the Uniform Prudent Management of Institutional of these funds. State educational appropriations pension expense have been determined based upon its employees of the Campus. The University established Funds Act allows for investment income, as well as a are recognized as nonoperating revenue; however, proportionate share of covered compensation for the the UCRHBT to allow certain University locations and portion of realized and unrealized gains, to be expended the related expenses for educational, retirement or fiscal year. The fiduciary net position and changes in affiliates, including UC Davis, to share the risks, rewards for the operational requirements of UC Davis programs.

specific operating purposes are reported as operating the fiduciary net position of UCRP have been measured and costs of providing for retiree health benefits and During fiscal 2017 and 2016 the University approved an expenses. State financing appropriations provide for consistent with the accounting policies used by the to accumulate funds on a tax-exempt basis under endowment payout of 4.75 percent. To the extent that principal and interest payments associated with lease-Plan. For purposes of measuring UCRPs fiduciary net an arrangement segregated from University assets. net income earned (interest and dividends reduced by purchase agreements with the State Public Works position, investments are reported at fair value and Contributions from the Campus to the UCRHBT are investment management fees) is less than distributable Board and are also reported as nonoperating revenue.

benefit payments are recognized when due and payable effectively made to a single-employer health plan endowment income, net gains are appropriated in order State appropriations for capital projects are recorded in accordance with the benefit terms. administered by the University as a cost-sharing plan. to meet the approved payout rate.

as revenue under other changes in net position when the related expenditures are incurred. Special state The Campus is required to contribute at a rate assessed TAX EXEMPTION. The University of California is The net pension liability is measured as the total appropriations, such as AIDS, tobacco, and breast each year by the University. recognized as a tax-exempt organization under the pension liability, less the amount of the pension plans cancer research, are reported as grant operating fiduciary net position. The fiduciary net position and Net retiree health benefits liability includes the Campus provisions of Section 501(c)(3) of the Internal Revenue revenue. changes in net position of the defined benefit plans share of the Universitys net retiree health benefits Code (IRC). Because the University is a state has been measured consistent with the accounting liability for UCRHBT. The Campus share of net retiree institution, related income received by UC Davis is also GRANT AND CONTRACT REVENUE. UC Davis receives polices used by the plans. The total pension liability health benefits liability, deferred inflows of resources, exempt from federal tax under IRC Section 115(a). In grant and contract revenue from governmental and is determined based upon discounting projected deferred outflows of resources and retiree health addition, UC Davis is exempt from state income taxes private sources. Revenue associated with the direct benefit payments based on the benefit terms and legal benefits expense have been determined based upon imposed under the California Revenue and Taxation costs of sponsored programs is recognized as the agreements existing at the pension plans fiscal year their proportionate share of covered compensation for Code.

related expenditures are incurred. Recovery of facilities and administrative costs of federally sponsored end. Projected benefit payments are discounted using the fiscal year. The fiduciary net position and changes in USE OF ESTIMATES. The preparation of financial programs is at cost reimbursement rates negotiated with a single rate that reflects the expected rate of return on net position of UCRHBT have been measured consistent statements in conformity with accounting principles UC Davis federal cognizant agency, the U.S. Department investments, to the extent that plan assets are available with the accounting policies used by the trust. For generally accepted in the United States of America of Health and Human Services. For the fiscal year ended to pay benefits, and a tax-exempt, high-quality municipal purposes of measuring UCRHBTs fiduciary net position, requires management to make estimates and June 30, 2017, the facilities and administrative cost bond rate when plan assets are not available. investments are reported at fair value and benefit assumptions that affect the reported amounts of assets recovery totaled $131 million; $93 million from federally payments are recognized when due and payable in and liabilities and disclosure of contingent assets and Pension expense is recognized for benefits earned sponsored programs and $38 million from other accordance with the benefit terms. liabilities at the date of the financial statements and the during the period, interest on the unfunded liability and sponsors. For the fiscal year ended June 30, 2016, the changes in benefit terms. The differences between Additional information on the UCRHBT can be obtained reported amounts of revenues and expenditures during facilities and administrative cost recovery totaled $127 expected and actual experience and changes in from the Universitys 2016-2017 Annual Financial Report. the reporting period. Although management believes million; $89 million from federally sponsored programs assumptions about future economic or demographic the estimates and assumptions are reasonable, they TRANSACTIONS WITH THE UNIVERSITY AND and $38 million from other sponsors. factors are reported as deferred inflows or outflows and are based upon information available at the time the UNIVERSITY AFFILITATES. The Campus has various are recognized over the average expected remaining estimate or judgment is made, and actual amounts could MEDICAL CENTER REVENUE. Medical center revenue transactions with the University and University affiliates.

service period for employees eligible for pension differ from those estimates.

is reported at the estimated net realizable amounts The University, as the primary reporting entity, has at its from patients, third-party payors including Medicare, benefits. The differences between expected and actual discretion the ability to transfer cash from the Campus Medi-Cal, and others, for services rendered, as returns are reported as deferred inflows or outflows and at will (subject to certain restrictive covenants or bond are recognized over five years.

58 Notes to Financial Statements UC Davis Financial Report 2016-17 59

NEW ACCOUNTING PRONOUCEMENTS. In March 2016, In March 2017, the GASB issued Statement No. 85, 1. Cash and Cash Equivalents the GASB issued Statement No. 81, Irrevocable Split- Omnibus 2017, effective for the Universitys fiscal The University maintains centralized management for substantially all of its cash and cash equivalents. UC Daviss cash Interest Agreements, effective for the Universitys fiscal year beginning July 1, 2017. The Statement addresses and cash equivalents consists of cash in demand deposit accounts and cash in the University STIP.

year beginning July 1, 2017. This statement addresses practice issues that have been identified during when Irrevocable Split-Interest Agreements constitute implementation and application of certain GASB Cash in UC Davis demand deposit accounts is minimized by sweeping available cash balances into the Universitys an asset for accounting and financial reporting purposes Statements including issues related to blending investment accounts on a daily basis. At June 30, 2017 and 2016, the carrying amount of UC Davis STIP balance and when the resources are administered by a third party. component units, goodwill, fair value measurement demand deposits, generally held in nationally recognized banking institutions, was $734 million and $630 million, The Statement also provides expanded guidance for and application and post-employment benefits. The respectively and bank balances were $729 million and $625 million, respectively. The difference between the carrying circumstances in which the government holds the University is evaluating the effect Statement No. 85 will amount and the bank balance is due to outstanding transfers, checks, and other reconciling items. UC Davis deposits in assets. The University is evaluating the effect that have on its financial statements. demand deposit accounts are uninsured and uncollateralized. UC Davis does not have significant exposure to foreign Statement No. 81 will have on its financial statements. currency risk in its cash and cash equivalents.

In May 2017, the GASB issued Statement No. 86, Certain In December 2016, the GASB issued Statement No. Debt Extinguishment Issues, effective for the Universitys A portion of UC Davis cash is deposited by the University into STIP. STIP allows UC Davis to maximize its returns on its 83, Certain Asset Retirement Obligations, effective fiscal year beginning July 1, 2017. This Statement short-term cash balances by taking advantage of the economies of scale of investing in a large pool with a broad range for the Universitys fiscal year beginning July 1, 2018. establishes standards of accounting and financial of maturities and is managed to maximize current earned income. Cash to provide for payroll, construction expenditures This Statement establishes guidance for determining reporting for in-substance defeasance transactions in and other operating expenses is invested in STIP. At June 30, 2017 and 2016, the carrying amount of UC Davis STIP was the timing and pattern of recognition for liabilities and which cash and other monetary assets acquired with $742 million and $626 million, respectively.

corresponding deferred outflow of resources related resources other than the proceeds of the refunding debt to asset retirement obligations. The Statement requires are placed in an irrevocable trust for the sole purpose the measurement of an asset retirement obligation to of extinguishing debt. In addition, this Statement revises be based on the best estimate of the current value of existing standards for prepaid insurance associated outlays expected to be incurred. The deferred outflow of with extinguished debt. The University is evaluating 2. Investments resources associated with an asset retirement obligation the effect Statement No. 86 will have on its financial The Regents, as the governing Board of the University, are responsible for the oversight of the Universitys investments will be measured at the amount of the corresponding statements. and establishes an investment policy, which is carried out by the Universitys Chief Investment Officer. These investments liability upon initial measurement and generally are associated with the STIP, TRIP, GEP, and other investment pools managed by the Universitys Chief Investment In June 2017, the GASB issued Statement No. 87, Leases, recognized as an expense during the reporting periods Officer, or are separately invested.

effective for the Universitys fiscal year beginning July that the asset provides service. Disclosure requirements UC Davis share of STIP is classified as cash and cash equivalents in the statements of net position.

1, 2020. This Statement establishes a single approach include a general description of the asset retirement to accounting for and reporting leases based on the The University does not maintain the composition of investments by investment type for each campus. The University obligation and associated tangible capital assets, the principle that leases are financings of the right to use managed commingled funds (UC pooled funds) serve as the core investment vehicle for UC Davis. A description of the source of the obligation to retire the assets, the methods an underlying asset. Under this Statement, a lessee is funds used is as follows:

and assumptions used to measure the liability, and other required to recognize a lease liability and an intangible relevant information. The University is evaluating the TRIP allows UC Davis the opportunity to maximize the return on its long-term working capital by taking advantage of the right-to-use lease asset, and a lessor is required to effect that Statement No. 83 will have on its financial economies of scale of investing in a large pool across a broad range of asset classes. TRIP is managed to a total return recognize a lease receivable and a deferred inflow of statements. objective and is intended to supplement STIP. Investments authorized by The Regents for TRIP include a diversified resources. Limited exceptions to the single-approach portfolio of equity, fixed income and alternative investments. The fair value of UC Davis investment in TRIP was $915.2 In January 2017, the GASB issued Statement No. 84, guidance are provided for short-term leases, defined million and $913.0 million at June 30, 2017 and 2016, respectively.

Fiduciary Activities, effective for the Universitys fiscal as lasting a maximum of twelve months at inception, year beginning July 1, 2019. This Statement establishes including any options to extend, financed purchases, GEP is an investment pool in which a large number of individual endowments participate in order to benefit from criteria for identifying fiduciary activities of all state and leases of assets that are investments and certain diversification and economies of scale. GEP is a balanced portfolio and the primary investment vehicle for endowed gift local governments. Governments with activities meeting regulated leases. The University is evaluating the effect funds. Where donor agreements place constraints on allowable investments, assets associated with endowments are the criteria should present a statement of fiduciary net Statement No. 87 will have on its financial statements. invested in accordance with the terms of the agreements. The fair value of UC Daviss investment in GEP was $740.0 position and a statement of changes in fiduciary net million and $663.1 million at June 30, 2017 and 2016, respectively.

position. This Statement describes four fiduciary funds There are many factors that can affect the value of investments. In addition to market risk, credit risk, custodial credit risk, that should be reported, if applicable: (1) pension (and concentration of credit risk and foreign currency risk may affect both equity and fixed-income securities. Equity securities other employee benefit) trust funds, (2) investment trust are affected by such factors as economic conditions, individual company earnings performance and market liquidity, funds, (3) private-purpose trust funds and (4) custodial while fixed-income securities are particularly sensitive to credit risk, inflation and changes in interest rates.

funds. Custodial funds generally should report fiduciary activities that are not held in a trust or equivalent More detail about the University of Californias investments can be found in the Universitys 2016-2017 Annual Financial arrangement that meets specific criteria. The University Report.

is evaluating the effect that Statement No. 84 will have on its financial statements.

60 Notes to Financial Statements UC Davis Financial Report 2016-17 61

3. Investments Held by Trustees 5. Pledges Receivable UC Davis has entered into agreements with trustees to maintain trusts for UC Davis long-term debt requirements, The composition of pledges receivable at June 30 is summarized as follows:

capital projects and landfill closure requirements. All investments held by trustees are insured, registered or held by the (in thousands of dollars)

University of Californias trustee or custodial bank, as fiduciary for the bondholder or as an agent for the University.

2017 2016 The trust agreements permit trustees to invest in U.S. and state government or agency obligations, commercial paper or Total pledges receivable outstanding $3,205 $4,460 other corporate obligations meeting certain credit rating requirements.

Less: Unamortized discount to present value (40) (38)

Investments held by trustees for future landfill closure expenditures are in accordance with requirements of the California Allowance for uncollectible pledges (398) (543)

Integrated Waste Management Board and reported as current assets. The fair value of these investments was $1.7 million at June 30, 2017. TOTAL PLEDGES RECEIVABLE, NET $2,767 $3,879 Investments held by trustees for endowment life annuities are reported as noncurrent assets. The fair value of these Less: Current portion of pledges receivable (1,328) (2,635) investments was $3.3 million at June 30, 2017. NONCURRENT PORTION OF PLEDGES RECEIVABLE $1,439 $1,244 UC Davis deposits into the trusts, or receipts from the trusts, are classified as a capital and related financing activity in the statements of cash flows if related to long-term debt requirements or capital projects. Investment transactions Future receipts under pledge agreements for each of the five fiscal years subsequent to June 30, 2017 and thereafter initiated by trustees in conjunction with the management of the trust assets and payments from the trust to third parties are as follows:

are not included in UC Davis statements of cash flows.

(in thousands of dollars)

Year ending June 30 2018 $1,725

4. Accounts Receivable 2019 475 Accounts receivable and the allowances for uncollectable amounts are as follows: 2020 366 (in thousands of dollars) 2021 305 LOCAL AND 2022 134 STATE AND PRIVATE 2023-2024 200 FEDERAL MEDICAL GRANTS AND EDUCATIONAL GOVERNMENT CENTER CONTRACTS ACTIVITIES OTHER TOTAL TOTAL PAYMENTS ON PLEDGES RECEIVABLE $3,205 At June 30, 2017 Accounts receivable $98,796 $361,297 $40,620 $36,068 $53,696 $590,477 Allowance for uncollectible (5) (61,991) (237) (10,461) (384) (73,078) amounts ACCOUNTS RECEIVABLE, NET $98,791 $299,306 $40,383 $25,607 $53,312 $517,399 6. Notes And Mortgages Receivable At June 30, 2016 Notes and mortgages receivable, along with the allowance for uncollectible amounts, are as follows:

Accounts receivable $97,699 $344,223 $38,411 $37,483 $43,819 $561,635 (in thousands of dollars)

Allowance for uncollectible (11) (49,962) (246) (15,253) (545) (66,017) NONCURRENT PORTION amounts CURRENT PORTION NOTES MORTGAGES TOTAL ACCOUNTS RECEIVABLE, NET $97,688 $294,261 $38,165 $22,230 $43,274 $495,618 At June 30, 2017 Other accounts receivable are primarily related to student tuition and fees and auxiliary enterprises. Notes and mortgages receivable $11,237 $78,346 $334 $78,680 The expense for uncollectible accounts have decreased the following revenues for the years ended June 30: Allowance for uncollectible amounts (844) (5,426) (5,426)

NOTES AND MORTGAGES RECEIVABLE, NET $10,393 $72,920 $334 $73,254 (in thousands of dollars)

At June 30, 2016 2017 2016 Notes and mortgages receivable $11,449 $79,760 $277 $80,037 Medical center $108,876 $96,770 Allowance for uncollectible amounts (1,216) (5,743) (5,743)

Educational activities 11,398 10,203 NOTES AND MORTGAGES RECEIVABLE, NET $10,233 $74,017 $277 $74,294 All other revenues 902 1,354 EXPENSE FOR UNCOLLECTIBLE ACCOUNTS $121,176 $108,327 62 Notes to Financial Statements UC Davis Financial Report 2016-17 63

7. Capital Assets, Net 8. Debt UC Davis capital asset activity for the years ended June 30, 2017 and 2016, is as follows: The University directly finances the construction, renovation and acquisition of facilities and equipment, or for such other purposes as are authorized by the Regents for UC Davis and other UC campuses through the issuance of debt (in thousands of dollars) obligations or indirectly through structures that involve legally separate entities reported as blended component units.

2015 ADDITIONS DISPOSALS 2016 ADDITIONS DISPOSALS 2017 Commercial paper and bank loans provide interim financing. Long-term financing includes revenue bonds, capital lease ORIGINAL COST obligations and other borrowings.

Land $60,894 $65 ($860) $60,099 $1,222 $61,321 UC Davis portion of the University of Californias outstanding debt at June 30 is as follows:

Infrastructure 213,356 2,470 215,826 8,152 223,978 (in thousands of dollars)

Buildings & improvements 4,064,414 127,266 (4,724) 4,186,956 243,041 $(1,198) 4,428,799 INTEREST RATE PRINCIPLE RESTATED Equipment 986,244 75,891 (39,073) 1,023,062 76,303 (45,992) 1,053,373 RANGE PAYMENT TERMS 2017 2016 Software 78,504 2,850 (23,654) 57,700 7,986 (8,467) 57,219 THE REGENTS OF THE UNIVERSITY OF CALIFORNIA:

Intangible assets 7,010 1,983 (1,741) 7,252 1,380 (1,384) 7,248 General Revenue Bonds Libraries & collections 444,725 15,142 (849) 459,018 13,772 (273) 472,517 Fixed Rate 1.0 - 7.6% Through 2115 $907,445 $896,535 Special collections 46,703 4,214 (2) 50,915 6,053 56,968 Variable Rate 0.9 - 1.1% Through 2048 88,603 88,603 Construction in progress 155,930 66,180 222,110 (44,351) 177,759 Medical Center Pooled Revenue Bonds 0.9 - 5.3% Through 2047 337,570 282,054 CAPITAL ASSETS, Limited Project Revenue Bonds 1.0 - 6.3% Through 2046 218,719 223,898 AT ORIGINAL COST $6,057,780 296,061 ($70,903) $6,282,938 $313,558 ($57,314) $6,539,182 Unamortized bond premium 134,007 94,603 DEPRECIATION & DEPRECIATION & REVENUE BONDS 1,686,344 1,585,693 2015 AMORTIZATION DISPOSALS 2016 AMORTIZATION DISPOSALS 2017 Mortgages and other borrowings Various Through 2018 5,520 11,952 ACCUMULATED DEPRECIATION AND Capital lease obligations 1.3 - 2.25% Through 2021 2,336 559 AMORTIZATION TOTAL DEBT OBLIGATIONS 1,694,200 1,598,204 Infrastructure $96,367 $7,513 $103,880 $7,427 $111,307 Less: Amounts due within one year (155,895) (156,843)

Buildings & improvements 1,733,879 107,175 $(3,107) 1,837,947 130,082 $(1,046) 1,966,983 NONCURRENT PORTION OF DEBT $1,538,305 $1,441,361 Equipment 693,423 82,251 (32,456) 743,218 69,880 (37,007) 776,091 Software 46,119 9,199 (22,806) 32,512 8,537 (8,467) 32,582 Total interest expense for the years ended June 30, 2017 and 2016 was $55 million and $65 million, respectively.

Intangible assets 2,684 1 2,685 13 2,698 Libraries & collections 324,111 14,424 (967) 337,568 14,591 (849) 351,310 ACCUMULATED DEPRECIATION AND AMORTIZATION $2,896,583 $220,563 ($59,336) $3,057,810 $230,530 ($47,369) $3,240,971 CAPITAL ASSETS, NET $3,161,197 $3,225,128 $3,298,211 Service concession arrangements with an original cost of $70 million are reported as buildings and improvements, with a corresponding $19 million and $18 million of accumulated depreciation at June 30, 2017 and 2016, respectively.

64 Notes to Financial Statements UC Davis Financial Report 2016-17 65

Outstanding Debt Activity Commercial Paper Limited Project Revenue Bonds are issued to finance Activity with respect to UC Davis current and noncurrent debt for the years ended June 30 is as follows: auxiliary enterprises and are collateralized by a pledge The University has a commercial paper program consisting of the sum of the gross revenues of the (in thousands of dollars) available which may be used for interim financing for specific projects. The bonds are not collateralized by any capital assets, gift financed projects or working capital.

MORTGAGES encumbrance, mortgage or other pledge of property, AND OTHER CAPITAL LEASE The programs liquidity is supported by available except pledged revenues, and do not constitute general REVENUE BONDS BORROWINGS OBLIGATIONS TOTAL investments in STIP and TRIP. Commercial paper is obligations of the Regents. The indenture requires the Year ended June 30, 2017 collateralized by a pledge of the revenues derived from University to achieve the sum of gross project revenues Current portion $145,256 $11,333 $254 $156,843 the ownership or operation of the projects financed and equal to 1.1 times debt service and maintain certain other Reclassification from noncurrent 84,435 668 1,193 86,296 constitutes limited obligations of the University. There is financial covenants.

no encumbrance, mortgage or other pledge of property Principal payments (69,606) (6,481) (797) (76,884) Medical Center Pooled Revenue Bonds are issued to securing commercial paper and the paper does not Amortization of deferred premium (10,360) (10,360) finance the University of California medical centers and constitute general obligations of the University.

are collateralized by a joint and several pledge of the CURRENT PORTION $149,725 $5,520 $650 $155,895 UC Davis commercial paper outstanding at June gross revenues of all five of the Universitys medical

$1,440,437 $619 $305 $1,441,361 30, 2017 and 2016 was $73 million and $44 million, Noncurrent portion centers. Medical center gross revenues are excluded respectively. Unallocated commercial paper available to from General Revenues. The Medical Center Pooled New obligations 432,204 49 2,574 434,827 draw at June 30, 2017 and 2016 was $180 million and Revenue Bond indenture requires the medical centers Refinancing or prepayment of debt (251,587) (251,587) $221 million, respectively. to set rates, charges and fees each year sufficient for Reclassification to current (84,435) (668) (1,193) (86,296) the medical center gross revenues to pay for the annual Revenue Bonds NONCURRENT PORTION $1,536,619 $0 $1,686 $1,538,305 principal and interest on the bonds and certain other Revenue bonds have financed various auxiliary, financial covenants.

Year ended June 30, 2016 (RESTATED) administrative, academic and research facilities of UC Davis. They have annual principal and semiannual The pledge of revenues under Limited Project Revenue Current portion $142,294 $15,652 $854 $158,800 interest payments, serial and term maturities, contain Bonds is subordinate to the pledge of revenues Reclassification from noncurrent 56,345 6,481 254 63,080 associated with projects financed with General Revenue sinking fund requirements and may have optional Principal payments (46,556) (10,800) (854) (58,210) redemption provisions. Bonds, but senior to pledges for commercial paper Amortization of deferred premium (6,827) (6,827) notes. Medical center gross revenues are not pledged General Revenue Bonds are collateralized solely by for any purpose other than under the indentures for the CURRENT PORTION $145,256 $11,333 $254 $156,843 general revenues defined in the indenture as certain Medical Center Pooled Revenue Bonds.

$1,417,349 $7,100 $559 $1,425,008 operating and nonoperating revenues consisting of gross Noncurrent portion All indentures permit the University to issue additional student tuition and fees; facilities and administrative New obligations 93,198 93,198 cost recovery from contracts and grants; revenues from bonds as long as certain conditions are met.

Refinancing or prepayment of debt (13,765) (13,765) educational, auxiliary, and other activities and other Reclassification to current (56,345) (6,481) (254) (63,080) revenues, including unrestricted investment income. The General Revenue Bond indenture requires the University NONCURRENT PORTION $1,440,437 $619 $305 $1,441,361 to set rates, charges, and fees each year sufficient for general revenues to pay for the annual principal and interest on the bonds and certain other financial covenants. UC Davis general revenues for the years ended June 30, 2017 and 2016 were $1.5 billion and $1.4 billion, respectively.

66 Notes to Financial Statements UC Davis Financial Report 2016-17 67

2017 Activity taxable bonds have a stated weighted average interest Future Debt Service In August 2016, Medical Center Pooled Revenue Bonds rate of 3.5 percent. The tax-exempt bonds have a stated Future debt service payments for each of the five fiscal years subsequent to June 30, 2017, and thereafter are as follows:

totaling $342.4 million, including $276.7 million of weighted average interest rate of 4.5 percent. The deferred premium will be amortized as a reduction to (in thousands of dollars) fixed-rate bonds and $65.7 million variable-rate demand bonds, were issued to finance and refinance certain interest expense over the term of the bonds.

MORTGAGES CAPITAL facilities and projects of the Medical Center. Proceeds In June 2016, Limited Project Revenue Bonds totaling REVENUE AND OTHER LEASE TOTAL for the UC Davis Medical Center, including a net bond $7.4 million, including $5.7 million tax-exempt bonds and BONDS BORROWINGS OBLIGATIONS PAYMENTS PRINCIPAL INTEREST premium of $48.4 million, were used to pay for project $1.7 million taxable bonds, were issued to finance certain Year ending June 30 construction, and issuance costs, and to refund $265.2 construction projects of the University. The bonds mature 2018 $115,474 $5,523 $680 $121,677 $57,129 $64,548 million of outstanding Medical Center Pooled Revenue at various dates through 2046. Proceeds for the campus, 2019 117,350 596 117,946 52,910 65,036 Bonds. The bonds mature at various dates through including a bond premium of $1 million, were used to 2047. The tax-exempt and taxable bonds have a stated pay for project construction and issuance costs. A loss 2020 115,346 596 115,942 52,951 62,991 weighted average interest rate of 4.5 percent and 3.0 of $0.2 million was recorded as a deferred outflow of 2021 113,263 533 113,796 52,889 60,907 percent, respectively. The refunding of the outstanding resources that will be amortized as interest expense over 2022 111,693 111,693 53,078 58,615 Medical Center Pooled Revenue Bonds resulted in a the remaining life of the refunded bonds. The taxable 2023 - 2027 525,894 525,894 280,055 245,839 loss of $9.5 million, recorded as a deferred outflow of bonds have a stated weighted average interest rate of 3.1 resources that will be amortized as interest expense over 2028 - 2032 407,952 407,952 221,833 186,119 percent. The tax-exempt bonds have a stated weighted the term of the refunded bonds. The deferred premium average interest rate of 4.3 percent. The deferred 2033 - 2037 376,018 376,018 240,732 135,286 will be amortized as a reduction to interest expense over premium will be amortized as a reduction to interest 2038 - 2042 299,609 299,609 216,611 82,998 the term of the bonds. Medical Center gross revenues expense over the term of the bonds.

2043 - 2047 220,220 220,220 172,866 47,354 continue to be pledged under the Indenture for the Medical Center Pooled Revenue Bonds.

Subsequent Events 2048 - 2052 52,900 52,900 19,139 33,761 In September 2017, $48.4 million tax-exempt Limited 2053 - 2115 556,025 556,025 140,000 416,025 In April 2017, General Revenue Bonds totaling $36.2 Project Revenue Bonds were issued to finance the million, including $34.7 million in tax-exempt bonds and TOTAL FUTURE DEBT SERVICE 3,011,744 5,523 2,405 3,019,672 $1,560,193 $1,459,479 acquisition, construction, improvement and renovation

$1.5 million in taxable bonds, were issued to finance Less: Interest component of future (1,459,407) (3) (69) (1,459,479) of certain facilities of the Campus. The bonds mature at certain projects and working capital purposes of the payments various dates through 2047. Proceeds, including a bond Campus. The bonds mature at various dates through PRINCIPAL PORTION OF FUTURE 1,552,337 5,520 2,336 1,560,193 premium of $8.6 million, were used to pay for project 2047 and the taxable fixed rate notes mature in 2028. PAYMENTS construction and issuance costs. The tax-exempt bonds Proceeds, including a bond premium of $5.2 million, Adjusted by:

have a stated weighted average interest rate of 4.9 were used to pay for project construction and issuance Unamortized bond premium 134,007 134,007 percent. The deferred premium will be amortized as a costs. The tax-exempt bonds have a stated weighted reduction to interest expense over the term of the bonds. TOTAL DEBT $1,686,344 $5,520 $2,336 $1,694,200 average interest rate of 4.8 percent. The taxable bonds have a stated weighted average interest rate of 3.8 Capital Leases percent. The deferred premium will be amortized as a Capital leases entered into with other lessors, typically General Revenue Bonds of $89 million are variable-rate demand bonds which reset weekly and, in the event of a failed reduction to interest expense over the term of the bonds. for equipment, totaled $2.6 million for the year ended remarketing, can be put back to the Regents for tender, therefore, UC Davis has classified these bonds as current June 30, 2017. liabilities as of June 30, 2017 and 2016.

2016 Activity In April 2016, General Revenue Bonds totaling $72.9 Other University Borrowings million, including $56.1 million in tax-exempt bonds UC Davis may use uncollateralized revolving lines and $16.8 million in taxable bonds were issued to of credit with commercial banks to provide interim finance or refinance certain facilities and projects of the financing for buildings and equipment. Lines of credit University. The bonds mature at various dates through commitments totaled $13 million at June 30, 2017.

2046. Proceeds for the campus, including a bond Outstanding borrowings under these bank lines totaled premium of $12 million, were used to pay for project $5 million at June 30, 2017.

construction and issuance costs and to refund $14 million of outstanding General Revenue Bonds. The refunding of the outstanding General Revenue Bonds resulted in a loss of $0.8 million, recorded as a deferred outflow of resources that will be amortized as interest expense over the remaining life of the refunded bonds. The 68 Notes to Financial Statements UC Davis Financial Report 2016-17 69

9. Other Current and Noncurrent Liabilities 10. Deferred Outflows And Inflows Of Resources UC Davis other liabilities as of June 30 are as follows: The composition of deferred outflows and inflows of resources as of June 30 is summarized as follows:

(in thousands of dollars) (in thousands of dollars) 2017 RESTATED 2016 SERVICE NET RETIREE CONCESSION NET PENSION HEALTH BENEFITS DEBT CURRENT NONCURRENT CURRENT NONCURRENT ARRANGEMENTS LIABILITY LIABILITY REFUNDING TOTAL Compensated absences $95,303 $63,511 $90,399 $58,959 At June 30, 2017 Third-party payor settlement liability 128,503 157,176 Deferred outflows of resources $172,058 $624,820 $44,284 $841,162 Accrued interest 8,722 8,782 Deferred inflows of resources $50,293 150169 778964 979,426 McClellan closure 17,593 17,593 At June 30, 2016 Pollution remediation 56,136 56,366 Deferred outflows of resources $729,160 $701,567 $50,388 $1,481,115 Landfill closure 2,030 2,040 Deferred inflows of resources $51,532 221542 287766 560,840 Other liabilities 15,766 3,724 15,459 2,977 TOTAL OTHER LIABILITIES $248,294 $142,994 $271,816 $137,935

11. Retirement Plans Pollution Remediation Liabilities McClellan Closure Liability Substantially all full-time employees of UC Davis participate in the University of California Retirement System (UCRS) that Pollution remediation liabilities generally involve In September 1999, the Regents of the University of is administered by the University. The UCRS consists of UCRP, a single-employer defined benefit pension plan, and the groundwater, soil and sediment contamination at certain California authorized UC Davis to acquire the McClellan University of California Retirement Savings Program (UCRSP) that includes four defined contribution plans with several sites where state and other regulatory agencies have Nuclear Radiation Center (MNRC) from the Department investment portfolios generally funded with employee non-elective and elective contributions. The Regents have the indicated UC Davis is among the responsible parties. of Defense. The Nuclear Regulatory Commission license authority to establish and amend the benefit plans. Additional information on the retirement plans can be obtained from the The Campus reviews the liabilities annually and may for this reactor requires that the majority (51 percent) 2016-2017 annual reports of the University of California Retirement System.

increase or decrease the cost or recovery from third of the workload be for the purposes of education and parties, if any, as a result of additional information research. Legislation authorized the allocation of $17.6 that refines the estimates, or from payments made million to UC Davis to cover the cost of the eventual UNIVERSITY OF CALIFORNIA RETIREMENT PLAN. The Universitys membership in UCRP consisted of the from revenue sources that support the activity. These decommissioning of the MNRC which is anticipated to UCRP provides lifetime retirement income, disability following at June 30, 2017:

estimates consider the investigative work and analysis occur in 2029. A fund functioning as an endowment protection, death benefits, and post-retirement and of engineers, outside environmental consultants, and the has been established for these funds and the estimated pre-retirement survivor benefits to eligible employees of UNIVERSITY OF CALIFORNIIA advice of legal staff regarding the status and anticipated decommission costs recorded as a liability. the University, and its affiliates. Membership is required results of various administrative and legal proceedings. in UCRP for all employees appointed to work at least Retirees and beneficiaries 72,995 Landfill Closure 50 percent time for one year or more or for an indefinite receiving benefits In most cases, only a range of reasonably possible costs can be estimated. In establishing the Campus UC Davis has two landfill units. Unit I has a total capacity period or for a definite period of a year or more. An Inactive members entitled to, 87,052 liability, the sum of probability-weighted amounts of nearly 252 thousand cubic yards and was closed in employee may also become eligible by completing 1,000 but not receiving benefits in a range of possible estimated amounts is used. June 2001. Unit II is made up of 8 cells with a combined hours within a 12-month period. Generally, five years Active members:

Accordingly, such estimates can change as the Campus capacity of 703 thousand cubic yards and was closed as of service are required for entitlement to plan benefits. Vested 76,064 periodically evaluates and revises these estimates as of August 2011 before reaching its full capacity. The amount of pension benefit is determined under the Nonvested 53,318 new information becomes available. The Campus cannot State laws and regulations require UC Davis to perform basic formula of covered compensation times age factor times years of service credit. The maximum monthly Total active members 129,382 predict whether new information gained as projects certain maintenance and monitoring functions at each progress will affect the estimated liability accrued. The landfill site for 30 years after closure. In 2012, with the benefit cannot exceed 100 percent of the employees TOTAL MEMBERSHIP 289,429 timing of payment for estimated future environmental formal closing of the landfill, the full present value of the highest average plan compensation over a 36-month costs is influenced by a number of factors such as the closure and post closure costs was reported for a total period, subject to certain limits imposed under the regulatory approval process, and the time required to liability of $4 million. Internal Revenue Code. Annual cost-of-living adjustments design, construct, and implement the remedy. There (COLAs) are made to monthly benefits according to a UC Davis is required by state laws and regulations to were no expected recoveries at June 30, 2017 reducing specified formula based on the Consumer Price Index. Ad make contributions to a trust to finance closure care. At the pollution remediation liability. hoc COLAs may be granted subject to funding availability.

June 30, 2017, investments of $1.7 million were held for these purposes.

70 Notes to Financial Statements UC Davis Financial Report 2016-17 71

CONTRIBUTIONS. Contributions to UCRP are made by UC Davis and its employees. The rates for contributions as a UC Davis net pension liability was measured as of June The long-term expected investment rate of return percentage of payroll are determined annually pursuant to the Regents funding policy and based upon recommendations 30 and calculated using the plan net position valued assumption for UCRP was determined in 2015 based on of the consulting actuary. The Regents determine the portion of the total contribution to be made by the campuses and as of the measurement date and total pension liability a building-block method in which expected future real by the employees. Employee contributions by represented employees are subject to collective bargaining agreements. determined based upon rolling forward the total pension rates of return (expected returns, net of inflation) are Effective July 1, 2014, employee member contributions range from 7 percent to 9 percent. The University pays a uniform liability from the results of the actuarial valuations developed for each major asset class. These returns contribution rate of 14 percent of covered payroll on behalf of all UCRP members. as of July 1 one year prior to the measurement date. are combined to produce the long-term expected rate Actuarial valuations represent a long-term perspective of return by weighting the expected future real rates of Employee contributions to UCRP are accounted for separately and currently accrue interest at 6 percent annually. Upon and involve estimates of the value of reported benefits return by the target asset allocation percentage, adding termination, members may elect a refund of their contributions plus accumulated interest; vested terminated members who and assumptions about the probability of certain events expected inflation and subtracting expected investment are eligible to retire may also elect monthly retirement income or a lump sum equal to the present value of their accrued occurring far into the future. UC Davis net pension expenses and a risk margin. The target allocation benefits.

liability was calculated using the following methods and and projected arithmetic real rates of return for each Contributions were as follows for the years ended June 30: assumptions: major asset class, after deducting inflation, but before (in thousands of dollars) deducting investment expenses, used in the derivation (shown as a percentage) of the long-term expected investment rate of return 2017 2016 2017 2016 assumption are summarized in the following table:

EMPLOYER EMPLOYEE TOTAL EMPLOYER EMPLOYEE TOTAL Inflation 3.0% 3.0%

(shown as a percentage)

Campus $137,400 $78,725 $216,125 $131,276 $75,502 $206,778 Investment rate of return 7.25 7.25 TARGET LONG-TERM Medical Center 102,403 58,672 161,075 95,435 54,888 150,323 Projected salary increases 3.8 - 6.2 3.8 - 6.2 ALLOCATION EXPECTED TOTAL $239,803 $137,397 $377,200 $226,711 $130,390 $357,101 REAL RATE Cost-of-living adjustments 2.0 2.0 OF RETURN U.S. Equity 28.5% 6.1%

Additional deposits were made by the University to UCRP for the fiscal years ended June 30, 2017 and 2016. The Actuarial assumptions are subject to periodic revisions Developed International Campus and medical center reported pension expense and an increase in the pension payable to the University for its Equity 18.5 7.0 as actual results are compared with past expectations portion of these additional deposits based upon their proportionate share of covered compensation for the year ended and new estimates are made about the future. The Emerging Market Equity 8.0 8.6 June 30 as follows: actuarial assumptions used in 2017 were based upon Core Fixed Income 12.5 0.8 (in thousands of dollars) the results of an experience study conducted for the High Yield Bonds 2.5 3.0 period of July 1, 2010 through June 30, 2014. For active 2017 2016 Emerging Market Debt 2.5 3.9 members, inactive members and healthy retirees, the Campus $42,946 $50,907 RP-2014 White Collar Mortality Tables are used (separate TIPS 4.5 0.4 Medical Center 32,007 37,008 tables for males and females), projected with the Real Estate 5.5 4.8 TOTAL $74,953 $87,915 two-dimensional MP-2014 projection scale of 2029, with Private Equity 8.0 11.2 ages then set forward one year. For disabled members, Absolute Return 6.5 4.2 rates are based on the RP-2014 Disabled Retiree Mortality Table, projected with the two-dimensional MP Real Assets 3.0 4.4 2014 projection scale to 2029, and with ages then set TOTAL 100.0% 5.6%

NET PENSION LIABILITY. The UC Davis Campus and medical centers proportionate share of the net pension liability back one year for males and set forward five years for for UCRP as of June 30 is as follows:

females. DISCOUNT RATE. The discount rate used to estimate (in thousands of dollars) the net pension liability as of June 30, 2017 and 2016 2017 2016 was 7.25 percent. To calculate the discount rate, cash PROPORTION OF PROPORTIONATE SHARE PROPORTION OF PROPORTIONATE SHARE flows into and out of UCRP were projected in order to THE NET PENSION OF THE NET THE NET PENSION OF THE NET determine whether UCRP has sufficient cash in future LIABILITY PENSION LIABILITY LIABILITY PENSION LIABILITY periods for projected benefit payments for current Campus 8.9% $905,879 9.0% $1,232,451 members. For this purpose, the Campus and medical Medical Center 6.7% 675,141 6.6% 895,967 center contributions that are intended to fund benefits TOTAL $1,581,020 $2,128,418 of current plan members and their beneficiaries are included. Projected Campus, medical center and member contributions that are intended to fund the service costs of future plan members and their beneficiaries, as well as projected contributions of future plan members, are not included. UCRP was projected to have assets sufficient to make projected benefit payments for current members for all future years as of June 30, 2017 and 2016.

72 Notes to Financial Statements UC Davis Financial Report 2016-17 73

SENSITIVITY OF THE NET PENSION LIABILITY TO THE DISCOUNT RATE ASSUMPTION. The following presents the Net deferred outflows of resources and deferred inflows UCRSP PLANS. The UCRSP plans (DC Plan, June 30, 2017 net pension liability of the Campus and the medical center calculated using the June 30, 2017 discount of resources as of June 30, 2017 related to pensions will Supplemental DC Plan, 403(b) Plan and 457(b) Plan) rate assumption of 7.25 percent, as well as what the net pension liability would be if it were calculated using a discount be recognized in pension expense during the five years provide savings incentives and additional retirement rate different than the current assumption: ending June 30 as follows: security for all eligible employees. The DC Plan accepts both pretax and after-tax employee contributions. The (in thousands of dollars) (in thousands of dollars)

Supplemental DC Plan accepts employer contributions 1% DECREASE CURRENT DISCOUNT 1% INCREASE MEDICAL on behalf of certain qualifying employees. The 403(b)

(6.25%) (7.25%) (8.25%) CAMPUS CENTER TOTAL and 457(b) Plans accept pretax employee contributions Campus $1,637,924 $905,879 $294,576 Year ending June 30 and the University may also make contributions on Medical Center 1,220,725 675,141 219,544 2018 ($40,993) ($18,243) ($59,236) behalf of certain members of management. Benefits TOTAL $2,858,649 $1,581,020 $514,120 2019 67,710 58,071 125,781 from the Plans are based on participants mandatory and voluntary contributions, plus earnings, and are 2020 27,179 26,444 53,623 immediately vested.

2021 (60,151) (39,610) (99,761)

DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES. Deferred outflows of resources Additional information on the retirement plans can and deferred inflows of resources for pension were related to the following sources as of the years ended June 30: 2022 (132) 1,614 1,482 be obtained from the 2016-2017 annual report of TOTAL ($6,387) $28,276 $21,889 (in thousands of dollars) the University of California Retirement System which can be obtained at http://reportingtransparency.

CAMPUS MEDICAL CENTER TOTAL universityofcalifornia.edu/.

At June 30, 2017 DEFERRED OUTFLOW OF RESOURCES Changes in proportion and differences between contributions and proportionate share of contributions $2,799 $18,863 $21,662

12. Retiree Health Benefit Costs and Obligations Changes of assumptions or other inputs 70,154 52,287 122,441 The University administers single-employer health and welfare plans to provide health and welfare benefits, primarily Difference between expected and actual experience 16,018 11,937 27,955 medical, dental and vision benefits, to eligible retirees and their eligible family members (retirees) of the University of TOTAL $88,971 $83,087 $172,058 California and its affiliates. The Regents has the authority to establish and amend the benefit plans.

DEFERRED INFLOWS OF RESOURCES Changes in proportion and differences between contributions Membership in UCRP is required to become eligible for Retirees who are employed by the University after July and proportionate share of contributions $30,548 $6,509 $37,057 retiree health benefits. Participation in the retiree health 1, 2013, and retire at the age of 56 or older, become Changes of assumptions or other inputs 33,822 25,208 59,030 benefit plans consisted of the following at July 1, 2015, the eligible for a percentage of the Universitys contribution date of the latest actuarial valuation: based on age and years of service. Retirees are eligible Net difference between projected and actual earnings on pension plan investments 17,500 13,043 30,543 for the maximum University contribution at age 65 with UNIVERSITY OF 20 or more years of service. Retirees employed by the Difference between expected and actual experience 13,488 10,051 23,539 CALIFORNIIA University prior to 1990 and not rehired after that date TOTAL $95,358 $54,811 $150,169 Retirees who are currently receiving 42,974 benefits are eligible for the Universitys maximum contribution At June 30, 2016 if they retire before age 55 and have at least 10 years Active members entitled to, but not yet 125,510 DEFERRED OUTFLOW OF RESOURCES receiving benefits of service, or if they retire at age 55 or later and have Changes in proportion and differences between contributions at least 5 years of service. Retirees employed by the TOTAL MEMBERSHIP 168,484 and proportionate share of contributions $2,444 $20,867 $23,311 University after 1989 are subject to graduated eligibility Changes of assumptions or other inputs 161,705 117,557 279,262 provisions that generally require 10 years of service CONTRIBUTIONS. The contribution requirements before becoming eligible for 50 percent of the maximum Net difference between projected and actual earnings on pension plan investments 234,970 170,818 405,788 of eligible retirees and the participating university University contribution, increasing to 100 percent after locations, such as UC Davis, are established and may 20 years of service.

Difference between expected and actual experience 12,044 8,755 20,799 be amended by the University. Contributions toward TOTAL $411,163 $317,997 $729,160 Active employees do not make any contributions toward benefits are shared with the retiree. The University the retiree health benefit plans. Retirees pay the excess, DEFERRED INFLOWS OF RESOURCES determines the employers contribution. Retirees are if any, of the premium over the applicable portion of the Changes in proportion and differences between contributions required to pay the difference between the employers Universitys contribution.

and proportionate share of contributions $32,965 $9,521 $42,486 contribution and the full cost of the health insurance.

Changes of assumptions or other inputs 79,247 57,612 136,859 In addition to the explicit University contribution provided to retirees, there is an implicit subsidy. The Difference between expected and actual experience 24,434 17,763 42,197 gross premiums for members that are not currently TOTAL $136,646 $84,896 $221,542 eligible for Medicare benefits are the same for active employees and retirees, based on a blend of their 74 Notes to Financial Statements UC Davis Financial Report 2016-17 75

health costs. Retirees, on average, are expected to have Participating University locations, such as UC Davis, are Actuarial assumptions are subject to periodic revisions as actual results are compared with past expectations and new higher health care costs than active employees. This is required to contribute at a rate assessed each year by estimates are made about the future. The actuarial assumptions are based upon the results of an experience study primarily due to the older average age of retirees. Since the University. The contribution requirements are based conducted for the period of July 1, 2010 through June 30, 2014. For pre-retirement mortality rates, the RP-2014 White the same gross premiums apply to both groups, the upon projected pay-as-you-go financing requirements. Collar Employee Mortality Tables (separate table for males and females) projected with the two-dimensional MP-2014 premiums paid for active employees by the University The assessment rates were $2.93 and $2.98 per $100 projection scale to 2029 were used. For post-retirement, healthy mortality rates are based on the RP-2014 White are subsidizing the premiums for retirees. This effect of UCRP covered payroll effective July 1, 2016 and 2015, Collar Healthy Annuitant Mortality Table projected with the two-dimensional MP-2014 projection scale to 2029, and is called the implicit subsidy. The implicit subsidy respectively. This resulted in UC Davis contributions of with ages then set forward one year. For disabled members, rates are based on the RP-2014 Disabled Retiree Mortality associated with retiree health costs paid during the past $51 million and $48 million for years ended June 30, Table projected with the two-dimensional MP-2014 projection scale to 2029, and with ages then set back one year for year is also considered to be a contribution from the 2017 and 2016, respectively. males and set forward five years for females. For disabled members, rates are based on the RP-2014 Disabled Retiree University. Mortality Table, projected with the two-dimensional MP-2014 projection scale to 2029 and with ages then set back one year for males and set forward five years for females.

SENSITIVITY OF NET RETIREE HEALTH BENEFITS LIABILITY TO THE HEALTH CARE COST TREND RATE. The following NET RETIREE HEALTH BENEFITS LIABILITY. The UC Davis Campus and medical centers proportionate share of the presents the June 30, 2017 net retiree health benefits liability of the UC Davis Campus and medical center calculated using net retiree health benefits liability as of June 30 is as follows:

the June 30, 2017 health care cost trend rate assumption with initial trend ranging from 5.0 percent to 9.5 percent grading (in thousands of dollars) down to an ultimate trend of 5.0 percent over 15 years, as well as what the net retiree health benefits liability would be if it 2017 2016 were calculated using a health care cost trend rate different than the current assumption:

PROPORTIONATE PROPORTION OF PROPORTIONATE (in thousands of dollars)

PROPORTION OF SHARE OF THE THE NET RETIREE SHARE OF THE THE NET RETIREE HEALTH NET RETIREE HEALTH HEALTH BENEFITS NET RETIREE HEALTH 1% DECREASE CURRENT DISCOUNT 1% INCREASE BENEFITS LIABILITY BENEFITS LIABILITY LIABILITY BENEFITS LIABILITY (4.0% TO 8.5% (5.0% TO 9.5% (6.0% - 10.5%

DECREASING TO 4.0%) DECREASING TO 5.0%) INCREASING TO 6.0%)

Campus 8.9% $1,659,773 9.0% $1,894,693 Campus $1,410,593 $1,659,773 $2,004,273 Medical Center 6.6% 1,227,803 6.6% 1,385,392 Medical Center 1,043,474 1,227,803 1,482,643 TOTAL $2,887,576 $3,280,085 TOTAL $2,454,067 $2,887,576 $3,486,916 DISCOUNT RATE. The discount rate used to estimate the net retiree health benefits liability as of June 30, 2017 and UC Davis net retiree health benefits liability was measured as of June 30 based on rolling forward the results of the 2016 was 3.58 percent and 2.85 percent, respectively. The discount rate was based on the Bond Buyer 20-Bond actuarial valuations as of July 1. Actuarial valuations represent a long-term perspective and involve estimates of the General Obligation index since UCHRBT plan assets are not sufficient to make benefit payments.

value of reported benefits and assumptions about the probability of occurrence of events far into the future. Significant actuarial methods and assumptions used to calculate the UC Davis net retiree health benefits liability were:

(shown as a percentage) SENSITIVITY OF NET RETIREE HEALTH BENEFITS LIABILITY TO THE DISCOUNT RATE ASSUMPTION. The following presents the June 30, 2017 net retiree health benefits liability of the UC Davis campus and medical center calculated 2017 2016 using the June 30, 2017 discount rate assumption of 3.58 percent, as well as what the net retiree health benefits liability Discount rate 3.6 % 2.9 %

would be if it were calculated using a discount rate different than the current assumption:

Inflation 3.0 3.0 (in thousands of dollars)

Investment rate of return 3.0 3.0 1% DECREASE CURRENT DISCOUNT 1% INCREASE Health care cost trend rates Initially ranges from 5.0 to 9.5 decreasing to an Initially ranges from 6.3 to 9.0 decreasing to an (2.58%) (3.58%) (4.58%)

ultimate rate of 5.0 for 2032 and later years. ultimate rate of 5.0 for 2031 and later years.

Campus $1,988,657 $1,659,773 $1,416,501 Medical Center 1,471,092 1,227,803 1,047,844 TOTAL $3,459,749 $2,887,576 $2,464,345 76 Notes to Financial Statements UC Davis Financial Report 2016-17 77

DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES. Deferred outflows of resources 13. Endowment Funds and deferred inflows of resources for pension were related to the following sources as of the years ending June 30:

The value of endowments and gifts held and administered by the University but reflected in UC Davis statements of net (in thousands of dollars) position at June 30, 2017 and 2016 is as follows:

MEDICAL (in thousands of dollars)

CAMPUS CENTER TOTAL RESTRICTED 2017 NON- RESTRICTED EXPENDABLE EXPENDABLE UNRESTRICTED TOTAL DEFERRED OUTFLOWS OF RESOURCES At June 30, 2017 Changes in proportion and differences between locations contributions $8,740 $8,740 and proportionate share of contributions Endowments $119,110 $186,036 $305,146 Difference between expected and actual experience $7,554 5,588 13,142 Funds functioning as endowments 246,521 $161,389 407,910 Changes of assumptions or other inputs 346,270 256,150 602,420 Annuity and life income 2,102 1,161 3,263 Net difference between projected and actual earnings on plan investments 298 220 518 Gifts 115,984 1,779 117,763 TOTAL $354,122 $270,698 $624,820 ENDOWMENTS AND GIFTS $121,212 $549,702 $163,168 $834,082 DEFERRED INFLOWS OF RESOURCES At June 30, 2016 (RESTATED)

Difference between expected and actual experience $130,776 $96,740 $227,516 Endowments $116,695 $155,764 $272,459 Changes of assumptions or other inputs 333,933 217,515 551,448 Funds functioning as endowments 221,139 $143,451 364,590 TOTAL $464,709 $314,255 $778,964 Annuity and life income 2,228 1,032 3,260 2016 Gifts 105,393 1,920 107,313 DEFERRED INFLOWS OF RESOURCES ENDOWMENTS AND GIFTS $118,923 $483,328 $145,371 $747,622 Changes in proportion and differences between locations contributions $8,823 $8,823 and proportionate share of contributions The Universitys endowment income distribution policies are designed to preserve the value of the endowment in real Changes of assumptions or other inputs $399,940 292,435 692,375 terms (after inflation) and to generate a predictable stream of spendable income. Endowment investments are managed to achieve the maximum long-term total return. As a result of this emphasis on total return, the proportion of the annual Net difference between projected and actual earnings on plan investments 213 156 369 income distribution provided by dividend and interest income and by capital gains may vary significantly from year to TOTAL $400,153 $301,414 $701,567 year. The Universitys policy is to retain the realized and unrealized appreciation with the endowment after the annual DEFERRED INFLOWS OF RESOURCES income distribution has been made. The portion of investment returns earned on endowments held by the University Difference between expected and actual experience $177,874 $109,892 $287,766 and distributed each year to support current operations of UC Davis is based upon a rate of 4.75 percent (stated in TOTAL $177,874 $109,892 $287,766 dollars per share). The total distribution from endowments held by the University to UC Davis was $26 million for the year ended June 30, 2017.

The net amount of deferred outflows of resources and deferred inflows of resources related to retiree health benefits that will be recognized in retiree health benefit expense during the years ending June 30 is as follows:

(in thousands of dollars)

MEDICAL CAMPUS CENTER TOTAL Year ending June 30 2018 ($8,128) ($981) ($9,109) 2019 (8,128) (981) ($9,109) 2020 (8,158) (1,003) ($9,161) 2021 (8,188) (1,025) ($9,213) 2022 (8,188) (1,053) ($9,241)

Thereafter (69,797) (38,514) ($108,311)

TOTAL ($110,587) ($43,557) ($154,144)

Additional information on the retiree health plans can be obtained from the Universitys 2016-2017 Annual Financial Report.

78 Notes to Financial Statements UC Davis Financial Report 2016-17 79

14. Operating Expenses By Function 15. Segment Information Operating expenses, by functional classification, for the years ended June 30, 2017 and 2016 are as follows: UC Davis Medical Center revenues are pledged in support of the outstanding University of California Medical Center (in thousands of dollars)

Pooled Revenue Bonds. The medical centers operating revenues and expenses consist primarily of revenues associated with patient care and the related costs of providing that care.

2017 RESTATED 2016 Condensed financial statement information related to each of the Universitys medical centers for the year ended June Instruction $916,548 $889,989 30, 2017 is provided in footnote 18 of the University of California Annual Financial Report. Condensed financial statement Research 569,826 609,357 information for the UC Davis Medical Center for the years ended June 30, 2017, and 2016, is below:

Public service 97,678 93,797 Academic support 290,873 308,897 (in thousands of dollars) 2017 2016 Student services 159,397 158,013 Revenue bonds outstanding $337,570 $282,054 Institutional support 181,283 148,937 Related debt service payments 32,491 32,833 Operations and maintenance of plant 106,141 101,828 Bonds due serially through 2047 2047 Student financial aid 87,817 88,472 CONDENSED STATEMENTS OF NET POSITION Medical center 1,917,831 1,907,975 ASSETS Current assets $999,025 $825,786 Auxiliary enterprises 110,606 104,842 Capital assets, net 1,030,246 1,004,073 Depreciation and amortization 230,530 220,563 Other noncurrent assets 104,942 18,837 Other, including impairment of capital assets 8,464 5,987 TOTAL ASSETS 2,134,213 1,848,696 TOTAL $4,676,994 $4,638,657 DEFERRED OUTFLOWS OF RESOURCES 362,917 630,774 LIABILITIES Current liabilities 328,609 374,616 Long-term debt 362,743 268,671 Other noncurrent liabilities 2,145,257 2,493,557 TOTAL LIABILITIES 2,836,609 3,136,844 DEFERRED INFLOWS OF RESOURCES 369,066 194,788 NET POSITION Net investment in capital assets 640,415 701,366 Restricted: Expendable capital projects and other 86,748 Unrestricted (1,435,708) (1,553,528)

TOTAL NET POSITION ($708,545) ($852,162)

CONDENSED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION Operating revenues $2,147,374 $1,935,274 Operating expenses (1,904,823) (1,895,627)

Depreciation expense (78,839) (79,291)

OPERATING INCOME (LOSS) 163,712 (39,644)

Nonoperating revenues (expenses), net 9,467 (461)

INCOME (LOSS) BEFORE OTHER CHANGES IN NET POSITION 173,179 (40,105)

Health system support (28,088) (41,387)

Transfers (to) from University, net (4,349) (8,563)

Changes in allocation for pension payable to University 1,892 (1,184)

Other, included donated assets 983 2,074 INCREASE (DECREASE) IN NET POSITION 143,617 (89,165)

Net position - beginning of year (852,162) (762,997)

NET POSITION - END OF YEAR ($708,545) ($852,162)

CONDENSED STATEMENT OF CASH FLOWS Net cash provided by (used in):

Operating activities $289,030 $207,723 Noncapital financing activities (29,396) (46,176)

Capital and related financing activities (25,665) (118,061)

Investing activities (70,468) 12,168 NET INCREASE IN CASH AND CASH EQUIVALENTS 163,501 55,654 Cash and cash equivalents - beginning of year 464,908 409,254 CASH AND CASH EQUIVALENTS - END OF YEAR $628,409 $464,908 80 Notes to Financial Statements UC Davis Financial Report 2016-17 81

16. UC Davis Foundation 17. Commitments And Contingencies Under University policies approved by the Regents, each campus may establish a separate foundation to provide valuable CONTRACTUAL COMMITMENTS. Amounts committed but unexpended for construction projects totaled $224 million at assistance in fundraising, public outreach and other support for the mission of the Campus and the University. Although June 30, 2017.

an independent board governs the UC Davis Foundation, its assets are dedicated for the benefit of the Campus.

UC Davis leases land, buildings and equipment under agreements recorded as operating leases. Operating lease The UC Davis Foundation was established in 1959 to raise funds to benefit UC Davis. The UC Davis Foundation is a expenses for the years ended June 30, 2017 and 2016 were $50 million and $35 million, respectively. The terms of component unit of the Campus. The financial statements of the UC Davis Foundation are presented discretely in a operating leases extend through the year 2034.

separate column on the Campus financial statements because of its nature and the significance of its relationship with Future minimum payments on operating leases with an initial or remaining non-cancelable term in excess of one year are the Campus. During the years ended June 30, 2017 and 2016, gifts of $40.0 million and $33.6 million, respectively, were as follows:

transferred to the Campus from the UC Davis Foundation.

(in thousands of dollars)

Condensed financial statement information related to UC Davis foundation for the years ended June 30, 2017 and 2016 is as follows: MINIMUM ANNUAL LEASE PAYMENTS (in thousands of dollars) Year Ending June 30 2017 2016 2018 $45,918 CONDENSED STATEMENTS OF NET POSITION 2019 34,173 ASSETS 2020 27,139 Current assets $21,154 $41,005 2021 21,350 Noncurrent assets 438,723 347,466 2022 18,733 TOTAL ASSETS 459,877 388,471 2023 - 2027 38,448 LIABILITIES 2028 - 2032 19,311 Current liabilities 720 682 2033 - 2034 8 Noncurrent liabilities 5,707 5,544 TOTAL $205,080 TOTAL LIABILITIES 6,427 6,226 NET POSITION CONTINGENCIES. Substantial amounts are received and expended by UC Davis, including its medical center, under Restricted 451,335 380,033 federal and state programs, and are subject to audit by cognizant governmental agencies. This funding relates to Unrestricted 2,115 2,212 research, student aid, medical center operations and other programs. UC Davis management believes that any liabilities arising from such audits will not have a material effect on UC Davis financial position.

TOTAL NET POSITION $453,450 $382,245 CONDENSED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION UC Davis is contingently liable in connection with certain other claims and contracts, including those currently in litigation, arising in the normal course of its activities. Although there are inherent uncertainties in any litigation, Operating revenues $38,332 $31,476 UC Davis management and general counsel are of the opinion that the outcome of such matters will not have a material Operating expenses (40,312) (33,860) effect on UC Davis financial position.

OPERATING INCOME (LOSS) (1,980) (2,384)

Nonoperating revenues (expenses), net 45,960 (12,198)

INCOME (LOSS) BEFORE CHANGES IN NET POSITION 43,980 (14,582)

Additions to permanent endowments 27,225 12,473 INCREASE (DECREASE) IN NET POSITION 71,205 (2,109)

Net position - beginning of year 382,245 384,354 NET POSITION - END OF YEAR $453,450 $382,245 CONDENSED STATEMENTS OF CASH FLOWS Net cash provided by (used in):

Operating activities ($6,636) ($19,481)

Noncapital financing activities 21,874 10,697 Investing activities (18,574) 6,155 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,336) (2,629)

Cash and cash equivalents - beginning of year 18,097 20,726 CASH AND CASH EQUIVALENTS - END OF YEAR $14,761 $18,097 Additional information for the Foundation can be found at:

http://giving.ucdavis.edu/recognition-resources/uc-davis-foundation/.

82 Notes to Financial Statements UC Davis Financial Report 2016-17 83

Required Supplementary Information The schedule of the Campus and medical centers proportionate share of UCRPs net pension liability is presented below:

(in thousands of dollars)

PLAN FIDUCIARY NET PROPORTIONATE POSITION SHARE OF THE AS A NET PENSION PERCENTAGE PROPORTION PROPORTIONATE LIABILITY AS A OF THE OF THE NET SHARE OF THE PERCENTAGE OF TOTAL PENSION NET PENSION COVERED ITS COVERED PENSION AS OF JUNE 30 LIABILITY LIABILITY PAYROLL PAYROLL LIABILITY Davis Campus 2017 8.9 % $905,879 $982,584 92.2 % 84.0 %

2016 9.0 1,232,451 939,207 131.2 77.2 2015 9.2 888,905 899,612 98.8 82.9 2014 9.2 660,342 850,488 77.6 86.3 2013 9.5 1,004,519 819,467 122.6 78.3 Davis Medical Center 2017 6.7 % $675,141 $732,307 92.2 % 84.0 %

2016 6.6 895,967 682,784 131.2 77.2 2015 6.5 627,561 635,120 98.8 82.9 2014 6.6 468,810 603,824 77.6 86.3 2013 6.5 690,989 563,695 122.6 78.3 Total 2017 15.6% $1,581,020 $1,714,891 92.2 % 84.0 %

2016 15.6 2,128,418 1,621,991 131.2 77.2 2015 15.7 1,516,466 1,534,732 98.8 82.9 2014 15.8 1,129,152 1,454,312 77.6 86.3 2013 16.0 1,695,508 1,383,162 122.6 78.3 The schedule of the Campus and medical centers proportionate share of UCRHBTs net retiree health benefits liability is presented below:

(in thousands of dollars)

PROPORTIONATE PLAN SHARE OF THE FIDUCIARY NET NET RETIREE POSITION AS A HEALTH PERCENTAGE PROPORTION PROPORTIONATE BENEFITS OF THE TOTAL OF THE NET SHARE OF NET LIABILITY AS A RETIREE RETIREE HEALTH RETIREE HEALTH PERCENTAGE OF HEALTH BENEFITS BENEFITS COVERED ITS COVERED BENEFITS LIABILITY LIABILITY PAYROLL PAYROLL LIABILITY Davis Campus 2017 8.9 % $1,659,773 $994,901 166.8 % 0.6 %

2016 9.0 1,894,693 933,779 202.9 0.3 2015 9.2 1,653,816 894,410 184.9 0.3 Davis Medical Center 2017 6.6 % $1,227,803 $735,904 166.8 % 0.6 %

2016 6.6 1,385,392 682,784 202.9 0.3 2015 6.5 1,174,370 635,120 184.9 0.3 Total 2017 15.5 % $2,887,576 $1,730,805 166.8 % 0.6 %

2016 15.6 3,280,085 1,616,563 202.9 0.3 2015 15.7 2,828,186 1,529,530 184.9 0.3 84

The UC Davis 2017 Annual Report is produced by the Office of Strategic Communications and the Division of Finance, Operations and Administration. No tuition or state funds were used to print this document.

Online version available at chancellor.ucdavis.edu/

reports/

©2018 The Regents of the University of California Printed on paper containing post-consumer waste annual report 2017 Statement of Intent (SOI) Regarding Decommissioning Funding for the UC Davis McClellan Nuclear Research Center and 2.0 MW TRIGA Reactor 10

• '

UNIVERSITY OF CALIFORNIA, DAVIS DERKELEY

• DAVIS

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• S.a\.N FRANCISCO SA,.'4TA llARllARA

• SA.,TA CRUZ KELLY M. RATLIFF FINANCE, OPERATIONS AND ADMINISTRATION Vice Chancellor ONE SHIELDS AVENUE DAVIS, CALIFORNIA 95616-8558 TELEPHONE: (530) 752-4964 May 25, 2018 U.S. Nuclear Regulatory Commission Document Control Desk Washington, DC 20555 RE: UC Davis McClellan Nuclear Research Center, License No. R-130 Docket No. 50-607 University of California, Davis Financial Assurance Statement of Intent As the Vice Chancellor of Finance, Operations, and Administration I have wide ranging authority and responsibility for campus operations and the allocation of resources. The University of California, Davis intends to operate its TRIGA reactor, located at the McClellan Nuclear Research Center, for the foreseeable future. The UC Davis McClellan Nuclear Research Center is a non-power reactor operated by The Regents of the University of California, a State of California government entity established by Article IX,Section IX of the California State Constitution, which reads in part:

"a) The University of California shall constitute a public trust, to be administered by the existing corporation known as "The Regents of the University of California," with full powers of organization and government, subject only to such legislative control as may be necessary to insure the security of its funds and compliance with the terms of the endowments of the university and such competitive bidding procedures as may be made applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services."

Based on a recent similar example at the University of Michigan, decommissioning costs of the reactor are currently estimated to be $24.9 million. A decommissioning fund is held in escrow and is approximately the same value as the estimated decommissioning cost. Any shortfall in decommissioning funds at the time of decommissioning are well within the University's financial ability to respond to as indicated under 10 CFR 50.75(e)(2)(iv). The University will make such funds (amount to be appropriately updated over time) available for decommissioning when necessary. The undersigned has been delegated authority to make this commitment and approved this Statement of Intent under Delegation of Authority 0131 and is therefore authorized by the Chancellor to make this commitment.

Kelly Ratliff Vice Chancellor Finance, Operations, and Administration

/MCH

CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT CIVIL CODE § 1189

• A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of California }

County of _ _ ~Y~a_l_o_______

On ,2/2&(5/; '?'

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J Name(s) of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Place Notary Seal and/or Stamp Above Signatur (j[J'

~~p. ~ ""' 6i OPTIONAL Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document.

Description of Attached Document t( (: . f)ai1 ~ /111n J2_c Title or Type of Document: £6a 11c:1tt/ tf,$SL/l....rll:r1Ce 5:kiem ",1!f 4.;t;n-kefl2/'

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Signer(s) Other Than Named Above: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

Number of Pages:-'---

Capacity(ies) Claimed by Signer(s)

Signer's Name: _ _ _ _ _ _ _ _ _ _ __ Signer's Name: _ _ _ _ _ _ _ _ _ _ __

• Corporate Officer - Title(s): _ _ _ _ _ __

• Corporate Officer - Title(s): _ _ _ _ _ __

D Partner -

• Limited

• General

• Partner -

• Limited

• General

• Individual

• Attorney in Fact

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• Trustee

• Guardian of Conservator

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• Other:

• Other:

Signer is Representing: _ _ _ _ _ _ _ __ Signer is Representing: _ _ _ _ _ _ _ __

©2017 National Notary Association Delegations of Authority 11

Official UC Davis Delegation of Authority Offices of the Chancellor and Provost

• • Retain this delegation for your records ..

Delegation of Authority-Licenses for Radioactive Materials (DA 0131)

Vice Chancellor-Finance, Operations, and Administration Source of Delegation: President Kerr's delegation dated 11/23/66 (DA 0131)

Effective Date of Delegation: 7/1/14 Supersedes: Chancellor Meyer's redelegation to Vice Chancellor-Business and Finance dated 7/2/86 and all subsequent redelegations (DA 0131)

The position of Vice Chancellor-Finance, Operations, and Administration is responsibility for nuclear reactor construction and operating licenses, AEC licenses for out-of-state operations, and any other licenses for radioactive materials and related activities within the parameters of the delegation from President Kerr.

Any redelegation of this authority must be in writing with copies to the individuals listed below.

Linda P.B. Katehi Chancellor

Attachment:

DA 0131 from President Kerr c: Campus Policy Coordinator Unit Policy Coordinator

DA0131 Page 1 of 1 DA 0131 November 23, 1966 CHANCELLORS:

Re: Licenses for Radioactive Materials Authority and responsibility for licenses for radioactive materials and related activities have been undergoing gradual decentralization. Effective immediately, responsibility for nuclear reactor construction and operating licenses, for AEC1 licenses for out-of-state operations and for any other licenses for radioactive materials and related activities is delegated to the Chancellors.

• Clark Kerr cc: University-wide Administrative Officer.

1 NowDOE.

https://policy .ucop.edu/_ files/da/da0 131.html 5/15/2018