SUNY 2009 Financial Report by Marcel Catafago

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The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report The State University of New York 2009 Annual Financial Report

2009

A N N U A L

F I N A N C I A L

R E P O R T

Board of Trustees Carl T. Hayden, Chairman Aminy I. Audi Robert J. Bellafiore Stephen J. Hunt H. Carl McCall John L. Murad, Jr. Pedro Noguera Michael E. Russell Linda S. Sanford Carl Spielvogel Cary Staller Harvey F. Wachsman Gerri Warren-Merrick Melody Mercedes (Student Trustee) Kenneth P. O’Brien (Faculty Senate)

Chancellor Nancy L. Zimpher

Senior Management Michael A. Abbott University Auditor Johanna Duncan-Poitier Chancellor’s Deputy for the Education Pipeline Dr. Dennis Golladay Vice Chancellor for Community Colleges Dr. David K. Lavallee Interim Provost and Vice Chancellor for Academic Affairs Mitch Leventhal Vice Chancellor for Global Affairs Jeffrey J. McGrath Officer-In-Charge, University Controller’s Office John J. O’Connor Vice Chancellor and Secretary of the University and President of the Research Foundation Monica Rimai Senior Vice Chancellor and Chief Operating Officer Nicholas Rostow University Counsel and Vice Chancellor for Legal Affairs Michael C. Trunzo Vice Chancellor for Government Relations Philip W. Wood Vice Chancellor for Capital Facilities and Interim Vice Chancellor and Chief Financial Officer

2009 ANNUAL FINANCIAL REPORT

Message from the Chancellor I am pleased to present this year’s Annual Financial Report of the State University of New York. The report provides an overview of the State University’s finances and operating results for the year ended June 30, 2009. Even in the midst of severe economic pressures, the State University continues to push forward with its mission to enhance educational excellence, affordability, and accessibility for New Yorkers. Enrollment, student retention and sponsored research all remain strong or at record levels. New York’s public higher education system is integral to the economic, cultural and civic well-being of the state. New York’s cities, towns and villages are more robust economically and culturally because of the presence of State University campuses. The State University has the unique ability to educate individuals across a spectrum of interests and career paths – from fashion to forestry, and from medicine to law – and in large numbers. Now serving nearly 465,000 students, the State University is the primary developer of the state's human capital, and a key driver of innovation, economic recovery and quality of life in our communities. The State University continues to attract and educate talented and promising students in record numbers. Total student enrollment has grown every year since 1997 and has been on a record-setting pace since the fall of 2000. Enrollment has increased almost 27 percent from the fall of 1997 to the fall of 2009. In addition, system-wide retention rates, which result in higher graduation rates, are steadily increasing. Retention of first-time, full-time students is 83 percent, which is the highest level in the history of the State University. The retention rates continue to outpace the rates at most public colleges nationally, and are as high as, or approaching, the rates at many of the best private colleges and universities in the United States. Reflecting the State University’s commitment to improved student performances across all cultural backgrounds, recent data show that the State University’s minority student graduation rates exceed the national rates for minority students attending public institutions. The volume of research and other sponsored programs revenue continues to be strong, with more than $1.026 billion reported in fiscal year 2009. Research continues to be an important facet of the State University’s mission, with faculty constantly breaking new ground in diverse fields such as medicine, education, high performance computing and alternative energy. In the 2009 fiscal year, The Research Foundation of State University of New York received 320 invention disclosures, filed 205 patent applications, was awarded 55 U.S. patents, executed 49 licenses and received more than $13 million in royalties. These achievements were the products of more than 7,200 projects that supported more than 17,000 employees statewide. More than ever before, the State University is an excellent investment for students and a critical resource for New York. If the State is to move forward in these tough economic times, then we must look to build a stronger future for the State University, which has provided generations of New Yorkers access to educational and economic opportunities. We take very seriously our responsibility to be good stewards of public dollars and will continue to strive to be as efficient and creative as possible in managing our resources.

Nancy L. Zimpher Chancellor

THE STATE UNIVERSITY OF NEW YORK

To The Board of Trustees State University of New York

Report of Independent Auditors

PricewaterhouseCoopers LLP 677 Broadway Albany NY 12207 Telephone (518) 462 2030 Facsimile (518) 427 4499

In our opinion, based on our audits and the reports of other auditors, the financial statements of the business-type activities and the aggregate discretely presented component units of The State University of New York (the â&#x20AC;&#x153;Universityâ&#x20AC;?) which collectively comprise the UniversityĘźs basic financial statements, present fairly, in all material respects, the respective financial position of the business-type activities and the aggregate discretely presented component units of the University at June 30, 2009 and 2008, and the respective changes in financial position and cash flows, where applicable, thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the University's management. Our responsibility is to express opinions on these financial statements based on our audits. For the year ended June 30, 2009, we did not audit the financial statements of the State University Construction Fund, the Research Foundation, nor certain auxiliary service corporations, which statements reflect total assets of 7 percent and total net assets of 10 percent of the related totals as of June 30, 2009 and total revenues of 18 percent of the related total revenues for the year ended of the business type activities. For the year ended June 30, 2008, we did not audit the financial statements of the State University Construction Fund, nor certain auxiliary service corporations, which statements reflect total assets of 3 percent and total net assets of 8 percent of the related totals as of June 30, 2008 and total revenues of 8 percent of the related total revenues for the year then ended of business type activities. Additionally, we did not audit the financial statements of the discretely presented component units, which comprise 100% of the total assets, total net assets and total revenue of the discretely presented component units. Those statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for the State University Construction Fund, the Research Foundation, certain auxiliary service corporations, and the discretely presented component units is based on the reports of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinions.

As discussed in Note 1, the University is included in the primary government reporting entity of the State of New York as an enterprise fund. The accompanying financial statements represent only the financial statements of the University and do not purport to, and do not, present fairly the financial statements of the State of New York in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 14 to the financial statements, the discretely presented component units are reported in accordance with generally accepted accounting principles promulgated by the Financial Accounting Standards Board ("FASB") and the audits were not performed in accordance with Government Auditing Standards. The Management's Discussion and Analysis on pages 3 through 11 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. October 29, 2009

2009 ANNUAL FINANCIAL REPORT

Management’s Discussion and Analysis Management’s discussion and analysis (MD&A) provides a broad overview of the State University of New York’s (State University) financial condition as of June 30, 2009 and 2008, the results of its operations for the years then ended, and significant changes from the previous years. Management has prepared the financial statements and related footnote disclosures along with this MD&A. The MD&A should be read in conjunction with the audited financial statements and related footnotes of the State University which directly follows the MD&A. For financial reporting purposes, the State University’s reporting entity consists of all sectors of the State University including the university centers, health science centers (including hospitals), colleges of arts and sciences, colleges of technology and agriculture, specialized colleges, statutory colleges (located at the campuses of Cornell and Alfred Universities), and central services, but excluding community colleges. The financial statements also include the financial activity of The Research Foundation of the State University of New York (Research Foundation), which administers the sponsored program activity of the State University, the State University Construction Fund, (Construction Fund), which administers the capital program of the State University, the auxiliary services corporations and foundations located on its campuses. The foundations meet the criteria under the Governmental Accounting Standards Board (GASB) accounting and financial reporting requirements for inclusion in the State University reporting entity. For financial statement presentation purposes, the combined totals of the foundations are not included in the reported amounts of the State University, but are discretely presented on separate pages in the State University’s financial statements, in accordance with display requirements prescribed by the Financial Accounting Standards Board (FASB) for not-forprofit organizations. The focus of the MD&A is on the State University financial information contained in the balance sheets, the statements of revenues, expenses, and changes in net assets, and the statements of cash flows, which exclude the foundations. Foundation financial statement information is presented separately on pages 16 and 17 of the State University’s financial statements.

F i n a n c i a l H i g hl i g h t s At June 30, 2009 and 2008, total assets reported by the State University were $10.92 billion and $11.15 billion and total liabilities were $10.03 billion and $9.22 billion, respectively. Net assets, which total $897 million and $1.93 billion at June 30, 2009 and 2008, experienced a decrease of $1.03 billion in 2009 and a decrease of $336 million in 2008. The net assets at June 30, 2009, 2008, and 2007 are summarized in the following categories (in thousands):

2009 Net Assets: Invested in capital assets, net of related debt $ 606,165 Restricted - nonexpendable 249,321 Restricted - expendable 328,863 Unrestricted (287,146) Total net assets $ 897,203

2008

641,283 264,380 830,009 195,872 1,931,544

2007

596,527 246,393 829,633 595,076 2,267,629

The decrease in net assets during 2009 and 2008 was driven by net realized and unrealized investment losses of $389 million and $35 million, respectively. In 2009, a $288 million transfer of substantially all of the assets held in the State University Endowment Fund to the State University campus foundations contributed to the decline. Revenues, expenses, and the change in net assets for the 2009, 2008, and 2007 fiscal years are summarized as follows (in thousands): 2009 Operating revenues Nonoperating revenues Other revenues Total revenues Operating expenses Nonoperating expenses Total expenses Change in net assets

$ 4,805,384 3,580,847 69,285 8,455,516 8,505,101 984,756 9,489,857 $ (1,034,341)

2008

2007

4,402,658 3,590,134 89,119 8,081,911 8,066,377 351,619 8,417,996 (336,085)

4,408,393 3,680,575 73,010 8,161,978 7,696,130 280,357 7,976,487 185,491

Total revenues reported in 2009, 2008, and 2007 were $8.46 billion, $8.08 billion, and $8.16 billion, respectively. Total revenue in 2009 increased $374 million while revenue in 2008 decreased $80 million, compared to the previous year. The revenue increase

THE STATE UNIVERSITY OF NEW YOR K

Management’s Discussion and Analysis in 2009 was driven by increases of $127 million in hospital and clinic revenue, $111 million in state and local grants and contracts, $92 million in state appropriations, net tuition revenues of $78 million, auxiliary enterprises of $49 million, and federal and state student financial aid grants of $36 million. These increases were offset by decreases of $71 million in investment income and $50 million in private and capital gifts.

Total expenses for 2009, 2008, and 2007 were $9.49 billion, $8.42 billion, and $7.98 billion, respectively. State University expense growth in 2009 and 2008 was $1.07 billion and $442 million, respectively. Expense growth in 2009 compared to 2008 was primarily the result of increases in investment losses of $354 million, the transfer of assets to the State University campus foundations of $288 million, hospital and clinic activity of $260 million, research activity of $120 million, and instruction activity of $71 million. Overview of the Financial Statements The financial statements of the State University have been prepared in accordance with U.S. generally accepted accounting principles as prescribed by the GASB. The financial statement presentation consists of comparable balance sheets, statements of revenues, expenses, and changes in net assets, statements of cash flows, and accompanying notes for the June 30, 2009 and 2008 fiscal years. These statements provide information on the financial position of the State University and the financial activity and results of its operations during the years presented. Certain amounts displayed for the 2008 and 2007 years have been reclassified to conform to the 2009 presentation. A description of these statements follows: The Balance Sheets present information on all of the State University’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the State University is improving or deteriorating. The Statements of Revenues, Expenses, and Changes in Net Assets present information showing the change in the State University’s net assets during each fiscal year. All changes in net assets are

reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses reported in these statements include items that will result in cash received or disbursed in future fiscal periods (e.g., the receipt of amounts due from students and others for services rendered, or the amount accrued for postemployment benefit earned). The Statements of Cash Flows provides information on the major sources and uses of cash during the year. The cash flow statements portray net cash provided or used from operating, investing, capital, and noncapital financing activities. B a l a n c e Sh e e t s The balance sheets present the financial position of the State University at the end of its fiscal years. During the 2009 and 2008 fiscal years, the State University’s total assets decreased $225 million and increased $745 million over the prior years, while total liabilities increased $810 million and $1.08 billion, respectively. The following table reflects the financial position at June 30, 2009, 2008, and 2007 (in thousands): 2009 Current assets Capital assets, net Other noncurrent assets Total assets

$ 2,828,996 6,235,899 1,859,604

Net assets

2,756,467 5,744,812 2,647,822

2007 2,470,162 5,233,361 2,700,652

10,924,499 11,149,101 10,404,175

Current liabilities Noncurrent liabilities Total liabilities

2008

1,674,262 8,353,034

1,719,058 7,498,499

1,504,132 6,632,414

10,027,296

9,217,557

8,136,546

1,931,544

2,267,629

897,203

Current Assets Current assets at June 30, 2009 increased $73 million while current liabilities decreased $45 million compared to the previous year. In general, current assets are those assets that are available to satisfy current liabilities (i.e., those that will be paid within one year). Current assets at June 30, 2009 and 2008 consist primarily of cash and cash equivalents of $1.23 billion and $1.2 billion, short-term investments of

2009 ANNUAL FINANCIAL REPORT

Managementâ&#x20AC;&#x2122;s Discussion and Analysis $296 million and $301 million, and receivables (accounts, interest, appropriations, and grants) of $1.24 billion and $1.2 billion, respectively. During 2009, accounts, notes, and loan receivables grew $87 million and cash and cash equivalents increased $32 million. These increases were offset by decreases in appropriations and grant receivable balances totaling $45 million.

Current Liabilities Current liabilities at June 30, 2009 and 2008 consist principally of accounts payable and accrued expenses of $602 million and $622 million, interest on debt of $162 million and $201 million, deferred revenue of $254 million and $258 million, and the current portion of long-term liabilities of $504 million and $477 million, respectively. The decline in current liabilities at June 30, 2009 was driven principally by a decrease in interest payable of $39 million.

Capital Assets, net Since 2003, the State University has received $5.8 billion in cumulative new multi-year capital funding authorizations for State-operated campus educational facilities and $869 million for the State University hospitals. Under the educational facilities program, a majority of the funding is designed to support critical maintenance projects to repair, renovate, or rehabilitate existing State University facilities. During the 2009 and 2008 fiscal years, capital assets (net of depreciation) increased $491 million and $511 million, respectively. The majority of the increase occurred at the State University campuses due to new building construction, renovations, and rehabilitation totaling $386 million and $395 million for the 2009 and 2008 fiscal years, respectively. Equipment additions during 2009 and 2008 of $173 million and $214 million, respectively, also contributed to the increase. Significant projects completed and capitalized during the 2009 fiscal year included construction of a new art center at Buffalo State College, a new administrative building at Empire State College, modernization and expansion of a library at the College at Purchase, a new residence hall at the College at Geneseo, and the rehabilitation of a

science building at the College at Oneonta. A summary of capital assets, by major classification, and related accumulated depreciation for the 2009, 2008, and 2007 fiscal years is as follows (in thousands):

Land Infrastructure and land improvements Buildings Equipment, library books and artwork Construction in progress Total capital assets

2009

2008

2007

313,175

301,862

274,846

664,602 6,684,860

593,877 6,337,676

518,808 6,000,197

2,450,532 2,334,476 1,125,153 901,084 11,238,322 10,468,975

2,169,505 752,776 9,716,132

Less accumulated depreciation: Infrastructure and land improvements 348,464 Buildings 2,923,117 Equipment, library books 1,730,842 and artwork Total accumulated depreciation 5,002,423 Capital assets, net

$ 6,235,899

334,785 2,787,220 1,602,158

327,075 2,679,161 1,476,535

4,724,163

4,482,771

5,744,812

5,233,361

Other Noncurrent Assets Other noncurrent assets exclusive of capital assets were $1.86 billion and $2.65 billion at June 30, 2009 and 2008, respectively. Noncurrent assets at June 30, 2009 and 2008 include long-term investments of $584 million and $1.37 billion, deposits with trustees of $803 million and $887 million, restricted cash of $98 million and $92 million, and the noncurrent portion of receivables and deferred financing costs of $374 million and $301 million, respectively. Long-term investments at June 30, 2009 and 2008 of $584 million and $1.37 billion include the Cornell statutory colleges of $482 million and $753 million, Research Foundation of $60 million and $172 million, auxiliary services corporations of $24 million and $28 million, and the statutory College of Ceramics at Alfred University of $16 million and $24 million, respectively. In an effort to reduce duplicative expenses relating to the management and administration of endowment assets, the Board of Trustees authorized the transfer of title

THE STATE UNIVERSITY OF NEW YOR K

Management’s Discussion and Analysis to campus foundations of allocable portions of substantially all of the assets held in the State University Endowment Fund. Total long-term investments reported in 2009 were $2 million compared to $390 million in 2008. In June 2009, the Research Foundation established a separate legal trust for their post-retirement benefit plan and the investments held in the plan were transferred to the trust. The investments designated for the plan totaling $76 million were reported as long-term investments in 2008. As a result of these transfers, the downturn in the markets which generated substantial investment losses, and amounts used to meet spending needs, long-term investments decreased by a total of $784 million in 2009 compared to 2008.

During fiscal year 2009, deposits with trustees, which generally represent funds available from the issuance of bonds by the Dormitory Authority of the State of New York (DASNY) used to finance capital projects and maintain debt service reserves for the State University’s facilities, decreased $83 million. Restricted cash and cash equivalents represent unspent funds under various capital financing arrangements, cash held for others, and cash restricted for loan programs. At June 30, 2009 restricted cash balances increased $6 million compared to 2008. The noncurrent portion of receivables reported at June 30, 2009 and 2008 consisted of accounts, notes, and loan receivables of $115 million and $114 million, appropriation receivables of $165 million and $90 million, and contribution receivables of $22 million and $30 million, respectively.

Noncurrent Liabilities Noncurrent liabilities at June 30, 2009 and 2008 of $8.4 billion and $7.5 billion, respectively, are largely comprised of debt on State University facilities, other long-term liabilities accrued for postemployment and post-retirement benefits, compensated absences, and litigation, as well as an outstanding loan from the State’s short-term investment pool (STIP). The State University capital funding levels and bonding authority are subject to operating and capital appropriations of the State. Funding for capital construction and rehabilitation of educational and residence hall

facilities of the State University is provided principally through the issuance of bonds by DASNY. The debt service for the educational facilities is paid by, or provided through a direct appropriation of, the State. The debt service on residence hall bonds is funded primarily from room rents. A summary of non-current long-term liabilities at June 30, 2009, 2008, and 2007 is as follows (in thousands): 2009 Educational facilities $ 4,907,472 Residence hall facilities 943,590 Postemployment and post-retirement obligations and compensated absences 1,765,603 Loan - State STIP pool 68,754 Other obligations 467,778 Long-term liabilities

$ 8,153,197

2008

2007

4,591,499 845,385

4,374,709 727,950

1,375,277 92,934 409,124

875,583 113,196 364,531

7,314,219

6,455,969

During fiscal year 2009, Personal Income Tax Revenue Bonds (PIT) were issued for the purpose of financing capital construction and major rehabilitation for educational facilities in the amount of $508.4 million. Also, during the year $34.4 million of PIT bonds were used in order to refinance $34.4 million of the State University’s existing educational facility obligations. The State University entered into agreements with DASNY during fiscal year 2009 to issue residence hall facility obligations totaling $129.4 million for the purpose of financing capital construction and major rehabilitation for residential hall facilities. The State University’s credit ratings for educational and residence hall bonds were unchanged in 2009 and 2008. The credit ratings at June 30, 2009 are as follows: PIT Bonds Moody’s Investors Service Standard & Poor’s Fitch IBCA

Aa3 AAA AA-

Educational Residence Facilities Halls A1 AAA+

Aa3 AAA+

Principal payments on educational and residence hall facilities obligations made during 2009 totaled $229 million and $28 million, in 2008 totaled $184.4 million and $24.3 million, and in 2007

2009 ANNUAL FINANCIAL REPORT

Management’s Discussion and Analysis totaled $389.2 million and $22.9 million, respectively. During fiscal years 2009 and 2008, the long-term portion of postemployment and post-retirement benefit obligations and compensated absences liabilities increased $390 million and $500 million, respectively. The State, on behalf of the State University, provides health insurance coverage for eligible retired State University employees and their spouses as part of the New York State Health Insurance Plan (NYSHIP). The State administers NYSHIP and has the authority to establish and amend benefit provisions offered. The State University, as a participant in the plan, recognizes these other postemployment benefits (OPEB) on an accrual basis. The State University’s OPEB plan is financed annually on a pay-as-you-go basis. There are no assets set aside to fund the plan. The actuarial accrued liability (AAL) and the unfunded AAL, utilizing the frozen entry age actuarial cost method, as of April 1, 2008 and April 1, 2006 was $9.56 billion and $7.81 billion, respectively. The State University’s total retirement related payroll during fiscal years 2009 and 2007 was $2.8 billion and $2.4 billion, respectively. The total unfunded actuarial accrued liability as a percentage of covered payroll, based on the 2008 and 2006 actuarial valuation dates, were 341% and 325%, respectively. The Research Foundation sponsors a separate defined benefit OPEB plan. Contributions are made by the Research Foundation pursuant to a funding policy established by its Board of Directors. In 2009, a Voluntary Employee Benefit Association (VEBA) trust was established and legal title to all the assets in the trust is vested in the trust for the benefit of the participants. The Research Foundation’s total retirement related payroll during the 2009, 2008, and 2007 fiscal years was $233.7 million, $224.2 million, and $209.1 million, respectively. The total unfunded actuarial accrued liability as of the June 30, 2009, 2008, and 2007 actuarial valuation was $188.8 million, $233.0 million, and $220.4 million or 81%, 104%, and 105% of the total retirement related payroll expense of the Research Foundation for fiscal years 2009, 2008, and 2007, respectively. In prior years, the State University experienced operating cash-flow deficits precipitated by cashflow difficulties experienced by its three hospitals. As a result, the State University borrowed funds

with interest from the short-term investment pool of the State. The amount outstanding under this borrowing, including accrued interest, at June 30, 2009 and 2008 was $86 million and $110.2 million, respectively. During fiscal years 2009 and 2008, the total amount paid on these loans was $25.6 million in both years. Refundable government loan funds at June 30, 2009 and 2008 totaled $146.3 million and $144.3 million, respectively. These revolving loan funds are principally those of the federal Perkins and Nursing Loan Programs established with an initial and continued federal capital contribution. Repayments of principal and interest and new contributions are deposited into a revolving loan fund for continual disbursement to students. S t a t e me n t s o f R e v e n u e s , Ex p e n s e s , a n d C h a n g e s in Ne t A s s e t s

The statements of revenues, expenses, and changes in net assets present the State University’s results of operations. Total operating revenues of the State University were $4.81 billion in 2009, $4.40 billion in 2008, and $4.41 billion in 2007. Nonoperating and other revenues, which includes State appropriations, totaled $3.65 billion, $3.68 billion, and $3.75 billion, for fiscal years 2009, 2008, and 2007, respectively. Total expenses for 2009, 2008, and 2007 were $9.49 billion, $8.42 billion, and $7.98 billion, respectively.

Revenue Overview

Revenues (in thousands): 2009

2008

2007

Tuition and fees, net $ 1,030,198 952,075 917,537 Hospitals and clinics 1,723,164 1,595,895 1,621,458 Federal grants and contracts 637,222 639,998 649,887 State, local, private grants and contracts, and other sources 634,500 483,777 539,658 Auxiliary enterprises 780,300 730,913 679,853 Operating revenues 4,805,384 4,402,658 4,408,393 State appropriations 3,062,915 2,970,720 2,910,145 Other nonoperating 587,217 708,533 843,440 Nonoperating and other revenues 3,650,132 3,679,253 3,753,585 Total revenues $ 8,455,516 8,081,911 8,161,978

THE STATE UNIVERSITY OF NEW YOR K

Managementâ&#x20AC;&#x2122;s Discussion and Analysis

State, Local, Private Grants, Contracts and Other Sources $634,500

2009 Revenues (in thousands)

Sponsored Research, Grant and Contract Revenue

Auxiliary Enterprises $780,300

During fiscal year 2009, State University increased its volume of sponsored program activity. Total revenue from federal, state, local, private and capital grants and contracts administered by the Research Foundation was $846 million, $794 million, and $791 million for the fiscal years ended June 30, 2009, 2008, and 2007, respectively. Facilities and administrative recoveries earned on grants and contracts administered by the Research Foundation were $125 million, $127 million, and $124 million for the fiscal periods ending June 30, 2009, 2008, and 2007, respectively.

Other Nonoperating $587,217 State Appropriations $3,062,915

Federal Grants and Contracts $637,222

Tuition and Fees $1,030,198 Hospitals and Clinics $1,723,164

Tuition and Fees, Net Tuition and fee revenue for the 2009, 2008, and 2007 fiscal years, net of scholarship allowances, was $1.03 billion, $952 million, and $918 million, an increase of $78 million and $35 million in 2009 and 2008, respectively. The increases in 2009 and 2008 were driven by increases in enrollment. During the 2009 fiscal year there was also a mid-year tuition rate increase effective for the spring semester. Annual average full-time equivalent students, including undergraduate and graduate, were approximately 189,600, 185,700, and 180,200 for the fiscal years ended June 30, 2009, 2008, and 2007, respectively.

Hospitals and Clinics The State University has three hospitals (each with academic medical centers) under its jurisdiction - the State University hospitals at Brooklyn, Stony Brook, and Syracuse. Hospital and clinic revenue for the 2009, 2008, and 2007 fiscal years were $1.72 billion, $1.60 billion, and $1.62 billion, respectively. During the 2009 fiscal year, hospital and clinic revenues increased $127 million compared to the previous year due to an increase in inpatient and outpatient revenue and a $64 million increase in Medicaid Disproportionate Share (DSH) Program revenue from the prior year.

The volume of research and other sponsored programs reported for 2009 and 2008 by the statutory colleges at Cornell University was $176.1 million and $147.9 million, and Alfred University was $3.9 million and $4.3 million, respectively. Revenue from projects sponsored by the federal government and administered by the Research Foundation totaled $338 million and $340 million for the 2009 and 2008 fiscal years. Of these federallysponsored projects, 55 percent and 54 percent of the funding was received from the Department of Health and Human Services during fiscal years 2009 and 2008, respectively. Other major federal sponsors include the National Science Foundation, the Department of Education, the Department of Defense, the Agency for International Development and the Department of Energy. Revenue from non-federal sponsors (including federal flow-through funds) administered by the Research Foundation totaled $508 million and $454 million for the 2009 and 2008 fiscal years, respectively. In fiscal years 2009 and 2008, the largest non-federal support of sponsored research programs was received from the Empire State Development Corporation. Amounts received under the Stateâ&#x20AC;&#x2122;s Tuition Assistance Program increased $13 million from the prior year. Federal grants under the Pell and other federal student aid programs increased $23 million from the previous year.

2009 ANNUAL FINANCIAL REPORT

Managementâ&#x20AC;&#x2122;s Discussion and Analysis Auxiliary Enterprises

State Appropriations

The State Universityâ&#x20AC;&#x2122;s auxiliary enterprise activity is comprised of sales and services for residence halls, food services, campus store operations, intercollegiate athletics, student health services, parking, and other activities. The residence halls are generally owned, operated and managed by the State University and its campuses. Generally, food services, campus store operations and other services are operated and managed by separately incorporated not-for-profit organizations, commonly referred to as auxiliary services corporations.

The State Universityâ&#x20AC;&#x2122;s single largest source of revenues are State appropriations, which for financial reporting purposes is classified as nonoperating revenues. State appropriations totaled $3.06 billion, $2.97 billion, and $2.91 billion and represented approximately 36 percent, 37 percent, and 36 percent of total revenues for fiscal year 2009, 2008, and 2007, respectively. State support (both direct support for operations and indirect support for debt service, litigation, and fringe benefits) for State University campus operations, statutory colleges, and hospitals and clinics increased $92 million in 2009 and $61 million in 2008. In 2009, State support for operating expenses decreased $49 million, while indirect State support for debt service, fringe benefits, and litigation expenses increased $141 million compared to 2008.

The residence hall operations and capital programs are financially self-sufficient. Each campus is responsible for the operation of its residence halls program including setting room rates and covering operating, maintenance, capital and debt service costs. Any excess funds generated by residence halls operating activities are separately maintained for improvements and maintenance of the residence halls. Revenue producing occupancy at the residence halls has risen steadily to 72,741 for the fall of 2008, an increase of 12,159 students since the fall of 2001 and an increase of over 1,136 students compared to the previous year. The overall utilization rate for the fall of 2008 was reported at 96.7 percent. Auxiliary enterprise sales and services revenue totaled $780 million, $731 million, and $680 million in the 2009, 2008, and 2007 fiscal years, respectively. Of these amounts, residence halls operating revenue totaled $354 million, $325 million, and $301 million for 2009, 2008, and 2007, respectively. Increases in revenue were largely due to increases in occupancy levels and modest increases in room rates. Food service operations and other auxiliary services each generated $426 million, $406 million, and $379 million in revenue for fiscal years 2009, 2008, and 2007, respectively.

9 Nonoperating and Other Revenue Nonoperating and other revenue excluding State appropriations were $587 million and $709 million for the 2009 and 2008 fiscal years, respectively. This decrease was primarily due to decreases of $71 million in investment income, $50 million in private and capital gifts, and $38 million in other nonoperating revenues offset by an increase of $36 million in federal and state student financial aid grant programs.

Expense Overview Expenses (in thousands): 2009 Instruction $ 2,044,597 Research 687,724 Public service 298,122 Support services 2,090,135 Scholarships and fellowships 125,965 Hospitals and clinics 2,082,902 Auxiliary enterprises 775,162 Depreciation and amortization 400,494 Other nonoperating 984,756 Total expenses $ 9,489,857

2008

2007

1,974,050 1,911,300 567,944 597,301 298,233 274,166 2,150,881 2,017,118 119,123 110,738 1,822,506 1,723,773 757,902 681,653 375,738 380,081 351,619 280,357 8,417,996 7,976,487

THE STATE UNIVERSITY OF NEW YOR K

Management’s Discussion and Analysis 2009 Expenses (in thousands) Instruction $2,044,597

an allowance (offset) to the respective revenue classification up to the amount of the student charges. The amount reported as expense represents amounts provided to the student in excess of State University charges.

Support Services $2,090,135

Other Nonoperating $984,756

Public Service $298,122

Scholarships and Fellowships $125,965 Depreciation $400,494 Auxiliary Enterprises $775,162

Research $687,724

Hospitals and Clinics $2,082,902

The increase in instruction expense of $71 million and $63 million during 2009 and 2008, respectively, is predominately from an increase in personal service and related fringe benefit expenses. Research expenses grew $120 million during 2009 compared to 2008 and decreased $29 million in 2008 compared to 2007. The increase in 2009 was due to increased sponsored research expenditure activity at the Research Foundation and Cornell statutory colleges. Support services, which includes expenses for academic support, student services, institutional support, and operation and maintenance of plant, decreased $61 million during 2009 compared to 2008. Support services expenses increased $134 million in 2008 compared to 2007. Institutional support decreased $27 million during 2009 and increased $42 million in 2008 compared to 2007. Academic support costs grew $13 million and $33 million in the 2009 and 2008 fiscal years, respectively, which was primarily driven by an increase in personal service costs. Operation and maintenance of plant costs decreased $53 million and increased $43 million during 2009 and 2008, respectively. The decrease in 2009 was attributable to lower utility costs and a decline in capital expenses. In the State University’s financial statements, scholarships used to satisfy student tuition and fees (residence hall, food service, etc.) are reported as

Total scholarships and fellowships, including federal and state grant programs, were $617 million and $554 million for the fiscal years ended June 30, 2009 and 2008, respectively. Of this amount, $491 million and $435 million were classified as scholarship allowances and $126 million and $119 million was reported as scholarship expense for fiscal years 2009 and 2008, respectively. Major scholarships and grants received include the State Tuition Assistance Program of $183 million and $170 million, and the federal Pell Program of $174 million and $153 million during fiscal years 2009 and 2008, respectively. Expenses at the State University’s hospitals and clinics increased $260 million and $99 million during 2009 and 2008, respectively, largely due to an increase in core operating and personal service costs. Also contributing to the growth in 2009 was an increase of $135 million in litigation expenses. During fiscal years 2009 and 2008, auxiliary enterprise expenses increased $17 million and $76 million, respectively. For the 2009 fiscal year residence halls expenses declined $1 million, compared to an increase of $48 million from 2007 to 2008. Food service expenses increased $9 million and $16 million, respectively, primarily due to an increase in enrolled students. Other auxiliary enterprise expenses for the years ended June 30, 2009 and 2008 increased $9 million and $12 million, respectively. Depreciation and amortization expense recognized in fiscal years 2009 and 2008 totaled $400 million and $376 million, respectively. Other nonoperating expenses were $985 million and $352 million for the years ended June 30, 2009 and 2008, respectively. The significant increase in nonoperating expenses during fiscal year 2009 was due to market conditions resulting in larger investment losses of $354 million year-over-year, and the transfer of assets to the State University campus foundations of $288 million.

2009 ANNUAL FINANCIAL REPORT

Management’s Discussion and Analysis E c o n o m i c F a c t o r s T h a t W i l l A f fe c t t h e Fu t u r e The State University is one of the largest public universities in the nation, with headcount enrollment of nearly 222,000 in the fall 2009, on twenty-nine State-operated campuses and five contract/statutory colleges. The State University’s student population is directly influenced by State demographics as the majority of students attending the State University are New York residents. The enrollment outlook remains strong for the State University based on its continued ability to attract quality students for its academic programs. Full-time equivalent (FTE) enrollment, excluding community colleges, for the fiscal year ended June 30, 2009, is approximately 189,600, an increase of 3,900 FTE compared to June 30, 2008. New York State appropriations remain the largest single source of revenues. The State University’s continued operational viability is substantially dependent upon a consistent and proportionate level of ongoing State support. For the most recent fiscal year, State appropriations totaled $3.06 billion which represented 36 percent of the total revenues of the State University. State appropriations consisted of direct support ($1.46 billion), debt service on educational facility and PIT bonds ($427 million), fringe benefits for State employees ($1.04 billion), and litigation ($134 million). Debt service on educational facilities is paid by the State in an amount sufficient to cover annual debt service requirements; pursuant to annual statutory provisions, each of the University’s three teaching hospitals must reimburse the State for their share of debt service costs to finance their capital projects. To maintain budgetary equilibrium in an era of fiscal uncertainty, in anticipation of declining State revenue streams, the State University is taking appropriate measures, such as hiring freezes, travel restrictions, and constraints on the use of energy

while seeking to enhance other revenue streams, including philanthropy and sponsored programs. The State University depends on the State to provide appropriations in support of its capital programs. Consistent with the Executive Budget’s request, in 2008 the State University submitted proposals for new five-year capital programs commencing in 2008-09 through 2012-13. As a result, the final enacted 2008-09 State Budget provided a $1.7 billion multi-year appropriation for strategic initiatives and $550 million for the first of five anticipated annual appropriations dedicated to critical maintenance efforts targeted for preservation or rehabilitation of existing facilities. The 2009-10 State Budget has authorized the second of the $550 million annual critical maintenance appropriations. With the additional annual critical maintenance appropriations, the State University anticipates a total of $2.75 billion in multi-year critical maintenance appropriations over the five year period. Taken together, the cumulative multi-year funding authorizations appropriated since 2003 provide the State University with the basic resources needed to address core critical maintenance needs of its existing buildings and infrastructure, and the means to make additional capital investments in a range of programmatic initiatives, including research and technology development. The State University hospitals, which are all part of larger State University Academic Health Centers at Brooklyn, Stony Brook and Syracuse, serve large numbers of Medicaid and uninsured patients and, as a result, their dependency on the Medicaid DSH Program revenue stream and Medicaid reimbursement is critical to their continued viability. Their financial and operational capabilities will also continue to be challenged by unsupported inflationary and contractual cost increases.

THE STATE UNIVERSITY OF NEW YOR K

Balance Sheets June 30, 2009 and 2008 In thousands 2009

2008

Assets

Current Assets: Cash and cash equivalents Short-term investments Accounts, notes, and loans receivable, net Interest receivable Appropriations receivable Grants receivable Inventories Other assets Total current assets Noncurrent Assets: Restricted cash and cash equivalents Deposits with trustees Accounts, notes, and loans receivable, net Contributions receivable Appropriations receivable Deferred financing costs Long-term investments Capital assets, net Total noncurrent assets Total assets

$ 1,227,501 295,947 668,571 1,407 388,107 179,800 48,827 18,836 2,828,996

1,195,109 301,093 582,048 5,934 414,329 198,599 40,648 18,707 2,756,467

98,254 803,298 114,686 21,887 165,484 72,082 583,913 6,235,899 8,095,503 $ 10,924,499

91,976 886,726 113,633 29,525 89,508 68,276 1,368,178 5,744,812 8,392,634 11,149,101

602,076 162,006 11,345 88,537 254,479 504,319 51,500 1,674,262

621,814 201,017 11,791 75,038 257,869 477,155 74,374 1,719,058

8,153,197 146,301 53,536 8,353,034 10,027,296

7,314,219 144,250 40,030 7,498,499 9,217,557

606,165

641,283

94,101 75,139 80,081

102,577 77,730 84,073

117,710 37,567 939 17,674 154,973 (287,146) 897,203

434,341 109,854 1,720 22,979 261,115 195,872 1,931,544

Liabilities and Net Assets Current Liabilities: Accounts payable and accrued liabilities Interest payable Student deposits Deposits held in custody for others Deferred revenue Long-term liabilities - current portion Other liabilities Total current liabilities Noncurrent Liabilities: Long-term liabilities Refundable government loan funds Other noncurrent liabilities Total noncurrent liabilities Total liabilities Net Assets: Invested in capital assets, net of related debt Restricted - nonexpendable: Instruction and departmental research Scholarships and fellowships General operations and other Restricted - expendable: Instruction and departmental research Scholarships and fellowships Capital projects Loans General operations and other Unrestricted Total net assets Total liabilities and net assets See accompanying notes to financial statements.

$ 10,924,499

11,149,101

2009 ANNUAL FINANCIAL REPORT

Statements of Revenues, Expenses, and Changes in Net Assets For the Years Ended June 30, 2009 and 2008 In thousands 2009 Operating revenues: Tuition and fees Less scholarship allowances Net tuition and fees Federal grants and contracts State and local grants and contracts Private grants and contracts Hospitals and clinics Sales and services of auxiliary enterprises: Residence halls, net Food service, net Other, net Other sources Total operating revenues

$ 1,407,900 (377,702) 1,030,198 637,222 218,850 312,078 1,723,164

1,284,276 (332,201) 952,075 639,998 107,808 275,416 1,595,895

353,890 216,874 209,536 103,572 4,805,384

324,895 203,277 202,741 100,553 4,402,658

2,044,597 687,724 298,122 433,336 263,481 808,493 578,467 125,965 2,082,902

1,974,050 567,944 298,233 420,120 257,000 835,074 631,140 119,123 1,822,506

308,703 215,741 250,718 400,494 6,358 8,505,101

309,746 206,567 241,589 375,738 7,547 8,066,377

(3,699,717)

(3,663,719)

3,062,915 386,176 61,227 (389,287) 70,529 (293,196) (4,481) (287,563) (10,229) 2,596,091

2,970,720 349,944 132,418 (35,418) 99,306 (306,472) (9,729) 37,746 3,238,515

(1,103,626)

(425,204)

Operating expenses: Instruction Research Public service Academic support Student services Institutional support Operation and maintenance of plant Scholarships and fellowships Hospitals and clinics Auxiliary enterprises: Residence halls Food service Other Depreciation and amortization expense Other operating expenses Total operating expenses Operating loss Nonoperating revenues (expenses): State appropriations Federal and state student financial aid Investment income, net Net realized and unrealized losses Gifts Interest expense on capital related debt Loss on disposal of plant assets Transfer to state university campus foundations Other nonoperating revenues (expenses), net Net nonoperating revenues Loss before other revenues and gains Capital appropriations Capital gifts and grants Additions to permanent endowments Decrease in net assets Net assets at the beginning of year Net assets at the end of year See accompanying notes to financial statements.

2008

4,679 48,096 16,510 (1,034,341) $

1,931,544 897,203

9,259 68,912 10,948 (336,085) 2,267,629 1,931,544

THE STATE UNIVERSITY OF NEW YOR K

Statements of Cash Flows For the Years Ended June 30, 2009 and 2008 In thousands

2009 Cash flows from operating activities: Tuition and fees $ 1,034,114 Grants and contracts: Federal 664,867 State and local 206,467 Private 288,848 Hospital and clinics 1,644,447 Personal service payments (3,674,846) Other than personal service payments (2,187,141) Payments for fringe benefits (413,545) Payments for scholarships and fellowships (62,236) Loans issued to students (16,701) Collection of loans to students 16,699 Auxiliary enterprise charges: Residence halls 349,519 Food service 210,798 Other (intercollegiate athletics, bookstore, fees, and vending) 197,971 Other receipts (payments) (16,204) Net cash used by operating activities (1,756,943) Cash flows from noncapital financing activities: State appropriations: Operations Debt service Federal and State student financial aid grants Private gifts and grants Proceeds from short-term loans Repayment of short-term loans Direct loan receipts Direct loan disbursements Transfers to state university campus foundations Other receipts Net cash provided by noncapital financing activities

2008 960,796 620,030 143,093 322,607 1,573,056 (3,402,942) (2,167,042) (390,181) (61,488) (26,461) 18,855 325,213 201,888 189,470 98,843 (1,594,263)

1,464,331 463,856 386,095 77,480 34,502 (86,450) 324,126 (324,126) (204,089) 66,821 2,202,546

1,468,865 437,669 350,787 77,876 54,839 (68,939) 275,953 (275,953) 40,004 2,361,101

777,854 4,679 47,783 164 (309,477) (550,767) (343,392) (348,885) 21,211 (700,830)

742,414 9,259 63,085 2,335 (227,927) (612,237) (260,524) (305,385) (2,310) (591,290)

Cash flows from investing activities: Proceeds from sales and maturities of investments Interest, dividends, and realized gains (losses) on investments Purchases of investments Net cash provided (used) by investing activities Net change in cash Cash - beginning of year Cash - end of year

3,826,542 (95,488) (3,437,157) 293,897 38,670 1,287,085 $ 1,325,755

4,040,036 152,200 (4,209,190) (16,954) 158,594 1,128,491 1,287,085

End of year cash comprised of: Cash and cash equivalents Restricted cash and cash equivalents

$ 1,227,501 $ 98,254

1,195,109 91,976

Cash flows from capital and related financing activities: Proceeds from capital debt Capital appropriations Capital grants and gifts received Proceeds from sale of capital assets Purchases of capital assets Payments to contractors Principal paid on capital debt and leases Interest paid on capital debt and leases Other receipts (payments) Net cash used by capital and related financing activities

2009 ANNUAL FINANCIAL REPORT

Statements of Cash Flows (continued) For the Years Ended June 30, 2009 and 2008 In thousands Reconciliation of net operating loss to net cash used by operating activities: Operating loss Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation and amortization expense Fringe benefits, litigation, and other noncash expenses Change in assets and liabilities: Receivables, net Inventories Other assets Accounts payable, accrued expenses, and other liabilities Deferred revenue Student deposits Deposits held for others Net cash used by operating activities

2009 $ (3,699,717) 400,494 1,149,419 (61,139) (8,179) (129) 462,793 (5,600) (446) 5,561 $ (1,756,943)

2008 (3,663,719) 375,738 1,026,794 (15,705) (4,019) (7,337) 575,822 74,523 1,750 41,890 (1,594,263)

Supplemental disclosures for noncash transactions: New capital leases / debt agreements

157,064

182,612

Fringe benefits provided by the State

$ 1,047,148

999,638

Litigation costs provided by the State

38,351

22,884

Noncash gifts

2,941

2,149

See accompanying notes to financial statements.

THE STATE UNIVERSITY OF NEW YOR K

State University of New York Foundations Balance Sheet June 30, 2009 (with comparative totals for June 30, 2008) In thousands Assets Cash and cash equivalents Accounts and notes receivable, net Pledges receivable, net Investments Other assets Capital assets, net Total assets

2009

2008

71,788 24,117 139,337 982,833 37,451 361,168

85,652 13,044 89,631 895,053 46,143 334,025

$ 1,616,694

1,463,548

22,902 8,248 1,469 51,814 42,644 267,644 394,721

23,290 9,232 1,639 42,744 44,096 267,850 388,851

112,323 72,353 62,957 3,948 4,639

105,593 115,990 61,069 17,098 16,588

72,840 205,752 93,893 112,393

70,106 155,637 16,773 72,703

222,347 167,542 14,350 76,636

201,331 150,720 13,411 77,678

1,221,973

1,074,697

$ 1,616,694

1,463,548

Liabilities and Net Assets

Liabilities: Accounts payable and accrued liabilities Current portion of long-term debt Deferred revenue Deposits held in custody for others Other liabilities Long-term debt Total liabilities Net Assets: Unrestricted: Board designated for: Fixed assets Campus programs Investments Other Undesignated Temporarily restricted: Scholarships and fellowships Campus programs Research General operations and other Permanently restricted: Scholarships and fellowships Campus programs Research General operations and other Total net assets Total liabilities and net assets

See accompanying notes to financial statements.

2009 ANNUAL FINANCIAL REPORT

State University of New York Foundations Statement of Activities For the Year Ended June 30, 2009 (with comparative totals for June 30, 2008) In thousands

Unrestricted Revenues: Contributions, gifts, and grants $ 35,751 Investment income, net 4,498 Net realized and unrealized losses (85,824) Rental income 49,986 Sales and services 17,287 Program income and special events 35,755 Change in value of split interest agreements 942 Other sources 2,854 Transfers from state university endowment 33,654 Endowment earnings transferred Net assets released from restrictions 69,155 Total revenues 164,058

Temporarily Permanently Restricted Restricted

2009 Total

2008 Total

114,429 7,521 (71,562) 403 5,096 (1,703) 703 183,232 696 (69,155) 169,660

30,398 210 (6,615) 2 171 (3,767) 44 17,987 (696) 37,734

180,578 12,229 (164,001) 50,389 17,289 41,022 (4,528) 3,601 234,873 371,452

162,763 30,815 (42,151) 46,106 20,506 42,931 (2,174) 1,776 260,572

Expenses: Program expenses Payments to the State University: Scholarships and fellowships Other Real estate expenses Depreciation and amortization expense Interest expense on capital-related debt Management and general Fundraising Other expenses Total expenses

94,873

94,868

23,233 19,822 19,653 13,355 12,991 18,651 15,354 6,244 224,176

22,450 20,296 18,639 13,146 13,020 18,310 14,424 3,533 218,686

Change in net assets

(60,118)

169,660

37,734

147,276

41,886

316,338

315,218

443,141 1,074,697 1,032,811

$ 256,220

484,878

480,875 1,221,973 1,074,697

Net assets, beginning of year Net assets, end of year

See accompanying notes to financial statements.

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008 1 . Su m ma r y o f Si g n i f i c a n t A c c o un t i n g P ol i c i e s a n d Bas i s o f P re s e n t at io n

R e p or tin g En t it y For financial reporting purposes, the State University of New York (State University) consists of all sectors of the State University including the university centers, health science centers (including hospitals), colleges of arts and sciences, colleges of technology and agriculture, specialized colleges, and statutory colleges (located at the campuses of Cornell and Alfred Universities), central services and other affiliated entities determined to be includable in the State University’s financial reporting entity.

Inclusion in the reporting entity is based primarily on the notion of financial accountability, defined in terms of a primary government (State University) that is financially accountable for the organizations that make up its legal entity. The reporting entity includes legally-separate organizations meeting certain financial accountability and fiscal dependency criteria of the State University. Separate legal entities meeting the criteria for inclusion in the blended totals of the State University reporting entity are described below. The State University is included in the financial statements of the State of New York (State) as an enterprise fund as the State is the primary government of the State University. Legally-separate, tax-exempt, affiliated organizations that receive or hold economic resources that are significant to, that are entirely or almost entirely for the direct benefit of, and that can be accessed by, the primary government, its component units, or its constituents are required to be included in the reporting entity using discrete presentation requirements. As a result, the combined totals of the campus-related foundations and student housing corporations (all referred to as foundations) are separately presented as an aggregate component unit on financial statement pages 16 and 17 in the State University’s financial statements in accordance with display requirements prescribed by the Financial Accounting Standards Board (FASB). The Research Foundation of State University of New York (Research Foundation) is a separate, private, nonprofit educational corporation that

administers the majority of the State University’s sponsored programs. The programs include research, training, and public service activities of the Stateoperated campuses supported by sponsored funds other than State appropriations. The activity of the Research Foundation has been included in these financial statements using GASB measurements and recognition standards. The financial activity was derived from audited financial statements of the Research Foundation for the years ended June 30, 2009 and 2008. Almost all of the State University’s campuses maintain auxiliary services corporations. These corporations are campus-based, nonprofit organizations which, as independent contractors, operate, manage, and promote educationally related services for the benefit of the campus community. Although separate and independent legal entities, these corporations carry out operations which are integrally related to the State University and, therefore, are included in the financial statements of the State University. All of the financial data for these corporations was derived from each entity’s individual audited financial statements, the majority of which have a May 31 or June 30 fiscal year end. The State University Construction Fund (Construction Fund) is a public benefit corporation that designs, constructs, reconstructs and rehabilitates facilities of the State University pursuant to an approved master plan. Although the Construction Fund is a separate legal entity, it carries out operations which are integrally related to the State University and, therefore, the financial activity related to the Construction Fund is included in the State University’s financial statements as of the Construction Fund’s fiscal years end of March 31, 2009 and 2008. The State statutory colleges at Cornell University and Alfred University are an integral part of, and are administered by, those universities. The statutory colleges are fiscally dependent on State appropriations through the State University. The financial statement information of the statutory colleges of Cornell University and Alfred University, have been included in the accompanying financial statements.

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 1. Su mmary of Signif icant Accounting Policies a n d B a s i s of P r e s e n t a t i on ( c on t i n ue d ) The operations of certain related but independent organizations, i.e., clinical practice management plans, alumni associations and student associations, do not meet the criteria for inclusion, and are not included in the accompanying financial statements. The State University administers State financial assistance to the community colleges in connection with its general oversight responsibilities pursuant to State Education Law. However, since these community colleges are sponsored by local governmental entities and are included in their financial statements, the community colleges are not considered part of the State University’s financial reporting entity and, therefore, are not included in the accompanying financial statements. The accompanying financial statements of the State University have been prepared using the economic resources measurement focus and the accrual basis of accounting in accordance with U.S. generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). The State University applies all applicable pronouncements of the FASB issued on or before November 30, 1989 that do not conflict or contradict GASB pronouncements. The State University has elected not to apply FASB pronouncements issued after November 30, 1989. The State University reports its financial statements as a special purpose government engaged in business-type activities, as defined by GASB. Business-type activities are those that are financed in whole or in part by fees charged to external parties for goods or services. The financial statements of the State University consist of classified balance sheets; statements of revenues, expenses, and changes in net assets, that distinguish between operating and nonoperating revenues and expenses; and statements of cash flows, using the direct method of presenting cash flows from operations and other sources. The State University’s policy for defining operating activities in the statement of revenues, expenses, and changes in net assets are those that

generally result from exchange transactions, i.e., the payments received for services and payments made for the purchase of goods and services. Certain other transactions are reported as nonoperating activities and include the State University’s operating and capital appropriations from the State, federal appropriations, nonexchange receipts, net investment income, gifts, and interest expense. Resources are classified for accounting and financial reporting purposes into the following four net asset categories: Invested in capital assets, net of related debt Capital assets, net of accumulated depreciation and amortization and outstanding principal balances of debt attributable to the acquisition, construction, repair or improvement of those assets. Restricted – nonexpendable Net assets subject to externally imposed conditions that require the State University retain in perpetuity. Restricted – expendable Net assets whose use is subject to externally imposed conditions that can be fulfilled by the actions of the State University or by the passage of time. Unrestricted, all other categories of net assets Included in unrestricted net assets are amounts provided for specific use by the State University’s colleges and universities, hospitals and clinics, and separate legal entities included in the State University’s reporting entity that are designated for those entities and, therefore, not available for other purposes. The State University has adopted a policy of generally utilizing restricted - expendable funds, when available, prior to unrestricted funds.

R e v e n ue s Revenues are recognized in the accounting period when earned. State appropriations are recognized when they are made legally available for expenditure. Revenues and expenditures arising from

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008 1 . Su m ma r y of S i g n i f i c a n t A c c o un t i n g P ol i c i e s a n d B a s i s of P r e s e n t a t i on ( c on t i n ue d )

nonexchange transactions are recognized when all eligibility requirements, including time requirements, are met. Promises of private donations are recognized at fair value. Net patient service revenue for the hospitals is reported at the estimated net realizable amounts from patients, third party payors and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third party payors. Tuition and fees and auxiliary sales and service revenues are reported net of scholarship discounts and allowances. Auxiliary sales and service revenue classifications for 2009 and 2008 were reported net of the following scholarship discount and allowance amounts (in thousands):

Residence halls Food service Other auxiliary

2009 $ 60,839 26,433 26,006

2008 54,088 24,476 24,410

C a s h a n d C a s h Eq ui v a l e n t s Cash and cash equivalents are defined as current operating assets that include investments with original maturities of less than 90 days, except for cash and cash equivalents held in investment pools which are included in short-term and long-term investments in the accompanying balance sheets.

I n v e s t me n t s Investments in marketable securities are stated at fair value based upon quoted market prices. Investment income is recorded on the accrual basis, and purchases and sales of investment securities are reflected on a trade date basis. Any net earnings not expended are included as increases in restricted nonexpendable net assets if the terms of the gift require that such earnings be added to the principal of a permanent endowment fund, or as increases in restricted - expendable net assets as provided for

under the terms of the gift, or as unrestricted. At June 30, 2009 and 2008, the State University had $111 million and $715 million available for authorization for expenditure, $56 million and $429 million from restricted funds, and $55 million and $286 million from unrestricted funds, respectively. The State University's Board of Trustees has the responsibility of oversight for the State Universityâ&#x20AC;&#x2122;s Endowment and similar funds. In an effort to reduce duplicative expenses relating to the management and administration of endowment assets, the Board of Trustees authorized the transfer of title to campus foundations of allocable portions of substantially all the assets of the State University Endowment Fund and has authorized a separate foundation to manage the investment of the remaining assets of the State University campuses totaling $1.9 million at June 30, 2009, title to which is not transferred to campus foundations. The assets were transferred during the 2009 fiscal year. In 2008, the expenditure of available endowment income was subject to New York State appropriation and the State Universityâ&#x20AC;&#x2122;s spending policy. The Investment Committee of the Cornell Board of Trustees establishes the investment policy of the Cornell statutory colleges. Distributions from the pool are approved by the Cornell Board of Trustees and are provided for program support independent of the cash yield and appreciation of investments in that year. Investments in the pool are stated at fair value and include limited use of derivative instruments, including leverage futures, options and other similar vehicles to manage market exposure and to enhance the total return. Alternative investments are valued using current estimates of fair value obtained from the investment manager in the absence of readily determinable public market values. The estimated fair value of these investments is based on the most recent valuations provided by the external investment managers. Because of the inherent uncertainty of valuation for these investments, the investment managerâ&#x20AC;&#x2122;s estimate may differ from the values that would have been used had a ready market existed.

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 1 . S u m m a r y o f S i g n i fi c a n t A c c o u n t i n g P o l i c i e s a n d B a s i s of P r e s e n t a t i on ( c on t i n ue d )

C ap it al A s s e t s Capital assets are stated at cost, or in the case of gifts, fair value at the date of receipt. Building renovations and additions costing over $100,000 and equipment items with a unit cost of $5,000 or more are capitalized. Equipment under capital leases are stated at the present value of minimum lease payments at the inception of the lease. Generally, the net interest cost on debt during the construction period related to capital projects is capitalized and totaled $12.4 million and $7.9 million in the 2009 and 2008 fiscal years, respectively. Library materials are capitalized and amortized over a ten-year period. Works of art or historical treasures that are held for public exhibition, education, or research in furtherance of public service are capitalized. Capital assets, with the exception of land, construction in progress, and inexhaustible works of art, are depreciated on a straight-line basis over their estimated useful lives, using historical and industry experience, ranging from 3 to 50 years.

D e f e r r e d Fi n a n c i n g C o s t s Deferred financing costs represent costs incurred for the issuance of bonds that are capitalized and amortized over the life of the related debt.

I n ve n t or ie s

behalf of the State University (except for the State University hospitals, which pay their own fringe benefit costs) at a fringe benefit rate determined by the State. The State University records an expense and corresponding State appropriation revenue for fringe benefit costs based on the fringe benefit rate applied to total eligible personal service costs incurred.

P o s t e m p l o y me n t B e n e f i t s Postemployment benefits other than pensions are recognized on an actuarially determined basis as employees earn benefits that are expected to be used in the future. The amounts earned include employee sick leave credits expected to be used to pay for a share of post-retirement health insurance.

T a x St a t u s The State University and the Construction Fund are political subdivisions of the State and are, therefore, generally exempt from federal and state income taxes under applicable federal and state statutes and regulations. The Research Foundation and campus auxiliary services corporations are nonprofit organizations as described in Section 501(c)(3) of the Internal Revenue Service Code and are tax-exempt on related income, pursuant to Section 501(a) of the code.

U s e o f Es tim a t e s

Employees accrue annual leave based primarily on the number of years employed up to a maximum rate of 21 days per year up to a maximum of 40 days.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F ri n g e Be n e f i ts

R e c l as s if ic a tio n s

Employee fringe benefit costs (e.g., health insurance, workerâ&#x20AC;&#x2122;s compensation, and pension and post-retirement benefits) are paid by the State on

Certain amounts displayed in the 2008 financial statements have been reclassified to conform to the 2009 presentation.

Inventories held by the State University are primarily stated at the lower of cost or market value on a first-in, first-out basis.

C o mp e n s a t e d A b s e n c e s

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008 2 . C a s h a n d C a s h Eq u iv a l e n ts

3 . D e p o s i t s w i t h Tr us t e e s

Cash and cash equivalents represent State University funds held in the State treasury, in the short-term investment pool (STIP), or local depositories, and cash held by affiliated organizations. Cash held in the State treasury beyond immediate need is pooled with other State funds for short-term investment purposes. The pooled balances are limited to legally-stipulated investments which include obligations of, or are guaranteed by, the United States, obligations of the State and its political subdivisions, and repurchase agreements. These investments are reported at cost (which approximates fair value) and are held by the State’s agent in its name on behalf of the State University.

Deposits with trustees primarily represent Dormitory Authority of the State of New York (DASNY) bond proceeds needed to finance capital projects and to establish required building and equipment replacement and debt service reserves. Pursuant to financing agreements with DASNY, bond proceeds, including interest income, are restricted for capital projects or debt service. Also included are non-bond proceeds which have been designated for capital projects and equipment. The State University’s cash and investments which comprise deposits with trustees are registered in the State University’s name held by an agent or in trust accounts in the State University’s name. Cash and short-term investments held in the State treasury and money market accounts were approximately $258 million and $53.9 million at June 30, 2009 and 2008, respectively. The market value of investments held and maturity are displayed in the table below (in thousands).

The New York State Comprehensive Annual Financial Report contains the GASB No. 40 risk disclosures for deposits held in the State treasury. Deposits not held in the State treasury that are not covered by depository insurance and are (a) uncollateralized; (b) collateralized with securities held by a pledging financial institution; or (c) collateralized with securities held by a pledging financial institution’s trust department or agency, but not in the State University or affiliates name at June 30, 2009 and 2008, is as follows (in thousands):

Category a

Category b

$ 69,489 59,238

20,083 24,868

2009 2008

Category c 8,724 4,639

4 . In v e s t m e n t s Investments of the State University are recorded at fair value. Investment income is reported net of investment fees of $3 million and $4.4 million for 2009 and 2008, respectively. Investments are comprised of the statutory colleges at Cornell University and Alfred University (Alfred Ceramics), the Research Foundation, the Construction Fund,

Fiscal Year 2009 Less than 1 year 1-5 years

Type of Investments

Fair Value

US Treasury notes/bonds

$ 75,404

68,989

233,330

US Treasury bills

6,415 -

4,060

86,631

145,897

$ 545,322

538,907

US Treasury strips FNMA* Federal Home Loan Bank Total

Fiscal Year 2008

*Federal National Mortgage Association

6,415

Rating AAA AAA

Fair Value

Less than 1 year 1-5 years 21,240 -

Rating -

206,887

185,647

360,903

246,328

243,777

4,062

2,551 -

AAA

14,635

AAA

832,815

809,024

23,791

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 4 . In v e s t m e n t s ( c o n t i n ue d ) the auxiliary services corporations, and certain State University campuses. Investments of the endowment and similar funds of the Cornell statutory colleges, except for separately invested funds with a fair value of $23 million and $42.7 million at June 30, 2009 and 2008, respectively, are pooled on a fair value basis in Cornell’s long-term investment pool and living trust fund. Individual funds enter or withdraw from the pool based on each fund’s share of the fair value of the pool’s investments. The investments of the State University campuses are well diversified to achieve return objectives. During 2009, the Board of Trustees authorized the transfer of title to campus foundations of allocable portions of substantially all of the assets held in the State University Endowment Fund. Total investments reported in 2009 were $2 million compared to $401 million in 2008. The Research Foundation maintains a diverse investment portfolio and with respect to debt instruments, has a policy of investing in primarily

high quality securities. Investments are held with the investment custodian in the Research Foundation’s name. During 2009, the Research Foundation transferred investment assets to a separate legal trust designated for their postretirement benefit plan. These assets were valued at $66.3 million at June 30, 2009. Investments of the Construction Fund have been made in accordance with the applicable provisions of the laws of the State and the Construction Fund’s investment policy and consisted primarily of obligations of the United States government and its agencies. These investments are held by the State’s agent in the State University Construction Fund’s name. Investments of the auxiliary services corporations and Alfred Ceramics were derived from each entity’s individual financial statements. The State University’s financial position may be impacted through its market risk positions and by changes in economic conditions. The composition of investments is as follows (in thousands):

2009 Cash and money market funds Non-equities Domestic and international equities Equity partnerships Hedge funds Other investments Total investments

Classified as short-term

153,695 218,034 58,684 294,906 125,616 28,925 879,860

43,304 415,458 639,232 483,221 54,618 33,438 1,669,271

295,947

301,093

2009 State University Campuses Cornell Statutory Colleges Alfred Ceramics Research Foundation Auxiliary Services Corporations State University Construction Fund Total investments

2008

1,960 542,076 16,252 239,041 50,015 30,516 879,860

2008 400,966 764,151 23,987 388,219 62,803 29,145 1,669,271

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008 4 . In v e s t m e n t s ( c o n t i n ue d )

Generally, individual investment securities must be of investment grade. Credit quality ratings of the State University’s investments in debt securities, as described by Moody’s, S&P, and Fitch IBCA as of June 30, 2009 and 2008 are summarized in Table B.

At June 30, 2009 and 2008, the State University had the following non-equity investments and maturities as summarized in Table A. Table A (in thousands)

Fiscal Year 2009 Market Less than More than Value 1 yr 1-5 yrs 6-10 yrs 10 yrs 10,687 10,687

Fiscal Year 2008 Market Less than More than Value 1 yr 1-5 yrs 6-10 yrs 10 yrs

US treasury notes/bonds

49,816

15,250

31,899

US treasury strips

Investment Type US treasury bills

2,115

13,010

2,193

(515)

2,941

8,391

6,018

48,964

704

35,777

8,018

4,465

1,209 -

1,654 -

1,364 -

13,952

3,452

10,500

Asset-backed securities

6,484

270

6,142

Municipals

1,990

107

870

953

4,242

Repurchase agreements

2,276

25,227

58,562

1,909

40,605

11,956

4,092

36,317

1,575

5,819

13,699 -

11,966 -

9,077 -

211,522 132,367

38,234

38,597

2,324

2,169

2,928

7,721

Corporate bonds Commercial paper

2,115

36 -

2,631 -

Mutual funds – non-equities

27,055

16,983

5,733

4,236

103

International – non-equities

5,341

514

1,550

1,763

1,514

US government TIPS US government agencies Total investments

13,542

3,494

1,122

303

2,069

5,706

724 -

38,377

3,293

5,387

24,686

5,011

42,976

1,116

$ 218,034

54,463

96,936

46,715

19,920

(1,411)

4,080

3,037

14,166

10,684

17,010

415,458 177,873 103,328

80,868

53,389

Table B (in thousands) C re d it R at in g

AAA

Investment Type - 2009 Asset-backed securities $ 3,070 Municipal bonds 653 Repurchase agreements Corporate bonds 7,141 Mutual funds - non-equities* 14,702 International - non-equities 1,870 US government agencies 25,877 Total Investment Type - 2008 Asset-backed securities Municipal bonds Corporate bonds Commercial paper Mutual funds - non-equities* International - non-equities US government agencies Total

B BB

CCC

N o t R a t ed

583 178

177 636

426 15

223

755

489

101

252

761 508 2,276 380 7,472 1,008 12,500

931

741

24,905

8,927

29,939

11,659

562

652

995

163 4,881 179 -

$ 53,313

10,250

31,404

13,095

5,446

46,050 1,480 2,831 4,973 103,911 3,228 24,694

999 1,413 7,329

233 758 10,077

743 146 14,143

372

$187,167

*based on average credit quality of holdings

204

161

69,880 1,825 132

600

832

460

102

567 445 1,572 846 37,731 6,495 18,150

81,578

11,668

263

65,806

15,864

1,036

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 4 . In v e s t m e n t s ( c o n t i n ue d )

5 . A c c o un t s , N ot e s , a n d L oa n s R e c e i v a b l e

The State Universityâ&#x20AC;&#x2122;s exposure to foreign currency risk for investments, held at June 30, 2009 and 2008, was as follows (fair value in thousands):

At June 30, accounts, notes, and loans receivable were summarized as follows (in thousands):

Currency Denomination Japanese yen Euro British pound Hong Kong dollar Taiwan dollar South Korean won Brazil real cruzeiro Malaysian ringgit Singapore dollar Turkish lira So. African rand Canadian dollar Thailand baht Australian dollar Norwegian krone Swedish krona Swiss franc Mexican Nuevo Peso Polish zloty Danish krone Other Total

2009

2008

4,377 4,154 2,306 1,924 826 795 538 522 513 353 344 307 291 276 257 224 191 191 185 18 637 $ 19,229

29,717 37,805 21,083 8,876 8,090 10,398 9,278 1,900 3,514 1,695 2,880 3,495 2,106 8,458 2,285 3,719 8,827 2,993 1,301 1,214 12,143 181,777

Tuition and fees Allowance for uncollectible Net tuition and fees Room rent Allowance for uncollectible Net room rent Patient fees, net of contractual allowances Allowance for uncollectible Net patient fees Other, net Total accounts and notes receivable

Student loans Allowance for uncollectible Total student loans receivable Total, net $

2009 31,864 (7,604) 24,260 7,780 (1,805) 5,975

2008 30,116 (7,419) 22,697 7,528 (1,748) 5,780

631,746 (194,787) 436,959 176,233

566,565 (172,466) 394,099 131,914

643,427

554,490

162,257 (22,427) 139,830 783,257

163,190 (21,999) 141,191 695,681

6 . C api tal A s s e ts Capital assets, net of accumulated depreciation, totaled $6.24 billion and $5.74 billion at fiscal year end 2009 and 2008, respectively. Capital asset activity for fiscal years 2009 and 2008 is reflected in Table C. In the table, closed projects and retirements represent capital assets retired and assets transferred from construction in progress for projects completed and the related capital assets placed in service.

Table C (in thousands) June 30, 2007

Closed Projects & Retirements

June 30, 2008

27,118 86,284 395,101 240,544 634,714 1,383,761

102 11,215 57,623 75,572 486,406 630,918

301,862 593,877 6,337,675 2,334,477 901,084 10,468,975

11,313 79,643 385,610 196,808 723,737 1,397,111

8,918 38,425 80,753 499,668 627,764

313,175 664,602 6,684,860 2,450,532 1,125,153 11,238,322

327,075 2,679,161 1,476,535 4,482,771

18,372 156,475 196,382 371,229

10,662 48,416 70,759 129,837

334,785 2,787,220 1,602,158 4,724,163

22,135 171,910 202,600 396,645

8,456 36,013 73,916 118,385

348,464 2,923,117 1,730,842 5,002,423

$ 5,233,361

1,012,532

501,081

5,744,812

1,000,466

509,379

6,235,899

Land $ 274,846 Infrastructure and land improvements 518,808 Buildings 6,000,197 Equipment, library books, and artwork 2,169,505 Construction in progress 752,776 Total capital assets 9,716,132

Additions

Closed Projects June 30, 2009 Additions & Retirements

Less accumulated depreciation: Infrastructure and land improvements Buildings Equipment and library books Total accumulated depreciation Capital assets, net

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008 7. Long-term Liabilities The State University has entered into capital leases and other financing agreements with DASNY to finance most of its capital facilities. The State University has also entered into financing arrangements with the New York Power Authority under the statewide energy services program. Equipment purchases are also made through DASNYâ&#x20AC;&#x2122;s Tax-exempt Equipment Leasing Program (TELP), various state sponsored equipment leasing programs, or private financing arrangements. At June 30, 2009 and 2008, other than facilities obligations, which are included as of March 31, 2009 and 2008, total obligations are summarized in Table D.

E du c a t io n a l F a c i l it ie s

The State University, through DASNY, has entered into financing agreements to finance various educational facilities which have a maximum 30-year life. Athletic facility debt is aggregated with educational facility debt. Debt service is paid by, or from specific appropriations of, the State. During the year, Personal Income Tax Revenue Bonds (PIT) were issued for the purpose of financing capital construction and major rehabilitation for educational facilities in the amount of $508.4 million. Also, during the year $34.4 million of PIT bonds were used in order to

refinance $34.4 million of the State Universityâ&#x20AC;&#x2122;s existing educational facilities obligations.

R e s id e n c e H al l F ac il it ie s The State University has entered into capital lease agreements for residence hall facilities. DASNY bonds for residence hall facilities, which have a maximum 30-year life, are repaid from room rentals and other residence hall revenues. Upon repayment of the bonds, including interest thereon, and the satisfaction of all other obligations under the lease agreements, DASNY shall convey to the State University all rights, title, and interest in the assets financed by the capital lease agreements. Residence hall facilities revenue realized during the year from facilities from which there are bonds outstanding is pledged as a security for debt service and is assigned to DASNY to the extent required for debt service purposes. Any excess funds pledged to DASNY are available for residence hall capital and operating purposes. During the year, the State University entered into agreements with DASNY to issue residential hall facility obligations totaling $129.4 million for the purpose of financing capital construction and major rehabilitation for residential hall facilities. In prior years, the State University defeased various obligations, whereby proceeds of new obligations were placed in an irrevocable trust to

Table D (in thousands) Additions

Reductions

June 30, 2009

$ 4,782,950 873,355 217,532 61,835

542,812 129,375 41,284 13,186

229,032 27,970 62,751 17,898

5,096,730 974,760 196,065 57,123

189,258 31,170 49,584 12,898

5,935,672

726,657

337,651

6,324,678

282,910

Postemployment and postretirement obligations and compensated absences 1,527,385 Loan from State 110,178 Litigation 109,157 Other long-term liabilities 108,982

826,731 1,383 139,900 11,220

427,747 25,563 44,482 4,306

1,926,369 85,998 204,575 115,896

160,766 17,244 39,091 4,308

1,855,702

979,234

502,098

2,332,838

221,409

$ 7,791,374

1,705,891

839,749

8,657,516

504,319

For the 2009 Fiscal Year

July 1, 2008

Current Portion

Long-term debt: Educational facilities Residence hall facilities Capital lease arrangements Other long-term debt Total long-term debt Other long-term liabilities:

Total other long-term liabilities Total long-term liabilities

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 Table D, continued (in thousands) July 1, 2007

Additions

Reductions

June 30, 2008

Current Portion

$ 4,549,253 752,200 213,734 5,845

418,105 145,405 56,419 56,140

184,408 24,250 52,621 150

4,782,950 873,355 217,532 61,835

191,451 27,970 55,362 9,405

5,521,032

676,069

261,429

5,935,672

284,188

Postemployment and postretirement obligations and compensated absences 1,020,796 Loan from State 130,440 Litigation 131,742 Other long-term liabilities 95,598

879,494 5,300 22,515 18,279

372,905 25,562 45,100 4,895

1,527,385 110,178 109,157 108,982

152,108 17,244 19,650 3,965

For the 2008 Fiscal Year Long-term debt: Educational facilities Residence hall facilities Capital lease arrangements Other long-term debt Total long-term debt Other long-term liabilities:

Total other long-term liabilities Total long-term liabilities

1,378,576

925,588

448,462

1,855,702

192,967

$ 6,899,608

1,601,657

709,891

7,791,374

477,155

27 7 . L on g - te rm L ia b i l it ie s ( c on t in u e d) provide for all future debt service payments on the defeased obligations. Accordingly, the trust account assets and liabilities for the defeased obligations are not included in the State Universityâ&#x20AC;&#x2122;s financial statements. As of March 31, 2009, $1.01 billion and $327.4 million of outstanding educational and residence hall facility obligations, respectively, were considered defeased.

C ap it al Le a s e A r ran g e m e n t s The State University leases equipment under

DASNY TELP, New York State Personal Income Tax Revenue Bonds, certificates of participation (COPs), vendor financing, or through statewide lease purchase agreements. The State University is responsible for lease debt service payments sufficient to cover the interest and principal amounts due under these arrangements.

L o a n Fr om S t a t e In prior years, the State University experienced operating cash-flow deficits precipitated by cash-flow difficulties experienced by its hospitals. In connection with these cash-flow deficits, as

Debt service requirements of the long-term debt obligations as of June 30, 2009 are as follows (in thousands): Fiscal year(s) 2010 2011 2012 2013 2014 2015-19 2020-24 2025-29 2030-34 2035-39 Total

Educational Facilities

Residential Facilities

Principal

Interest

Principal

Interest

Principal

Interest

189,258 215,622 272,905 297,049 305,667 1,254,436 904,309 810,509 573,450 273,525

300,177 289,308 239,576 226,363 210,278 841,009 573,974 338,688 154,651 29,004

31,170 31,980 34,465 36,315 37,935 193,885 192,595 185,350 159,465 71,600

46,831 45,390 43,891 42,315 40,600 175,266 127,032 80,889 35,599 7,221

62,482 51,034 44,939 34,730 13,276 31,771 11,520 2,151 1,285

8,679 6,579 4,798 2,885 2,010 5,548 747 62 11

$ 5,096,730 3,203,028

974,760

645,034

253,188

Interest rates range from 2.0% to 7.5%

Interest rates range from 3.0% to 6.0%

Other

Total Principal

Interest

282,910 298,636 352,309 368,094 356,878 1,480,092 1,108,424 998,010 734,200 345,125

355,687 341,277 288,265 271,563 252,888 1,021,823 701,753 419,639 190,261 36,225

31,319

6,324,678

3,879,381

Interest rates range from .54% to 9.78%

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008 7 . L o n g - t e r m L i a b i l i t i e s (c o n t i n u e d ) authorized by State Finance Law, the State University borrowed funds with interest from the short-term investment pool of the State. The amount outstanding under this borrowing from the State at June 30, 2009 was $86 million. During the year, $25.6 million was paid on these loans. The State University incurred an interest cost of $1.4 million at an average interest rate of 1.3 percent. 8 . R e t i r e me n t P l a n s

R e ti re m e n t Be n e f it s

There are three major retirement plans for State University employees: the New York State and Local Employees’ Retirement System (ERS), the New York State Teachers’ Retirement System (TRS), and the Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA/CREF). ERS is a cost-sharing, multiple-employer, defined benefit public plan administered by the State Comptroller. TRS is a cost-sharing, multipleemployer, defined benefit public plan separately administered by a nine-member board. TIAA/CREF is a multiple-employer, defined contribution plan administered by separate boards of trustees. Substantially all full-time employees participate in the plans. Obligations of employers and employees to contribute, and related benefits, are governed by the New York State Retirement and Social Security Law (NYSRSSL) and Education Law. These plans offer a wide range of programs and benefits. ERS and TRS benefits are related to years of credited service and final average salary, vesting of retirement benefits, death and disability benefits, and optional methods of benefit payments. TIAA/CREF is a State University Optional Retirement Program (ORP) and offers benefits through annuity contracts. ERS and TRS provide retirement benefits as well as death and disability benefits. Benefits generally vest after five years of credited service. The NYSRSSL provides that all participants in ERS and TRS are jointly and severally liable for any actuarial unfunded amounts. Such amounts are collected through annual billings to all participating employers. Employees who joined ERS and TRS

after July 27, 1976, and have less than ten years of service or membership are required to contribute 3 percent of their salary. Employee contributions are deducted from their salaries and remitted on a current basis to ERS and TRS. Employer contributions are actuarially determined for ERS and TRS. TIAA/CREF provides benefits through annuity contracts and provides retirement and death benefits to those employees who elected to participate in the ORP. Benefits are determined by the amount of individual accumulations and the retirement income option selected. All benefits generally vest after the completion of one year of service if the employee is retained thereafter. Employees who joined TIAA/CREF after July 27, 1976, and have less than ten years of service or membership are required to contribute 3 percent of their salary. Employer contributions range from 8 percent to 15 percent depending upon when the employee was hired. Employee contributions are deducted from their salaries and remitted on a current basis to TIAA/CREF. The State University’s total retirement-related payroll was $2.8 billion and $2.5 billion for the June 30, 2009 and 2008 fiscal years, respectively. The payroll for 2009 and 2008 for State University employees covered by TIAA/CREF was $1.73 billion and $1.57 billion, ERS was $993 million and $874 million, and TRS was $109 million and $84 million, respectively. Employer and employee contributions under each of the plans were as follows (in millions): 2008 2007 2009 Employer contributions: TIAA-CREF $194.6 167.8 161.0 ERS 47.1 48.6 50.7 TRS 8.3 8.3 6.7 Employee contributions: TIAA-CREF ERS TRS

$ 40.6 13.7 1.1

43.6 11.5 1.0

43.9 10.7 0.9

The employer contributions are equal to 100 percent of the required contributions under each of the respective plans. The Research Foundation maintains a separate non-contributory plan through TIAA/CREF for substantially all of its employees. Employees become fully vested in contributions made by the Research

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 8 . R e t i r e m e n t P l a n s ( c on t i n ue d ) Foundation after three years of service. Contributions are allocated to individual employee accounts. Employer contributions are based on a percentage of regular salary and range from 8 percent to 15 percent. The payroll for Research Foundation employees covered by TIAA/CREF for its fiscal year ended June 30, 2009 and 2008 was $350 million and $337.7 million, respectively. The Research Foundation pension contributions for fiscal years 2009 and 2008 were $28.2 million and $27.5 million, respectively. These contributions are equal to 100 percent of the required contributions for each year. Each retirement system issues a publicly available financial report that includes financial statements and supplementary information. The reports may be obtained by writing to: New York State and Local Employees’ Retirement System 110 State Street Albany, New York 12244 New York State Teachers’ Retirement System 10 Corporate Woods Drive Albany, New York 12211 Teachers Insurance and Annuity Association/ College Retirement Equities Fund 730 Third Avenue New York, New York 10017

P o s t e mp l o y m e n t a n d P o s t - r e t i r e me n t B e n e fi t s The State, on behalf of the State University, provides health insurance coverage for eligible retired State University employees and their spouses as part of the New York State Health Insurance Plan (NYSHIP). NYSHIP offers comprehensive benefits through various providers consisting of hospital, medical, mental health, substance abuse and prescription drug programs. The State administers NYSHIP and has the authority to establish and amend the benefit provisions offered. NYSHIP is considered an agent multiple-employer defined benefit plan, is not a separate entity or trust, and does not issue stand-alone financial statements. The State University, as a participant in the plan, recognizes these other postemployment benefit (OPEB) expenses on an accrual basis.

Employee contribution rates for NYSHIP are established by the State and are generally 10 percent for enrollee coverage and 25 percent for dependent coverage. NYSHIP premiums are being financed on a pay-as-you-go basis. There are no assets set aside to fund the plan. During the fiscal year, the State, on behalf of the State University, paid health insurance premiums of $201.9 million. The State University’s annual OPEB cost and increase in the OPEB obligation for the years ended June 30 2009, 2008, and 2007 were as follows (in thousands):

Annual OPEB cost $ Benefits paid

2009

2008

2007

625,691

749,962

712,551

(201,894) (234,293) (142,399)

Increase in OPEB Obligation

423,797

515,669

570,152

Net obligation at beginning of year

1,085,821

570,152

Net obligation at end of year

$ 1,509,618 1,085,821

570,152

The components of the State University’s OPEB obligation include the total annual required contribution (ARC) of $621.4 million (comprised of service costs of $239.0 million, amortization of unfunded actuarial liability of $357.1 million, and interest costs of $25.3 million), ARC reduction of $41.8 million, and interest costs of $46.1 million. The unfunded actuarial accrued liability totaled $9.56 billion as of the April 1, 2008 actuarial valuation date and is being amortized over an open period of thirty years using the level percentage of projected payroll amortization method. The State University total retirement related payroll for the June 30, 2009 fiscal year was $2.8 billion. The actuarial valuation utilizes a frozen entry age actuarial cost method. The actuarial assumptions include a 4.2 percent discount rate, payroll growth rate of 3.5 percent, and an annual healthcare cost trend rate for medical coverage of 10 percent initially, reduced by decrements to a rate of 5 percent after 6 years. Projections of benefits are based on the plan and include the types of benefits provided at the time of each valuation. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of future events

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008 8 . R e t i r e me n t P l a n s ( c o n t i n u e d) and actual results are considered for future valuations. The actuarial methods and assumptions used are designed to reduce short-term volatility in reported amounts and reflect a long-term perspective. The Research Foundation sponsors a separate single employer defined benefit post-retirement plan that provides health insurance and medical benefits that covers substantially all non-student Research Foundation employees. The Research Foundation Board of Directors administers the plan and has the authority to establish and amend the benefit provisions offered. Contribution rates for employees hired after 1985 are 10 percent for employee coverage and 25 percent for dependent coverage.

Contributions by the Research Foundation are made pursuant to a funding policy established by its Board of Directors and were $13.3 million and $12.3 million during the 2009 and 2008 fiscal years, respectively. In 2009, a separate legal trust was established and the assets held in the trust of $66.3 million at June 30, 2009 are considered plan assets in determining the funded status of the plan. In 2008, assets were held in a designated investment account and were not considered plan assets in determining the funded status of the plan. The actuarial accrued liability at June 30, 2009 and 2008 was $188.8 million and $233.0 million, respectively. The payroll for employees covered by the plan for the 2009 fiscal year was $233.7 million. The plan did not issue stand-alone financial statements. The plan will issue stand-alone financial statements for the 2009 calendar year. The Research Foundationâ&#x20AC;&#x2122;s annual cost and increase in the OPEB obligation for the years ended June 30, 2009, 2008, and 2007 were as follows (in thousands): 2009 2008 2007 Annual OPEB cost Benefits paid

$ 27,598 (5,542)

17,227

34,995

(4,580)

(3,994)

Contribution to plan

(66,296)

Change in OPEB Obligation

(44,240)

12,647

31,001

Net obligation at beginning of year

233,017

220,370

189,369

Net obligation at end of year

$ 188,777

233,017

220,370

The components of the Research Foundation OPEB obligation at June 30, 2009 include the total annual required contribution (ARC) of $260.6 million (comprised of service cost of $11.3 million and amortization of unfunded actuarial accrued liability of $ 249.3 million), ARC reduction of $ 249.3 million, and interest costs of $16.3 million. The unfunded actuarial accrued liability is amortized over one year. The cost of the benefits provided under this plan is recognized on an actuarialdetermined basis using the projected unit cost method. Under this method, actuarial assumptions are made based on employee demographics and medical trend rates to calculate the accrued benefit cost. The actuarial assumptions include a 7 percent discount rate, and an initial healthcare cost trend rate range of 7 to 9 percent grading down to 5 percent. A blended discount rate was utilized using the expected investment return on investments of the plan and investments held in the operational pool expected to be used to fund future OPEB obligations. 9 . C o mm i t me n t s The State University has entered into contracts for the construction and improvement of various projects. At March 31, 2009, these outstanding contract commitments totaled approximately $894 million. The State University is also committed under numerous operating leases covering real property and equipment. Rental expenditures reported for the years ended June 30, 2009 and 2008 under such operating leases were $32.3 million for both fiscal years. The following is a summary of the future minimum rental commitments under non-cancelable real property and equipment leases with terms exceeding one year (in thousands): Year ending June 30, 2010 2011 2012 2013 2014 2015-19 2020-24 2025-39 Total

31,014 27,042 23,478 18,769 13,671 25,615 1,989 1,219 $ 142,797

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 1 0 . C o n ti n g e n c i e s The State is contingently liable in connection with claims and other legal actions involving the State University, including those currently in litigation arising in the normal course of State University activities. The State University does not carry malpractice insurance and, instead, administers these types of cases in the same manner as all other claims against the State involving State University activities in that any settlements of judgments and claims are paid by the State from an account established for this purpose. With respect to pending and threatened litigation, the State University has recorded a liability and a corresponding appropriation receivable of approximately $204.6 million at June 30, 2009 ($197.2 million related to hospitals and clinics) for unfavorable judgments, both anticipated and awarded but not yet paid. The State University is exposed to various risks of loss related to damage and destruction of assets, injuries to employees, damage to the environment or noncompliance with environmental requirements, and natural and other unforeseen disasters. The State University has insurance coverage for its residence hall facilities. However, in general, the State University does not insure its educational buildings, contents or related risks and does not insure its vehicles and equipment for claims and assessments arising from bodily injury, property damages, and other perils. Unfavorable judgments, claims, or losses incurred by the State University are covered by the State on a self-insured basis. The State does have fidelity insurance on State employees. 1 1 . R e l at e d P ar tie s The State University's single largest source of revenue is State appropriations. State appropriations take the form of direct assistance, debt service on educational facility and PIT bonds, fringe benefits for State employees, and litigation expenses for which the State is responsible. State appropriations totaled $3.06 billion and $2.97 billion and represented approximately 36 and 37 percent of total revenues for the 2009 and 2008 fiscal years, respectively. The State Universityâ&#x20AC;&#x2122;s continued operational viability is substantially dependent upon a consistent and proportionate level of ongoing State support.

1 2 . Fe d e r a l G r a n t s a n d C on t r a c t s a n d Th i r d- P a r t y R e i mb ur s e me n t Substantially all federal grants and contracts are subject to financial and compliance audits by the grantor agencies of the federal government. Disallowances, if any, as a result of these audits may become liabilities of the State University. State University management believes that no material disallowances will result from audits by the grantor agencies. The State University hospitals have agreements with third-party payors, which provide for reimbursement to the hospitals at amounts different from their established charges. Contractual service allowances and discounts (reflected through State University hospitals and clinics sales and services) represent the difference between the hospitals established rates and amounts reimbursed by third-party payors. The State University has made provision in the accompanying financial statements for estimated retroactive adjustments relating to third-party payors cost reimbursement items. 1 3 . Su b s e q u e n t E v e n t s The State University entered into agreements with DASNY to issue obligations totaling $570 million for the construction and major rehabilitation of educational facilities in August 2009. In September 2009, the State University entered into agreements with DASNY to issue obligations totaling $368.1 million to refinance the State Universityâ&#x20AC;&#x2122;s existing educational and athletic facilities obligations. In October 2009, the State of New York reduced the 2009-10 State appropriated support to the State-operated campuses by $90 million. The State Universityâ&#x20AC;&#x2122;s financial position may be affected by this reduction. 1 4 . Fo u n d a t i o n s Discretely presented component unit information is comprised principally of the campus-related foundations. These foundations are nonprofit organizations responsible for the fiscal administration of revenues and support received for the

THE STATE UNIVERSITY OF NEW YOR K

Notes to Financial Statements June 30, 2009 and 2008

1 4 . Fo u n d a t i o n s ( c on t i n u e d )

Ne t A s s e t C l as s if i c ati o n s

promotion, development and advancement of the welfare of its campus, the State University and its students, faculty, staff and alumni. The foundations receive the majority of their support and revenues through contributions, gifts and grants and provide benefits to their campus, students, faculty, staff and alumni. In addition, the reported amounts include foundation student housing corporations, nonprofit organizations that operate and administer certain housing and related services for students. All the foundations are exempt from federal income taxes on related income pursuant to Section 501(a) of the Internal Revenue Code. All of the financial data for these organizations was derived from each entityâ&#x20AC;&#x2122;s individual financial statements, reported in accordance with generally accepted accounting principles promulgated by FASB, the majority of which have a June 30 fiscal year end.

Unrestricted net assets represent resources whose uses are not restricted by donor-imposed stipulations and are generally available for the support of the State University campus and foundation programs and activities. Temporarily restricted net assets represent resources whose use is limited by donorimposed stipulations that either expire by the passage of time or are removed by specific actions. Permanently restricted net assets represent resources that donors have stipulated must be maintained permanently. The income derived from the permanently restricted net assets is permitted to be spent in part or in whole, restricted only by the donorsâ&#x20AC;&#x2122; wishes. The beginning net asset amounts have been revised from those previously reported to reclassify amounts to conform with donor intentions. As a result, temporarily restricted net assets were increased $12.1 million and permanently restricted and unrestricted net assets were decreased by $2.5 million and $9.6 million, respectively.

During the years ended June 30, 2009 and 2008, the foundations distributed $43.1 million and $42.8 million, respectively, to the State University principally for scholarships and support of campus program activities. Separately issued financial statements of the foundations and other related entities may be obtained by writing to: The State University of New York System Administration Office of the University Controller State University Plaza, S-421 Albany, New York 12246

T r a n s f e r t o t he Fo u n d a t i o n s During 2009, the State University Board of Trustees authorized the transfer of title of substantially all of the assets held in the State University Endowment Fund to the campus foundations. As a result, the foundations recognized $234.9 million in revenue in the statement of activities for the year ended June 30, 2009. Three foundations which received their allocable share of the endowment fund have a year-end other than June 30, 2009 and the transfer occurred after their year-end. As a result, the transfer for these foundations is not recognized in the 2009 statement of activities.

In v e s t m e n t s All investments with readily determinable fair values have been reported in the financial statements at fair value. Realized and unrealized gains and losses are recognized in the statement of activities. Gains or losses on investments are recognized as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or by law. Investments of the State University foundations were $982.8 million and $895 million as of June 30, 2009 and 2008, respectively. The composition of investments is as follows (in thousands): 2009 Equities - domestic $ 266,670 Equities - international 213,668 Non-equities 352,420 Other investments 150,075 Total investments $ 982,833

2008 317,949 156,472 304,110 116,522 895,053

Ca p i t a l A s s e t s Capital assets are stated at cost, if purchased, or fair value at date of receipt, if acquired by gift. Land improvements, buildings, and equipment are depreciated over their estimated useful lives using the straight-line method. Capital assets, net of

2009 ANNUAL FINANCIAL REPORT

Notes to Financial Statements June 30, 2009 and 2008 accumulated depreciation, totaled $361.2 million and $334 million at fiscal year end 2009 and 2008, respectively. Capital asset classifications are summarized as follows (in thousands): Land and land improvements Buildings Equipment Artwork and library books Construction in progress Total capital assets Less accumulated depreciation Capital assets, net

2009 $ 32,627 358,377 21,167 21,761 22,240 456,172 95,004 $ 361,168

2008 24,525 342,331 30,501 18,831 9,503 425,691 91,666 334,025

L o n g- t e r m D e b t The Foundations have entered into various financing arrangements, principally through the issuance of Industrial Development Agency bonds and Housing Authority bonds for the construction of student residence hall facilities. The following is a summary of the future minimum annual debt service requirements for the next five years and thereafter (in thousands): Year ending June 30: 2010 2011 2012 2013 2014 Thereafter

8,248 10,949 10,946 8,964 15,570 221,215 $ 275,892

The State University of New York ANNUAL FINANCIAL REPORT 2009 The State University of New York State University Plaza Albany, NY 12246 www.suny.edu