The New Jersey Institutional Investors Forum XI October 23, 2008 - - PowerPoint PPT Presentation

The New Jersey Institutional Investors Forum XI

October 23, 2008

Jon S. Corzine Governor Vivian Altman Chair Roger L. Anderson Executive Director

NJEFA Services

• Financial Services:
• Tax-exempt bonds
• Taxable bonds
• State-supported bond programs
• Tax-exempt leasing program
• Post-closing/Other Services:
• Investment of bond funds
• Monitoring for refunding opportunities
• Arbitrage compliance
• Swap monitoring
• Escrow restructuring
• Higher education finance conferences
• Investor relations

NJEFA Issuance Overview

By Par Amount (in Million $) By Number of Issues

* Includes par amount financed to date

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1970s 1980s 1990s 2000s

NJEFA Financings by Decade vs. Last 8 ½ years

* Includes par amount financed in 1969 ** Includes par amount financed to date

$7,568,717,418 $2,505,433,659 $884,117,000 $425,931,000

(in Million $)

Higher Education: Heavy Borrowing Continues

$0 $5 $10 $15 $20 $25 $30 $35

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Higher Education $billion HE % Share of "Municipal" Market

Sources: Moody’s Investors Service; Thomson Financial

Bond Insurer Ratings

ARS/VRDB Transactions

14 series of ARS 9 clients 3 series of insured VRDBs Total > $800 million Each client determines own solution

Process

• Fall 2007 -

monitored ARS and VRDB markets; provided updates to affected clients

• Began search for alternatives once it looked like

bond insurers would be downgraded

• February 4th and 29th -

issued RFPs for letters of credit to more than 50 banks and other institutions

• Received proposals from 7 banks -

enough to cover almost all exposure

• February 27th –

adopted global restructuring resolution authorizing staff to restructure affected transactions as approved by affected institutions

• Reached out to Assured Guaranty Corp.

Options

• Status quo

­ Several failed auctions

• Letter of credit backed VRDBs
• Fixed-rate bonds
• Put bonds
• Buybacks

Results to Date

Of the 9 institutions: Closed

• 4 selected fixed-rate refundings
• 1 wrapped existing VRDB’s

with a LOC

• 1 did a letter of credit refunding

Pending

• 1 combination put bond and letter of credit

bonds refunding

• 1 fixed-rate refunding
• 1 combination fixed-rate and letter of credit

bonds refunding

2008 Transactions

Public Institutions

• New Jersey City University, $74,620,000

(2 transactions)

• Rowan University, $35,205,000
• The College of New Jersey, $287,790,000
• The Richard Stockton College of New Jersey,

$136,910,000

• The William Paterson University of New

Jersey, $88,670,000 Private Institutions

• Drew University, $22,765,000

(2 transactions)

• College of Saint Elizabeth, $24,090,000
• Institute for Advanced Study, $11,255,000
• Institute for Defense Analyses, $15,015,000
• Princeton University, $250,000,000
• Saint Peter’s College, $8,728,462

(2 transactions)

The William Paterson University

• f New Jersey

Science Hall

Source: The William Paterson University of New Jersey

The Richard Stockton College

• f New Jersey

Campus Center

Source: The Richard Stockton College of New Jersey

Princeton University

Sherrerd Hall

Source: Princeton University

Long-Term Interest Rate Comparison

Source: Phoenix Advisors, LLC

30-Year Treasury vs. 30-Year AAA MMD

Since January 1, 2008

Forward Calendar

• Seton Hall University

$75 million Citigroup

• Montclair State University

$28 million Morgan Stanley

• Kean University

$175 million RBC Capital Markets

• Princeton University

$225 million JP Morgan

• University of Medicine and Dentistry of NJ

Morgan Stanley

“If you can solve the education problem, you don’t have to do anything else. If you don’t solve it, nothing else is going to matter all that much.”

ALAN GREENSPAN Former Chairman, U.S. Federal Reserve Board 2006

College Participation

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 1 9 6 7 1 9 7 1 9 7 3 1 9 7 6 1 9 7 9 1 9 8 2 1 9 8 5 1 9 8 8 1 9 9 1 1 9 9 4 1 9 9 7 2 2 3 2 6

Percent Enrolled in College

U.S. population of 18-24 year olds

Source: U.S. Census Bureau, 2006

Sources: The College Board; U.S. Census Bureau, 2006

Earnings Premium Relative to Price of Education

NJ Enrollment: Degrees Conferred 2000-2007

Total Enrollments Total Degrees/ Certificates 2000 335,930 52,579 2001 346,277 53,205 2002 361,757 55,866 2003 372,696 58,277 2004 379,447 61,428 2005 379,686 64,007 2006 385,612 65,105 2007 398,169 66,364

Cumulative Increase

62,239 (18.53%) 13,785 (26.22%)

Source: New Jersey Commission on Higher Education

Steady Demand for College

Sources: NJ Association of State Colleges and Universities; National Center for Education Statistics, December 2007

Actual and Projected NJ High School Graduates

Responding to Demand

• NJ public institutions:

50% acceptance rate

• National average:

70% acceptance rate

• NJ ranks #1 in out-migration of high

school graduates

NJEFA Financing Expansion 2000-2008

500 1,000 1,500 2,000 2,500 3,000 3,500

Public Institutions Private Institutions State-Supported Programs

New Money Refunding

$1,805,202,745 $1,505,600,000 $835,423,891 $1,624,635,771 $416,230,000 $773,625,000

(in Million $)

The Broader Economy

“As in prior periods of economic weakness, most colleges and universities enjoy relatively inelastic student market demand and have thus far sustained good pricing ability.”

MOODY’S INVESTORS SERVICE U.S. Higher Education Outlook: Six-Month Update July 2008

“[T]he potential impacts of the combined credit freeze and recession on some colleges and universities will be significant if current trends persist.”

MOODY’S INVESTORS SERVICE Impact of the Credit Crisis and A Weaker Economy

• n U.S. Higher Education

October 2008

Outlook Dims for Key Revenue Streams of U.S. Higher Education

Source: Moody’s Investors Service

* Moody’s rated institutions

Source: Moody’s Investors Service

Giving Usually Holds Up Well

* Moody’s rated institutions

Tuition Increases Compared to Changes in State Appropriations

* Moody’s rated institutions

Sources: Moody’s Investors Service; Center for the Study of Education Policy, Illinois State University; The College Board

• 5%

0% 5% 10% 15% 1983 1988 1993 1998 2003 2008 % Change State Approps % Change Tuition and Fees

State Support is Declining

Source: New Jersey Association of State Colleges and Universities; Governor’s Budget Recommendations; US Department of Labor’s CPI Detailed Report

Adjusted for CPI

$150,000 $200,000 $250,000 $300,000 $350,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Direct State Adjusted Appropriations Inflation-Adjusted Appropriations

$249,911,0 0 0 $224,932,0 0 0 (in Thousands $)

New Jersey Higher Education Spending

• FY 2009 – 3.5% cut
• FY 2008 - $2.04 billion - operating expenses
• FY 2006 - $858 million - research and development

The Price of College is Going Up

Sources: Jobs for the Future; U.S. Bureau of Labor Statistics; The College Board; Data were analyzed by the National Center for Higher Education Management Systems and the Delta Project on Postsecondary Costs for Making Opportunity Affordable, an initiative supported by Lumina Foundation for Education

Private Institutions

NJ Privates All Privates NJ Privates All Privates NJ Privates All Privates

Median FTE Enrollment (number may be estimated) 4,583 2,847 4,164 2,822 3,892 2,801 Primary Selectivity (%) 66 55 70 58 76 62 Expendable Resources to Direct Debt 1.71 1.93 1.56 1.67 1.43 1.52 Expendable Resources to Operations .9 1.3 .88 1.17 .87 1.1 Annual Operating Margin (%) 5.4 4.1 1.9 3.6 5.6 3.1

2007 2006

Source: Moody’s Investors Service

2005

* Moody’s rated institutions

Public Institutions

Source: Moody’s Investors Service

NJ Publics All Publics NJ Publics All Publics NJ Publics All Publics

Median FTE Enrollment (number may be estimated) 7,138 16,064 6,896 13,904 6,745 13,698 Primary Selectivity (%) 53.1 70.6 53.2 72.6 50 75.2 Expendable Resources to Direct Debt .4 1.1 .4 .9 .3 .9 Expendable Resources to Operations .41 .49 .37 .41 .41 .4 Annual Operating Margin (%) 4.2 2.3 3.4 1.9 6.5 2.2

2007 2006 2005

* Moody’s rated institutions

“[T]he state’s universities and colleges . . . require state-of-the-art equipment, buildings, libraries and distance-learning capacity.”

GOVERNOR JON S. CORZINE Economic Growth Strategy for the State of New Jersey 2007

Higher Education is Our Future

Changing Workforce Needs

Sources: Jobs for the Future; U.S. Bureau of Labor Statistics; Data were analyzed by the National Center for Higher Education Management Systems and the Delta Project on Postsecondary Costs for Making Opportunity Affordable, an initiative supported by Lumina Foundation for Education (2007)

Differences in College Attainment

Sources: Jobs for the Future, Organisation of Economic Co-operation and Development (OECD), Education at a Glance 2006; Data were analyzed by the National Center for Higher Education Management Systems and the Delta Project on Postsecondary Costs for Making Opportunity Affordable, an initiative supported by Lumina Foundation for Education

The Degree Gap

Sources: Jobs for the Future; U.S. Census Bureau 2005 ACS, Population Projections, NCES, IPEDS Completions Survey; Data were analyzed by the National Center for Higher Education Management Systems and the Delta Project on Postsecondary Costs for Making Opportunity Affordable, an initiative supported by Lumina Foundation for Education

Shifting the Burden

• f Investment

Source: New Jersey Association of State Colleges and Universities calculations; NJ Commission on Higher Education

“The acceptance of higher education as a personal benefit rather than a public good…and the shift of the cost burden to individuals have made it increasingly difficult for low-income students to advance beyond high school. In the long run, the nation as a whole will suffer from the lack of new talent that could have been discovered and nurtured in affordable, accessible, high-quality public schools, colleges, and universities.”

Rising Above the Gathering Storm: Energizing and Employing America for a brighter Economic Future National Academy of Sciences, National Academy of Engineering, and Institute of Medicine of the National Academies, 2007

“The nations, states, and communities that are most successful in developing human talent, particularly college-level knowledge and skills, will enjoy significant

• advantages. Conversely, those nations, states, and

communities that fall behind educationally are likely also to fall behind in competing for good jobs and in achieving or maintaining high standards of living.”

“MEASURING UP 2006” The National Center for Public Policy and Higher Education

Thank You