A change in the debt service coverage was made by the Business Affairs and Audit Committee (now Finance and Planning Committee) at its meeting on April 4, 2000. The policy was amended on May 8, 2003 to reflect current U. T. System practices and to make the policy consistent with other U. T. System policies.

AVAILABLE UNIVERSITY FUND SPENDING POLICY

In order to provide a consistent and dependable level of funding and to maintain the highest credit ratings level possible, the appropriation of the Available University Fund (AUF) shall be governed by the following:

A. Any staff recommendation to appropriate funds from the AUF or from Permanent University Fund (PUF) Bond Proceeds will be presented in the context of that appropriation's impact on: (a) AUF funding for the support and maintenance of U. T. Austin, (b) bond ratings, (c) projected AUF balances, and (d) other PUF projects in the Capital Improvement Program (CIP). As such, the following procedures will apply:

1. A forecast of at least six years of the income and expenditures of the AUF will be presented at each meeting of the U. T. Board of Regents’ Finance and Planning Committee by the Office of Finance. Quarterly, The University of Texas Investment Management Company (UTIMCO) shall provide to the Office of Finance a forecast of the PUF distributions to the AUF that will be the basis of the AUF forecast. Included as part of the AUF forecast will be the projected amount of remaining PUF debt capacity calculated in accordance with this policy.

2. As a part of each agenda item requesting approval of AUF expenditures or PUF funded projects, a statement indicating compliance with this policy based on the most recent forecast shall be included.

3. In preparing recommendations for projects to be approved, the staff will be guided by the following justification criteria:

a. Consistency with institution’s mission;

b. Project need;

c. Unique opportunity;

d. Matching funds/leverage;

e. Cost effectiveness;

f. State of existing facility condition; and

g. Other available funding sources.

4. No project will be recommended for approval, if in any of the forecasted years the required appropriations from the AUF or PUF bond proceeds would cause:

a. The forecasted AUF expenditures for program enrichment at U. T. Austin to fall below 45% of the sum of the projected U. T. System share of the net divisible AUF annual income and interest income on AUF balances (subject to the limits imposed by b. and c. below);

b. Debt service coverage to be less than 1.50:1.00; and

c. The forecasted end of year AUF balance to be less than $30 million.

B. Permanent University Fund Investment Income Forecast and AUF Expenditures

1. In conjunction with the annual U. T. System budget process, UTIMCO shall recommend to the U. T. Board of Regents in May of each year an amount to be distributed to the AUF during the next fiscal year. UTIMCO's recommendation on the annual distribution shall be an amount equal to 4.75% of the trailing 12-quarter average of the net asset value of the PUF for the quarter ending February of each year.

2. Operating expenditures of the U. T. System Administration will be carefully controlled in order to maximize the opportunity to meet the capital needs of the component institutions and the operating budget needs of U. T. Austin. Wherever possible, alternate funding from component institutions, State funds, or other sources will be sought. Programs for which alternative funding cannot be obtained will be evaluated for possible reductions or phaseout.

3. The CIP will be reviewed and updated every two years. The update will include an estimated start date for each project which will be based on the criteria set forth in Section A3 above, project readiness, projected fund availability, and relative urgency of need for the completed project.

Last reviewed May 2003

Available University Fund Spending

AVAILABLE UNIVERSITY FUND SPENDING POLICY