Weatherproofing the campus against financial storms
A Q&A with Vice Chancellor Frank Yeary
| 5 January 2009
(Cathy Cockrell/UC Berkeley NewsCenter photo)
BERKELEY — For the past four months, international investment banker Frank Yeary has been serving as a new vice chancellor in California Hall, where he advises the campus administration on strategic planning and financial issues. (Yeary donates his $200,000 annual salary to a needs-based undergraduate scholarship program.) NewsCenter writer Cathy Cockrell spoke recently with him about his new role and the campus's financial challenges.
The University of California is facing the economic effects not only of the national and international economic downturn but of the state's periodic, and currently extreme, budget crisis. What's unique about the California context?
The State of California has a more volatile revenue stream than many other states, because of the way the revenues are raised. This state's revenues are highly correlated to personal capital gains, personal income tax, and sales tax; other states rely more on revenues from property taxes, which is a much more stable tax. But ever since 1979, with the passage of Proposition 13, California has relied more heavily on these more volatile taxes, which create greater year-to-year swings, especially in periods of economic downturn; at those times the magnitude of the revenue decline is much greater.
This is a structural challenge that's getting attention right now in Sacramento. It's not an easy one to solve. If California were able to create a revenue profile with much less volatility, that would be terrific; it would solve a lot of problems. But I don't think the campus should be basing its plans on an expectation that they will solve it. We're going to focus on the problems that we can control — trying to create an environment that allows us to have a greater influence over our own future. We're focused on how to better insulate the campus from the kind of short-term swings that have characterized the state's revenue situation — to develop the kind of reserves that will allow us to weather the storms.
The state has been a very strong supporter of the university for a long time, and we think it will continue to be a very strong supporter. But we're also going to need to work hard to find other revenue sources, and to be creative about reaching out to our other friends and allies.
How optimistic are you about the campus achieving its long-term financial goals?
I think the university has a large number of terrific assets. So I am optimistic. One of the things that makes Berkeley unique is its comprehensive excellence across a very large number of fields. We're able to operate at a very high level in a lot of areas, and that creates an "ecosystem" that's incredibly attractive to students, faculty, and staff. In a world where interdisciplinary study and research is important to leading-edge discoveries, comprehensive excellence is an incredibly powerful strength.
The campus has done quite a good job recently — a better job than many of its peers — in increasing research support. Many of our peers have had a decline in research support in the last three years, while we've had increases in the same period. It's been broad based; the $500 million for energy research from BP is part of it, but we've had a lot of success beyond that. Faculty and staff have done a great job of keeping momentum around research support, and it's going to be important to continue that trend.
Berkeley has also had a number of years of increasingly successful fundraising in philanthropy. We've launched a capital campaign to raise $3-plus billion over five years. In the quiet phase of the campaign [which ended in September], we've raised 40 percent, almost $1.4 billion. Although it's a complicated time to launch a capital campaign, we have high expectations that over the course of five years we'll be successful. It's very important that we are successful.
To get there we have some untapped strengths — one being more than 430,000 living alumni, whose potential for giving we've not yet fully tapped, compared to the levels of alumni giving at some of our peer institutions. We have a lot of opportunities to reconnect our alumni with the university and to remind them of how they've benefited from philanthropic efforts going back well over a hundred years. That's a cornerstone of our "Thanks to Berkeley" campaign. This university exists because of great contributions from the state, but also because of a long history of great contributions from philanthropic individuals and companies.
How did you come to leave a career in international banking, at least temporarily, to focus specifically on UC Berkeley's financial picture?
I'm a Berkeley alum. I grew up in California and started at Berkeley in 1981. Actually I met my wife at Berkeley. I got my undergraduate degree in 1985, with a double major in history and economics. After graduation I went "temporarily" to New York, "just for a few months." And that few months ended up turning into almost 25 years, working in global finance — in the last half a dozen or so years managing the acquisitions and mergers business at Citigroup.
During the past decade or so I became increasingly connected back to Berkeley — as a volunteer and then as a member of the UC Berkeley Foundation's Board of Trustees. Recently the chancellor and his senior staff and I started discussing the benefits of having someone to help the campus think through the campus's financial model, and to help put in place a financial model that has less volatility and offers a greater level of self-sufficiency. They were interested in bringing someone in to help with that, and it was a good time for me to think about new challenges. In essence I think about this — coming to help the university — as a sabbatical from my business career.