FOCUS ON Making a Difference

RAND Corporation

A n n u a l R e p o r t 2 0 1 0 rand B oar d of T rus tees

December 2010

Paul G. Kaminski (Chairman) Michael Lynton Chairman and Chief Executive Officer, Technovation, Inc.; Chairman and Chief Executive Officer, Sony Pictures Entertainment Former U.S. Under Secretary of Defense for Acquisition and Technology Ronald L. Olson Philip Lader (Vice Chairman) Partner, Munger, Tolles & Olson LLP Chairman, The WPP Group; Former U.S. Ambassador to the Court of St. James’s Paul H. O’Neill Former U.S. Secretary of the Treasury Barbara Barrett President and Chief Executive Officer, Triple Creek Ranch; Michael K. Powell Former U.S. Ambassador to Finland Former Chairman, Federal Communications Commission; Senior Advisor, Providence Equity Capital; Chairman, Richard J. Danzig MK Powell Group Chairman, Center for a New American Security; Former U.S. Secretary of the Navy Donald B. Rice Retired President and Chief Executive Officer, Agensys, Inc.; Francis Fukuyama Former U.S. Secretary of the Air Force Olivier Nomellini Senior Fellow, The Freeman Spogli Institute for International Studies, Center on Democracy, Development, and the James E. Rohr Rule of Law, Chairman and Chief Executive Officer, The PNC Financial Services Group Richard Gephardt President and Chief Executive Officer, Gephardt Group Hector Ruiz Government Affairs; Former U.S. Congressman Former Chairman, GLOBALFOUNDRIES; Former Chairman and Chief Executive Officer, Advanced Micro Devices, Inc. Pedro José Greer, Jr., M.D. Assistant Dean of Academic Affairs, Florida International Carlos Slim Helú University College of Medicine Honorary Life Chairman, Grupo CARSO, S. A. de C.V.

John W. Handy Donald Tang Vice Chairman, American Shipping and Logistics Group; Chief Executive Officer and Founder, CITIC Securities International General, Air Force, Retired Partners Group (CSIP Group)

Bonnie Hill James A. Thomson President, B. Hill Enterprises, LLC President and Chief Executive Officer, RAND Corporation

Lydia H. Kennard Robert C. Wright Former Executive Director, Los Angeles World Airports Former Vice Chairman, General Electric; Former Chairman and Chief Executive Officer, NBC Universal; Chairman and Cofounder, Ann McLaughlin Korologos Autism Speaks; Senior Advisor, Lee Capital Chairman Emeritus, The ; Former U.S. Secretary of Labor Trustees Emeriti Peter Lowy Chief Executive Officer, Westfield,LL C Harold Brown Counselor, Center for Strategic and International Studies; Former U.S. Secretary of Defense

Frank C. Carlucci Chairman Emeritus, The Carlyle Group; Former U.S. Secretary of Defense Contents

3 Message from the Chairman and the President Focus on Multinational Challenges Focus on Healthy Societies Focus on Forces and Resources Focus on Education Focus on Financial Stability Focus on Safety and Justice Focus on Infrastructure and Environment Focus on Terrorism

20 Our People

22 Outreach

26 Pardee RAND Graduate School

32 Philanthropy at RAND

42 Advisory Boards

50 Clients and Grantors

53 Financial Report

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FOCUS ON Making a Difference

Message from the Chairman and the President

Public policy decisions affect us all. We each have a personal stake in knowing that these decisions are made wisely. For nearly 65 years, RAND has served the policymaking process—and by extension, the public interest—by delivering evidence-based analysis to the people who shape policy and outcomes for all of us.

In 2010, our work focused on

• the policy issues that were in the headlines throughout much of the year, such as legalizing drugs, ending discrimination based on sexual orientation, health care reform, and improving corporate ethics and governance;

• the perennial challenges of disaster preparedness, public safety, military readiness, and improving student achievement; and

• impending concerns that require novel approaches and new methodologies, such as financing the health and welfare needs of an aging population and navigating the dangers of space debris.

RAND’s commitment and capacity to make a difference with its research are what attract clients, grantors, and donors to support RAND’s work. They are also what motivate people to join RAND and to stay here. Our collective staff—comprising engineers, medical doctors, , economists, physicists, mathematicians, statisticians, sociologists, anthropologists, and individuals from just about every other discipline you can name— thrives on the opportunity to offer ideas and analysis to decisionmakers at all levels of government and in the private and nonprofit sectors.

The questions they pursue, the disciplines and methods they employ, and the communities whose needs they address are in many ways different. But they draw inspiration from the same place: the opportunity to focus on facts and aim for progress.

We thank you for your support of RAND—our work, our people, and our ideas.

James A. Thomson Paul G. Kaminski President and Chief Executive Officer Chairman, RAND Board of Trustees FOCUS ON Multinational Challenges

Rebuilding Haiti

In the aftermath of the 7.0 magnitude earthquake that battered Haiti on January 12, 2010, killing 300,000 people, injuring 300,000 more, and leaving 1.3 million homeless, a team of RAND researchers set to work to identify plans for recovery that would extend beyond the initial rounds of medical and humanitarian aid. The resulting study emphasized state-building as a critical, threshold priority, arguing that Haiti will remain vulnerable to natural disasters, political turbulence, and civil unrest until it develops effective institutions. RAND researchers presented detailed findings to Haitian President René Préval, as well as to numerous Haitian and international officials. Study insights were also cited widely in global media outlets and formed the basis of multiple briefings to U.S. congressional audiences, RAND philanthropic supporters, and other public assemblages.

Scan the code with your smartphone to watch RAND experts Keith Crane and Laurel Miller discuss strategies for a more resilient Haitian state.

4 foc u s on mak ing a dif ference Afghanistan

UZB. The rising number of TAJ. CHINA Public opinion polls and other data indicate that the TURKM. K2 (Mt Godwin- terrorist plots in the Austen) Taliban has failed to establish significant support Gilgit United States with KASHMIR among Afghans. A 2010 RAND analysis concluded Khyber AFGHANISTAN Pass links to Pakistan— PeshawarX ISLAMABAD that leveraging traditional policing institutions in Rawalpindi Sialkot Gujranwala including the 2010 Faisalabad Lahore rural villages and mobilizing the population against Zhob Jhang failed car bombing Quetta Indus Sadr insurgents can improve security in Afghanistan. Multan Bolan X Nok Pass Bahawalpur in City— Kundi The study also addressed concerns about whether IRAN Sukkur has policymakers engaging local forces will lead to more violence in the

Gwadar Hyderabad concerned about countryside, strengthen local warlords, and weaken 0 100 200 km Port Muhammad the effectiveness of Bin Qasim central government forces. Another 2010 study Arabian Sea 0 100 200 mi existing strategies examined NATO’s peacekeeping role in Afghanistan to weaken militant groups operating in and from and concluded that failure, or even an indeterminate Pakistan. A 2010 study, supported through RAND’s outcome, would cloud the alliance’s own future. The Investment in People and Ideas program (see page authors examine the 32), examined counterinsurgency efforts in Pakistan risks, commitments, and found that militant groups persist in the nation and obligations of because Pakistani leaders continue to provide the current mission support to some groups and have not yet developed in light of NATO’s an effective counterinsurgency strategy that protects history and with the local population. The long-term objective of an eye toward developing a comprehensive counterinsurgency the future, as well strategy—including addressing deficiencies in as the effects on local police forces, providing aid and assistance to the alliance’s internal dynamics. Drawing on a wide displaced civilians, expanding development efforts, range of sources, the authors describe how NATO and creating new legal structures and improved came to be involved; concerns and tensions that governance—must take precedence over efforts to have developed over the investments and risks that destroy the enemy if Pakistan is to end the militant member and nonmember states have in the operation; threat, the study finds. management of the expectations of nations and peoples; and the need for a coherent, comprehensive, and coordinated long-term strategy.

RAND researchers are recognized thoughtleaders on top international policy topics. A selection of 2010 commentaries published in global news outlets includes

Managing Catastrophic Europe’s Empty Fifth Columns in A To-Do List for Shoring North Korea Risks by Promises by Christopher S. the Gulf? by Frederic up Haiti by James Dobbins, Bruce W. Bennett (The Korea Chivvis (ForeignPolicy.com, Wehrey, Dalia Dassa Kaye Laurel E. Miller (Los Angeles Herald, January 21) February 24) (ForeignPolicy.com, Times, August 23) May 24) How Washington Can The Cost of Reuniting Your COIN Is No Good Really Help the Greens Korea by Charles Wolf, Jr. Don’t Lose Ukraine Here by James Dobbins in Tehran by Alireza Nader, (Forbes.com, March 15) by Taras Kuzio, F. Stephen (ForeignAffairs.com, Trita Parsi (ForeignPolicy.com, Larrabee (Project Syndicate, October 26) February 9) The Moscow Metro June 25) Suicide Attacks Revolutionary Guards by Lindsay Clutterbuck The Afghanistan Clock Criticize Ahmadinejad (Korrespondent, April 2) by James Dobbins by Alireza Nader (PBS.org and (ForeignPolicy.com, USIP, November 5) Only a New “Grand June 25) Bargain” on A WikiLeaks Transatlantic Solidarity A Bottom-Up Peace Disconnect by Dalia Dassa Can Meet Deepest in Afghanistan by Wali Kaye (Los Angeles Times, Challenges by Robert Ahmad Shaaker, John V. December 6) E. Hunter (European Affairs Parachini (Providence Journal, online, April 23) July 15)

Building on Greek- Turkish Detente by F. Stephen Larrabee, Charles P. Ries (Project Syndicate, May 10)

RA n D A nn u a l R epo rt 2 0 1 0 5 FOCUS ON Healthy Societies

Health Care Quality Around the World

Assessment and international benchmarking of health care quality has considerable potential to improve patient outcomes, and significant work is under way to develop valid cross-national quality indicators from which to draw meaningful comparisons. A 2010 RAND Europe report evaluated two measures widely used for international comparisons—avoidable mortality and cancer survival—to illustrate the potential utility of such comparisons as well as some of the pitfalls in drawing valid interpretations from the data. Access, for example, may be a key determinant of differences in outcomes between countries; thus, comparing quality across countries is only a first step to then assessing the causes underlying those differences and determining how to improve outcomes. Another 2010 RAND study compared the health of aging Americans with that of their English counterparts. Researchers found that older Americans are less healthy but live longer. According to study author Jim Smith, “It appears that, at least in terms of survival at older ages with chronic disease, the U.S. medical system may be better than the system in England.”

6 foc u s on mak ing a dif ference Health Care Reform

Following enactment of the Patient Protection and Affordable Care Act (2010), a RAND analysis concluded that the new law provides health insurance coverage to the largest number of Americans while keeping The link between safety federal costs as low as performance among reasonably possible. The health care providers and only alternatives that malpractice suits is a key would have covered more concern for policymakers Americans at a lower cost in the ongoing debate over to the federal government health care reform. A 2010 were all politically RAND Institute for Civil untenable—substantially Justice study is the first to higher penalties for demonstrate a link between RAND expert Lois Davis testifies before a California state those who don’t comply improving performance assembly committee on understanding the public health with mandates, lower on 20 well-established implications of prisoner reentry as California counties government subsidies, and indicators of medical safety prepared for the early release of thousands of inmates less-generous Medicaid outcomes and fewer medical because of budget shortfalls. expansion. ■ malpractice claims. ■

Why Do Americans Avoid the Flu Vaccine?

A 2010 article by RAND Health researchers on the U.S. response to the H1N1 flu experience detailed weaknesses in the nation’s ability to respond to a pandemic flu outbreak. First, theU nited States lacks the capacity to develop, produce, and distribute a new vaccine in time to counter a fast-moving pandemic. By the time adequate stocks of the H1N1 vaccine arrived in late 2009, the pandemic had passed its peak, public demand declined, and manufacturers were left with 70 million unused doses. In addition, any improvement in supplying the vaccine Choosing a Good Doctor must be matched by an equally substantial increase Two recent collaborations by RAND and the University in demand for it. Despite an unprecedented public of Pittsburgh School of Medicine produced noteworthy education campaign, only about 20 percent of U.S. findings about obtaining quality care. In the first adults were vaccinated, and perhaps most striking, study, which received broad media coverage in 2010, fewer than half were health care workers. Noting researchers determined that retail medical clinics that 95 percent of the public funding on influenza located in pharmacies and other stores can provide has been devoted to biomedical topics rather than care for routine illnesses at a lower cost and similar to social and behavioral science, the study calls quality as offered in physician offices, urgent care for a renewed focus on the best ways to inform and centers, or emergency departments. Another study motivate the public to get vaccinated. challenged the assertion that patients, when looking for a new physician, should select one who is board certified or has not made payments on malpractice claims. These criteria are not always a good predictor of which physicians will provide the highest- quality medical care, nor are a physician’s years of experience. The study underscores the need for better physician performance data and more public reporting of individual physician quality information to help consumers choose their doctors.

RA n D A nn u a l R epo rt 2 0 1 0 7 FOCUS ON Forces and Resources

Providing Evidence Amidst Controversy: Gays in the Military

The RAND National Defense Research Institute’s 2010 study on sexual orientation and U.S. military policy, conducted at the request of the Senate Armed Services Committee and the Secretary of Defense, helped bring critical facts and evidence to the debate over repeal of the law known as “Don’t Ask, Don’t Tell” (DADT). The study, which updated a 1993 RAND analysis on the topic, examined DADT implementation; U.S. public and military opinion about allowing gay men and lesbians to serve in the military without restriction; and the scientific literature on group cohesion, sexual orientation, and related health issues. RAND researchers also examined the comparable experiences of other institutions, domestic agencies, and foreign militaries, as well as how repeal of DADT might affect unit cohesion and military readiness and effectiveness. The research concludes that there would be little impact on recruiting and retention of military personnel and on unit cohesion and performance. Many military focus group participants said that they knew gay men and lesbians who were serving and respected their contributions. Seventeen years after DADT went into effect, Congress repealed the law in December 2010.

Scan the code with your smartphone to watch study director Bernard Rostker discuss DADT on PBS NewsHour.

8 foc u s on mak ing a dif ference Manpower

selection test used by the ascertained that enlist- U.S. Air Force is unfair and ment and reenlistment negatively affects diversity, bonus programs are RAND was asked to evaluate indeed important in the test’s utility. Researchers helping the services concluded that the officer meet their recruiting and qualification test is a valid retention objectives; predictor of important Air that the services flexibly Force outcomes and should manage these programs continue to be used, but that by targeting bonuses to Analysis of aptitude the officer selection system specific groups and ad- tests used for academic and could be supplemented with A 2010 study by the RAND justing them in a timely professional selections is additional valid performance National Defense Research manner; and that such abundant, and similar predictors, such as personal- Institute sought to answer bonuses are cost- research exists in military ity, which may lessen the the question, Do bonuses effective relative to pay contexts. Prompted by adverse impact on minority affect enlistment and reen- as a recruiting and concerns that the officer and female candidates. ■ listment? Researchers retention resource. ■

Saving the Government Money

U.S. Secretary of Defense announced in September 2010 a sweeping initiative to improve Department of Defense (DoD) efficiency. RAND is a long-standing source of objective evaluation of DoD program cost-effectiveness and cost-saving recommendations. A 2010 study for the U.S. Army proposed a new equipping strategy for Army field hospitals that would eliminate much of their equipment that is currently sitting in storage or never being used for training. When deployed, the hospitals would instead draw on shared sets of equipment that could more readily be kept up-to-date. The proposed strategy, which has been Family Matters endorsed by the U.S. Army Surgeon General, would reduce total equipment replacement costs from The wars in Iraq and Afghanistan have put the just over $1 billion to approximately $740 million. U.S. all-volunteer force to its most severe test Another 2010 study by RAND Project Air Force since its inception in 1973. In response, RAND identified the opportunity to save up to $300 million research has addressed a variety of related annually by consolidating certain maintenance concerns, including the resilience of the force, functions that are now being conducted by each the impact on earnings of activated reservists, U.S. Air Force flying unit. the changing nature of battlefield casualties, and the care that service members receive when wounded or traumatized. A multiyear study is helping to focus attention on military families and the emotional health of the children of deployed parents. Findings reveal elevated levels of anxiety symptoms and emotional distress among children with a deployed parent. The study suggests targeting support to families facing more months of deployment, and that more systematic screening could be offered to assess emotional problems within families. More resources might also be needed to support caregivers, particularly the spouses of National Guard and Reserve members who may not live near military bases where help is more readily available.

RA n D A nn u a l R epo rt 2 0 1 0 9 FOCUS ON Education

Teacher Quality and Student Achievement

Drawing upon more than 30 years of experience applying data and objective analysis to K–12 education issues, a series of RAND studies published in 2010 focused on effective teaching. In a study examining teacher performance in one of the nation’s largest urban school districts, researchers found that traditional teacher qualification standards—such as certification and experience—do not have a substantial effect on student achievement. The study suggests that other measures and reward systems might be better at identifying and cultivating teacher quality. Pay-for-performance programs are premised on the notion that rewarding teachers financially for student achievement gains can spur the teachers to be more effective in the classroom. But RAND and its collaborators at the National Center on Performance Incentives found no evidence of such an outcome in the pay-for-performance program in Nashville public schools. In Nashville, student test scores rose evenly whether or not the teachers had been paid on the basis of their students’ performance. Although it evaluates just one pay-for-performance design, the Nashville study underscores the importance of putting all accountability and incentive systems to the test.

10 foc u s on mak ing a dif ference Evaluating Reform

help the students they Studies suggest that Will reforms to student are paid to serve. As it the No Child Left Behind loan laws offering incen- stands, the No Child Left Act’s goal of all U.S. tives for college graduates Behind Act—otherwise students achieving to take up public service known as the Elementary proficiency in reading jobs—such as teaching— and Secondary Education and mathematics by work to bring the best and Act (ESEA)—emphasizes 2014 will not be met. brightest to the classrooms promoting parent choice Broad implementation that need them most? and access to providers guidelines under the law In a 2010 commentary rather than any systematic have resulted in a different published in Education evaluation of services. With accountability system in Week, RAND education reauthorization of ESEA every state. Study findings expert Jennifer Steele and pending, commentary from RAND Education collaborators from the by sociologist Megan in 2010 make the case Harvard Graduate School Beckett in Education Week for more consistent of Education suggest One might expect that offered recommendations and rigorous academic that the new incentives, providers of supplemental to Congress on how standards across while laudable, may be educational services to evaluate whether states, as well as more overly broad to effectively (more commonly known as supplemental services consistent and relevant get talented grads into tutoring) would be evaluated benefit students, and, if so, teacher qualification teaching positions in needy according to how well they which providers are most requirements. ■ communities. ■ (and least) effective. ■

Back to School for Veterans

The Post-9/11 GI Bill, which took effect in August 2009, significantly increased the higher education benefits available to eligible veterans, offering the most generous benefits since the original GI Bill of 1944. Concerned that the new benefits be used to their fullest, the American Council on Education (ACE) asked RAND to work with veterans and eligible dependents, as well as higher education administrators, to better understand their experiences with the new law. Study findings are providing colleges and universities with the information they need to better serve veterans and help them take full advantage of the new GI Bill. Improving After-School Programs

The likelihood of youth exposure to drug use and other criminal behavior increases dramatically in the hours after school ends. RAND research has shown that the availability of quality after- school activities can reduce participation in and victimization as a result of illicit activities, and can boost academic performance. In findings published in 2010, RAND researchers found that stronger after-school programs result from citywide coordination of assets and resources, solid support and leadership from their mayors, and the use of rich data systems to assess and deliver programs.

RA n D A nn u a l R epo rt 2 0 1 0 11 FOCUS ON Financial Stability

Aging Workforce

As U.S. baby boomers near retirement, concern for America’s economic growth and the solvency of the Social Security Trust Funds is high. A trio of RAND studies published in 2010 assesses the demographic, economic, cognitive, and health care implications of the aging boomers and finds cause for some optimism as well as concern. First, researchers observed that older American workers are retiring at later ages than ever before and will likely continue to do so in the future. This trend of continuing employment will help ease the downward pull on economic growth and the financial strain on Social Security and Medicare that retirement would otherwise entail. Delayed retirement could also be good news for the cognitive capacities of aging baby boomers. Cross-national data from 13 developed countries show a causal link between the timing of retirement and cognition: Later retirement helps maintain cognitive function. Yet, despite these positive signs, the small percentage of middle-aged Americans aged 50 to 64 who report the need for help in daily personal care activities, such as getting into or out of bed or getting around inside the home, has risen significantly over the past decade as boomers have entered this age bracket. This trend is in sharp contrast to the disability decline found among Americans aged 65 and over. The reason for the setback among boomers is not clear, but it poses challenges for future health spending, demand for health care and other support workers, and prospects for continued labor force participation.

12 foc u s on mak ing a dif ference Improving Financial Literacy

The Financial Literacy Center (FLC) is a Social Security Administration–funded consortium of RAND, Dartmouth College, and the Wharton School of the University of Pennsylvania that is developing and testing innovative programs to improve financial literacy and financial decisionmaking. FLC focuses particularly on low-income and minority workers, the most vulnerable populations during an economic downturn. In 2010, FLC shared findings from early research projects at its first annual conference in Washington, D.C. The topics included how much Americans know about social security, what influences new hires to save for retirement, and whether social security statements received by Americans during their working lives improve their knowledge of retirement benefits. FLC also briefed a congressional audience on the value of financial entertainment as an educational tool, and demonstrated new FLC-funded video games targeted at low-income adults.

Scan the code with your smartphone to learn more about the Financial Literacy Center, watch FLC videos, find topical RAND documents, and take the online Financial Knowledge Test.

Numeracy Skills Predict In the Boardroom: Family Wealth Compliance and Ethics

Within a family, the skills needed to make successful The collapse of investment choices are among the most cognitively financial markets demanding, especially as individuals get older and in late 2008 has assume greater control of decisions about their invited renewed wealth, pensions, and health care. A RAND paper questions about published in 2010 was one of the first to examine who the governance, makes these financial decisions for a household, how compliance, that selection is influenced by a couple’s personal and ethics attributes, and the relative cognitive abilities of both practices of firms spouses. Researchers found that a simple test that throughout the world. In May 2010, RAND convened checks a person’s numeracy skills was a good a symposium on the perspective and role of predictor of who would be a better family financial corporate boards of directors in overseeing ethics decisionmaker and that couples who score well on and compliance matters within their organizations. the test accumulate more wealth by middle age than Participants included thoughtleaders from the ranks couples who score of public company directors at major corporations; poorly. Moreoever, when ethics and compliance officers; and stakeholders families choose the from the nonprofit sector, academia, and less-numerate spouse government. Discussions focused on the challenges to be the primary that directors face in this rapidly evolving role; financial decisionmaker, on the responsibility of boards to oversee corporate total household wealth cultures that foster integrity and compliance with is lower. the law; and on steps that business leaders and policymakers might take to better encourage and empower directors to strengthen compliance mechanisms and ethical leadership within firms.

RA n D A nn u a l R epo rt 2 0 1 0 13 FOCUS ON Safety and Justice

Marijuana Legalization

For more than two decades, RAND has conducted leading-edge analyses on drug policy issues, from substance abuse among school children to global drug trafficking. A pair of 2010 studies by the RAND Drug Policy Research Center helped bring facts and evidence to the contentious debate in California over legalizing the production and distribution of marijuana. The findings demonstrated that the price of marijuana would drop dramatically after legalization and that the potential for generating significant public revenue from taxing marijuana was far more speculative than was being reported. Moreover, researchers showed that legalizing marijuana in California would not dramatically reduce the drug revenues of Mexican drug cartels, debunking the often-cited, yet unsubstantiated claim that marijuana accounts for 60 percent of Mexican cartels’ gross drug export revenues. Supported by RAND’s Investment in People and Ideas program, the research was widely recognized by all sides of the contentious ballot effort as providing definitive facts upon which debate could be had.

Scan the code with your smartphone to hear Beau Kilmer, codirector of the RAND Drug Policy Research Center, discuss findings from the 2010 report Altered State?

14 foc u s on mak ing a dif ference Officer Recruitment and Retention

The RAND Center on Quality Policing helps law enforcement agencies across the United States identify the most cost-effective and results-oriented practices, make better operational decisions, and consistently perform at their best. A trio of studies released in 2010 identified a threefold challenge in contemporary recruiting and retention: attrition resulting from budget crises and baby-boomer retirements, shifting generational patterns (toward drug use, obesity, and debt) that restrict the flow of applicants, and an expanding scope of duties (community policing, The Cost of Crime counterterrorism, information- sharing, and immigration Existing high-quality research on the costs of crime enforcement) that require more and the effectiveness of police demonstrates that officers with a greater breadth public investment in police can generate substantial of skills. While there is little social returns. A 2010 study by the RAND Center police agencies on Quality Policing, Hidden in Plain Sight: What can do to limit Cost-of-Crime Research Can Tell Us About Investing the demand in Police, shows how this research—which is often for officers, the buried in journals targeted to academic rather than studies offer policymaking audiences—can be used to better promising understand the returns on investments in police. As strategies for part of this research stream, RAND developed an increasing innovative online cost-of-crime calculator into which the supply. users can input city-specific variables to determine how an increase or decrease in police personnel will affect crime costs. Users can also edit costs-per- crime and crimes-per-year fields to calculate the value of police in other cities. The tool includes an inflation calculator to adjust cost-of-crime figures for specific years. Access the calculator on RAND’s website at cqp.rand.org/cost-of-crime

Security, at What Cost?

Can governments improve security for all without infringing individual liberties? A recent RAND Europe study sought to better understand how much liberty and privacy individuals are willing to surrender in return for security benefits in three situations: applying for a passport, traveling by rail, and attending a major public event such as the opening ceremony of the Olympics. Findings demonstrate that users of security infrastructure are willing to forgo some liberty and privacy, and even pay extra for certain security benefits, but with caveats. In some cases, governments would need to subsidize people to accept intrusions on their privacy. The study can help policymakers identify where security measures conflict with user preferences and evaluate ways to strike a better balance in security infrastructure and processes without undermining effectiveness.

RA n D A nn u a l R epo rt 2 0 1 0 15 FOCUS ON Infrastructure &Environment

The Deepwater Horizon Oil Spill

Following the April 2010 oil spill in the Gulf of Mexico—the largest spill in U.S. history— RAND contributed expertise on a range of issues. A team of researchers provided input to a presidentially commissioned report on long-term recovery plans, with a focus on governance and funding options for revitalizing the economy, coastal restoration, and public health response. Senior economist Lloyd Dixon and the RAND Institute for Civil Justice conducted analyses on failures in the insurance market along the Gulf Coast and proposed options for how to fix them. Admiral Thad Allen joined RAND as a senior fellow in October 2010, having just completed his service as the presidentially appointed National Incident Commander for the unified response to the Deepwater Horizon oil spill. In presentations to policy audiences both in the Gulf region and in Washington, D.C., Allen discussed critical disaster preparedness and response issues.

16 foc u s on mak ing a dif ference Transportation Paying the Price Challenges, Green for Dirty Air

Ambitions A RAND study published in 2010 showed that A series of RAND California’s dirty air caused more than $193 million in studies explored options hospital-based medical care from 2005 to 2007 as for the United States people sought help for problems such as asthma and to develop a more pneumonia that are triggered by elevated pollution sustainable source of levels. Researchers estimate that exposure to excessive highway funding and levels of ozone and particulate pollution caused nearly reduce traffic congestion 30,000 emergency room visits and hospital admis- by transitioning from sions over the study period. Public insurance programs reliance on motor fuel were responsible for most of the costs, with Medicare taxes to a system that and Medi-Cal covering more than two-thirds of the ex- would charge drivers based on vehicle-miles of penses. Previous studies have documented California’s travel (VMT). Relying on fuel taxes to maintain and failure to meet federal clean air standards, especially in improve the nation’s vital road network in an era of the Los Angeles basin and the San Joaquin Valley. The growing concern about fuel efficiency and RAND study was the first to quantify the medical cost greenhouse gas emissions creates an and show how California’s dirty air is driving untenable contradiction between up the price of both government and public policy goals—policies aimed private insurance. at reducing gasoline consumption to address environmental or energy concerns would directly undermine the goal of raising transportation revenue through fuel taxes. Study authors lay out the argument for an end to fuel Scan the code with your smartphone to use RAND’s taxes and other such programs that California Air Pollution discourage government pursuit of Mapping Tool to explore by congressional district the number energy efficiency over the long of adverse health events that term for fear of losing transportation clean air would have prevented revenue in the short term. and the resulting savings.

Limiting climate change requires Confronting Space Debris a revolution in the way the global

economy generates and consumes communities outside the aerospace industry energy. It is becoming increasingly approached their “orbital debris-like” risks? What clear that the current diplomatic lessons can be learned approach—as evidenced by the from these cases before proceeding with debris results of [2009’s] Copenhagen mitigation or remediation measures? Findings Climate Conference and the follow- are drawn from other problems identified to on talks completed in Bonn— A 2010 RAND study have similar threat profiles should be redesigned to meet this looked at the growing threat including acid rain, the to satellites posed by the U.S. commercial airline immense political, technical, and hundreds of thousands industry, asbestos, and the of pieces of orbital debris 2010 Deepwater Horizon social challenge.” in Earth’s orbit. How have incident. ■

Robert J. Lempert, director of the Frederick S. Pardee Center for Longer Range Global Policy and the Future Human Condition, argues for redesigning the international approach to climate change in a Huffington Post commentary on July 1, 2010.

RA n D A nn u a l R epo rt 2 0 1 0 17 FOCUS ON Terrorism

Homegrown Terrorism

“Terrorist attempts are not evidence of our failure to protect the nation from terrorism, nor should they be cause for feigned outrage and divisive finger-pointing. They provide opportunities to learn lessons and improve defense,” according to Brian Michael Jenkins, senior adviser to the president of RAND, in May 2010 testimony on deterring homegrown terrorism delivered before the Committee on Homeland Security in the House of Representatives. Also in 2010, Jenkins published Would-Be Warriors: Incidents of Jihadist Terrorist Radicalization in the United States Since September 11, 2001, in which he concludes that while radicalization and recruitment to jihadist terrorism are cause for continuing concern, the current threat must be kept in perspective. The volume of domestic terrorist activity was much greater in the 1970s than it is today and effective police work and lack of local Muslim support for terrorist activity is working to limit the posed by homegrown jihadists in America.

18 foc u s on mak ing a dif ference In 2010, the Advisory including terrorism. In all, Panel on Department of the report provides more Defense (DoD) Capabilities than 40 recommendations for Support of Civil about how to overcome Authorities After Certain obstacles that complicate Incidents—a panel of effective response to retired senior U.S. military chemical, biological, A 2010 RAND analysis of the officers, former members of radiological, nuclear, financial operations and Congress, National Guard or high-yield explosive economics of al-Qa’ida generals, and academics incidents. Since the in Iraq in Anbar province with expertise in responding congressionally mandated reveals vulnerabilities of to domestic disasters— panel’s inception, research the terrorist organization, delivered to Congress and and administrative support indicates that members the secretary of defense had been provided by the were poorly compensated, a detailed report on how RAND Homeland Security and suggests that they were defense officials can better and Defense Center not motivated primarily by support the response to a under contract from the money to join the group. major disaster on U.S. soil, Department of Defense. ■

Deradicalizing Extremists

In recent years, several Middle Eastern, Southeast Asian, and European countries have implemented measures to prevent vulnerable individuals from radicalizing and to rehabilitate those who have already embraced extremism. A 2010 RAND study explored the strengths and limitations of these programs. Authors concluded that successful programs require extensive efforts that include affective, pragmatic, and ideological components, as well as considerable aftercare. Effective programs, the study found, are culturally specific, making it difficult to export best practices from one region to another. Noting that most programs focus on reforming less committed radicals, the authors recommend that governments should target the more devoted militants for rehabilitation. Although it is extremely difficult to induce these individuals to renounce extremism, deradicalizing them will yield The Changing Role of greater results as the most committed activists have Law Enforcement more influence on the rank and file. In research supported by the U.S. Department of Justice, RAND researchers conducted case studies of five urban areas to determine how local law enforcement duties and practice have changed since September 11, 2001. One critical change is the evolution of “fusion centers,” which now take an all-crimes, all-hazards approach to intelligence collection, information-sharing, and analysis. The focus on counterterrorism and homeland security has promoted the use of technology that provides a means to identify the nexus between different types of criminal activity and potential terrorist-related activity, and the centers have helped formalize information exchange among law enforcement agencies.

RA n D A nn u a l R epo rt 2 0 1 0 19 Our People

People are the key to RAND’s success. Diversity among our staff promotes creativity, deepens understanding of the practical effects of policy, and ensures multiple viewpoints and perspectives.

Approximately 1,700 1,700 people work at RAND from 1 of 11 office locations around the world. Our staff is diverse in work experience and academic training; political and áideological outlook; and race, gender, and ethnicity.

Tackling complex policy issues requires multiple disciplines and experiences. RAND researchers hold advanced degrees in political science and international relations; economics; behavioral science; medicine; engineering; law and business; math, operations research, and statistics; policy analysis;1,700 life sciences; social sciences; arts and letters; physical sciences; and computer sciences.

With more than á 50 nationalities represented by RAND staff, many of our people are multilingual. Languages spoken include Spanish, French, Chinese, Arabic, Russian, German, Korean, and Japanese.

RAND’s focus is global: Our staff are committed to helping people and societies throughout the world be safer, healthier, and more prosperous. 1,700

á 20 foc u s on mak ing a dif ference Leadership Global Reach RAND senior management guides RAND opened a new office in Abu Dhabi, United Arab Emirates. The office is collocated and supports staff as they carry with the Centre of Excellence for Applied Research and Training (CERT) and was created out our mission to help improve under the patronage of His Excellency Sheikh Nahayan Mabarak Al Nahayan, minister of policy and decisionmaking higher education and scientific research, chairman of CERT, and chancellor of the Higher through research and analysis. Colleges of Technology.

James A. Thomson RAND was selected as one of the Best Places to Work in Los Angeles for 2010 by the President and Chief Executive Los Angeles Business Journal and the Best Companies Group. Officer Michael D. Rich Marking its 10th year of operations in 2010, RAND’s Pittsburgh office received the Executive Vice President 2010 Good Government Award from the League of Women Voters of Greater Pittsburgh Karen Treverton for contributions to improving government. Special Assistant, President’s Office

Vivian J. Arterbery Corporate Secretary

Robert H. Brook Cambridge Vice President and Director, Brussels RAND Health Pittsburgh Boston Santa Monica Lynn Davis Headquarters Washington Director, Washington Office Jackson Doha James N. Dertouzos New Orleans Director, RAND Institute for Civil Abu Dhabi Justice Mexico City Representative Office Susan Everingham Director, Pittsburgh Office Richard Fallon Vice President and Chief Financial Officer Jonathan Grant President, RAND Europe Arthur L. Kellermann, one of the nation’s leading public health Andrew R. Hoehn and emergency medicine researchers, was named the new head Vice President and Director, of RAND Health in November 2010 (effective January 2011). He RAND Project AIR FORCE succeeded Robert Brook, who stepped down after 19 years in Patrick Horrigan the leadership position, to return to full-time research. Kellermann Vice President, Office of Services joined RAND in 2009 after being appointed to the Paul O’Neill Alcoa Professorship in Policy Analysis. Previously, Kellermann Jeffrey Isaacson Vice President and Director, served as a professor of emergency medicine at Emory University RAND Arroyo Center and as the medical school’s first associate dean for health policy. Arie Kapteyn Director, RAND Labor and Jack Riley, an 11-year RAND veteran and alumnus of the Population Pardee RAND Graduate School, was appointed vice president and Debra Knopman director of the RAND National Security Research Division. During Vice President and Director, his career at RAND, Riley has worked on U.S. and international RAND Infrastructure, Safety, and security issues, including assessments of security institutions in Environment Palestine, Liberia, Afghanistan, and Mexico; cost-effectiveness Lindsey C. Kozberg analyses of security measures in settings such as airports and Vice President for External Affairs passenger rail facilities; and a multiyear evaluation of police– community relations in Cincinnati. Susan L. Marquis Dean, Pardee RAND Graduate School Desirée van Welsum joined as a research leader on RAND Europe’s Innovation and Technology team. She is an expert Bruce Nardulli in the analysis of the economic impact of information and Director, RAND-Qatar Policy Institute communication technologies, innovation, intellectual assets, skills, and international trade and investment. Previously, van Adele R. Palmer Welsum worked with the United Nations Conference on Trade Vice President, Staff Development and Development, the World Bank Institute, and the Organisation and Management Office for Economic Co-operation and Development. Jack Riley Vice President, RAND National Security Research Division Director, RAND National Defense Johanna Zmud was named director of the RAND Transportation, Research Institute Space, and Technology program in December 2010 (effective Debra Schroeder January 2011). Zmud has 25 years of experience measuring and Vice President and General analyzing travel behavior. She has international credentials in travel Counsel behavior survey science and national credentials in passenger travel and road pricing, freight and commodity flows, transportation Brian Stecher data programs, and the intersection of transportation and Acting Director, RAND Education information/communication technologies. as of december 2 0 1 0

RA n D A nn u a l R epo rt 2 0 1 0 21 The RAND Center for Asia Pacific Policy (CAPP) regularly convenes stakeholders for exchange and discussion on matters affecting the Asia Pacific region. Here, a participant reads RAND’s Focus on Korea publication during a roundtable symposium on China, Korea, Japan, and U.S. relations organized by CAPP and the Pacific Century Institute.

Outreach

Enriching the Debate For RAND, the scholarly objectives of expanding knowledge, illuminating issues, and developing new ideas are but a first step in our mission to help improve policy and decisionmaking through research and analysis. We are equally focused on communicating our findings broadly to enrich the quality of public debate and help decisionmakers make sound choices.

Konstantin Kosachev (pictured), chairman of the Russian Senior behavioral scientist Rebecca Collins led a Federation’s State Duma International Affairs Committee, discussion on how popular media is shaping boys’ and traveled to RAND to participate in a dialogue organized by girls’ beliefs about sex and gender and sexual behavior. the RAND Center for Russia and Eurasia (CRE) focused Collins was joined at the event by Madeline Di Nonno, on the next phase in U.S.–Russian relations. CRE director executive director for the Geena Davis Institute on Gender Andrew Weiss moderated the discussion, which was in Media. RAND Health Board of Advisors member followed by media interviews. Suzanne Nora Johnson introduced the discussion.

22 foc u s on mak ing a dif ference RAND Europe’s third Annual Reception in Brussels featured remarks by Herman Van Rompuy, president of Delivering Insight the European Council. Van Rompuy Each year, RAND experts make hundreds focused on the importance of of presentations to decisionmakers innovation policy in the European and thoughtleaders on issues of local, Union, the need for a more coordinated national, and global concern. A sample approach to innovation in Europe, of 2010 presentations includes and the key role played by RAND Europe in research and innovation in Green Buildings, Green Jobs relation to the Europe 2020 Strategy. Tackling Corruption in Afghanistan

Mumbai Rising? India and the Global Economy

Rebuilding Haiti

Improving Public Services Through Performance-Based Accountability Systems

Global Health: Building Capacity to Fight Infectious Disease

The Impact of Deployment on Military Children

Tipping the Scale: Policy Approaches Toward Healthy Living and Tackling the Obesity Epidemic

Executive Compensation Regulation: Challenges and Opportunities

In March 2010, RAND hosted the Fourth Annual Conference of the U.S. Transportation System Funding International Society for the Study of Drug Policy (ISSDP), the first ISSDP Annual Conference held outside of Europe. Among dozens of leading Retail Clinics and the Efficient voices in drug policy featured were Antonio Maria Costa, executive director of Health Care of the United Nations Office of Drugs and Crime, and Keith Humphreys, Impact of Air Pollution on Hospital senior policy advisor in the U.S. Office of National Drug Control Policy. Spending in California Beau Kilmer, codirector of the RAND Drug Policy Research Center, led a conversation on the unintended consequences of drug policy.

Hans Pung, vice president of RAND Europe, addressed the 9th Congress on European Security and Defence.

RA n D A nn u a l R epo rt 2 0 1 0 23 Madame Thandiwe Banda, the First Lady of the Republic of Zambia (center), visited RAND to meet with Executive Vice President Michael Rich (pictured), RAND researchers, and concerned philanthropists to discuss policy approaches for improving maternal and child health, primary education, and HIV prevention in Zambia.

RAND briefings conducted for lawmakers and their staff on Capitol Hill in Washington, D.C., are available in streaming video on www.rand.org or as an audio podcast.

A RAND Visiting Voices seminar supported by the RAND-Qatar Policy Institute featured Tim Sebastian, award-winning broadcaster and chair of the critically acclaimed television program The Doha Debates. Senior political scientist Dalia Dassa Kaye moderated the conversation, which addressed a variety of topics, including free speech in the Arab and Islamic worlds, the development of a new generation of leaders in the region, and opportunities and prospects for political reform. The Doha Debates is considered a leading forum for public discussion in the Arab world.

24 foc u s on mak ing a dif ference Making Policy Accessible

In 2010, RAND findings and recommendations were published in more than 700 policy reports, journal articles, and research briefs and referenced in more than 4,000 media reports by influential publishing and broadcast outlets around the world.

Published three times a year, RAND’s policy magazine, RAND Review, helps thoughtleaders from around the world stay ahead of the curve on the issues that matter most. The Spring 2010 cover story looked at Israel’s energy challenges and RAND’s work to explore opportunities for greater resiliency and sustainability.

Research Brief GULF STATES POLICY INSTITUTE Research Brief EDUCATION

A study by RAND Labor and Population

How Fare the Displaced and Returned Residents of Are Performance-Based Accountability Systems Effective? New Orleans? Evidence from Five Sectors

Results of an Innovative Pilot Survey RAND ReseARch AReAs uring the past two decades, performance- ChiLDREN AND FAMiLiES Key findings: EDUCAtiON AND thE ARtS based accountability systems (PBASs), RAND ReseARch AReAs hen Hurricane Katrina came through ENERgy AND ENviRONMENt which link financial or other incentives ChiLDrEN AND FAMiLiES • Under the right circumstances, a performance- Key findings: hEALth AND hEALth CARE to measured performance as a means EDUCAtiON AND thE ArtS the Gulf in August 2005, it displaced iNFRAStRUCtURE AND based accountability system (PBAS) can tRANSPORtAtiON D ENErgy AND ENvirONMENt almost the entire population of New of improving services, have gained popularity iNtERNAtiONAL AFFAiRS improve the effectiveness and efficiency of hEALth AND hEALth CArE • Results from the Displaced New Orleans Orleans, scattering residents across LAW AND BUSiNESS among policymakers. For example, the No Child iNFrAStrUCtUrE AND Residents Pilot Study (DNORPS) show that services for the public; however, existing trANSPOrtAtiON W the region, state, and country. By the fall of NAtiONAL SECURity Left Behind (NCLB) Act of 2001 (Pub. L. 107- rates of return and mental illness vary by evidence for PBAS effectiveness is . iNtErNAtiONAL AFFAirS 2006, almost half the residents had returned, POPULAtiON AND AgiNg 110) combined explicit expectations for student LAW AND BUSiNESS sociodemographic factors, particularly race. PUBLiC SAFEty • PBASs are often created without consensus NAtiONAL SECUrity and almost two-thirds had returned by the fall SCiENCE AND tEChNOLOgy performance with well-aligned tests to measure POPULAtiON AND AgiNg • Housing damage is strongly associated with tERRORiSM AND achievement, and it included strong consequences on key design issues. of 2007, nearly two years after the hurricane. hOMELAND SECURity PUBLiC SAFEty These return rates were very close to early esti- higher levels of mental illness and accounts for schools that did not meet performance SCiENCE AND tEChNOLOgy • The selection of incentives and performance tErrOriSM AND mates produced by RAND researchers, which for ongoing displacement. targets. In the transportation sector, cost plus hOMELAND SECUrity measures has proved challenging. highlighted the important effects of flooding time (A+B) contracting has become a popular • Fielding the DNORPS shows that it is possible and housing damage on return rates. A ques- means of streamlining and speeding up highway • Creating an effective PBAS requires careful to study this hard-to-survey population tion remained, however: Which residents have construction projects, while, in health care, there attention to selecting an appropriate design, and that a full-scale survey is feasible; the returned and which have not, and how are these are more than 40 hospitals and more than 100 given the context in which it is to operate, challenge is in locating cases. people affected by the trauma caused by such a physician/medical group performance-based and to monitoring, evaluating, and adjusting massive displacement? • The Displaced New Orleans Residents Survey accountability programs (popularly dubbed pay- the system, as appropriate. To help answer this question, RAND (DNORS), being fielded in 2009–2010, will for-performance, or P4P) in the United States. researchers fielded an innovative pilot survey in fill a gap in existing surveys of displaced Although PBASs can vary widely across the fall of 2006—the Displaced New Orleans residents, both complementing and supple- sectors, they share three main components: goals Residents Pilot Survey (DNORPS). The goal was menting them. (i.e., one or more long-term outcomes to be tion to the selection of incentives, performance to establish the feasibility of identifying a repre- achieved), incentives (i.e., rewards or sanctions to measures, and implementation issues, as well as sentative sample of pre-Katrina residents of New motivate changes in behavior to improve perfor- rigorous evaluation to monitor the program’s Orleans, determine the likely success of efforts mance), and measures (formal mechanisms for effectiveness. this product is part of the (see Figure 1). The first stratum, areas with no this product is part of the monitoring service delivery or goal attainment). rAND Corporation research to track and interview this sample in a major RAND Corporation research brief series. rAND research longitudinal study, and ultimately to launch the flooding, included about 29 percent of all dwell- brief series. RAND research But, while the use of PBASs has spread in Methods briefs present policy-oriented briefs present policy-oriented summaries of published, full-scale version—the Displaced New Orleans ings in New Orleans. The second stratum, areas summaries of published, the public sector, little is known about whether The PBASs studied are listed by sector in the peer-reviewed documents. Residents Survey (DNORS), currently under with less than four feet of flooding, accounted for peer-reviewed documents. such programs are having the desired effect or table. The selection was guided by an interest in way. The researchers also sought to gain insights about 20 percent of all dwellings. Finally, areas how to design them to be as effective as possible. focusing on services in which the public sector Corporate headquarters headquarters Campus To address this gap, a RAND study examined has an important role, either in providing the 1776 Main Street into the recovery of the New Orleans population with four or more feet of flooding composed the 1776 Main Street P.O. Box 2138 P.O. Box 2138 several examples of PBASs, large and small, from services (e.g., education, transportation, PHEP) by examining rates of displaced residents return- third stratum, which included 51 percent of dwell- Santa Monica, California Santa Monica, California or in governance of the services (health care, 90407-2138 ing to the city and the well-being of displaced ings. Flood depth was directly tied to housing 90407-2138 a range of public service areas. The study focused tEL 310.393.0411 tEL 310.393.0411 on nine PBASs, drawn from five sectors: child child care). residents. damage in previous RAND work and, thus, repre- FAx FAx 310.393.4818 310.393.4818 sents a potentially crucial factor shaping residents’ care, education, health care, public health emer- The research approach included development © RAND 2010 © rAND 2010 What Is DNORPS? ability and choice about whether to return to the gency preparedness (PHEP), and transportation. of an analytic framework, a broad review of DNORPS is an area-based probability sample of city and in understanding financial and other The study suggests that PBASs represent literature related to performance measurement pre-Katrina dwellings in the City of New Orleans, dimensions of well-being. a promising policy option for improving the and accountability in the private and public sec- where the dwellings were stratified based on three The survey questionnaire collected demo- quality of service delivery in many contexts. tors, and an integrative workshop with experts levels of flood depth on August 31, 2005—no graphic information; information about evacua- However, evidence of PBAS effectiveness is rare, and practitioners to examine various features of www.rand.org flooding, up to four feet, and four feet or more tion and resettlement experience, including when www.rand.org and successful design requires careful atten- PBASs.

What’s your security

BACKGROUND worth? The security debate in the United Kingdom is emotional and polarised. Civil libertarians argue strongly against measures that infringe liberty or Can governments improve security for all privacy, while the security community asserts that without infringing individual liberties? public protection comes first. Policymakers face RAND Europe quantifies the trade-offs tough decisions. How far can individual rights can be reconciled with the security of society as a whole? people make between liberty, privacy and security. Are people are willing to surrender some liberty or privacy in return for security benefits? RESEARCH APPROACH RAND Europe undertook a self-funded initiative A PASSPORT APPLICATION CHOICE SCENARIO to understand and quantify the trade-offs that Option 1 Option 2 Option 3 people might make when faced with realistic

Total price £72 £100 £100 choices. We examined three scenarios in which privacy and liberty could conflict with security: Processing time Two weeks Two weeks Same day Type of personal Photograph and Photograph and Photograph and I would opt not to have applying for a passport; travelling on the information DNA sample DNA sample iris scan a passport under any national rail network; and attending a required of these conditions major public event. Using stated- Within the Across government Within other Level of sharing of private sector generally EU countries preference techniques, we defined passport data some alternative options, each with Additional uses of As a personal identification As a personal identification As a personal passport document and to speed up document and to speed up identification advantages and disadvantages. the processing time for the processing time for document official forms and official forms and documents documents

Number of illegal 300,000 800,000 800,000 immigrants that may be identified

Number of Less than 750 2,400 2,400 terrorists that may be identified

Please, indicate your answer here: RAND research is available for free

SECURITY BENEFITS TAKE PRIORITY 'HANDS-OFF' SECURITY CHECKS download from www.rand.org; IN PUBLIC PLACES PREFERRED Our rail travel and public event People would prefer to pass through an scenarios showed that people are x-ray arch or scanner than submit to a prepared to sacrifice some privacy or pat-down or bag search. Respondents more than 4 million documents were liberty to improve security in public were willing to pay an additional £2.44 places. People were willing to pay an for metal detectors and x-rays at rail extra £3.14 on their rail ticket in return stations, but only £1.17 for bag search. for advanced face-recognition closed circuit television (CCTV) at stations, or Physical searches may be seen as more an extra £2.05 for regular CCTV. Respondents were also willing to pay an invasive, even though the data recorded downloaded in 2010. extra £0.73 for transport police, but less enthusiastic about armed police in detectors or scanners can be stored or (£0.54) or uniformed military (£0.29). shared more systematically.

PEOPLE RELUCTANT TO PROVIDE BIOMETRIC DATA While citizens are willing to share substantial private data on their passport applications, they are reluctant IMPACT to provide biometric information. People would only Bringing objectivity to an emotionally charged debate. allow DNA collection if passport costs were subsidised Our research shows that it is possible to obtain and monetise by £19, and would not pay any extra for the security the preferences of citizens to provide an objective assessment benefits of an iris scan. However, they would pay an of the potential social and economic impact of security options. additional £7 to provide fingerprint data. Reflecting preferences in policy. This approach allows policymakers to assess the impacts of different measures on OPPOSITION TO PERSONAL DATA BEING SHARED users of the security infrastructure. It may be possible to adjust People were not comfortable sharing personal data with third parties. Large measures to better reflect preferences without reducing their incentives would be required for people to agree to their data being effectiveness. shared with other government departments (£16 subsidy), or with other European nations (£23 subsidy). Respondents were only willing to Innovative application of methodology. Stated preference share information with the private sector if the passport price was techniques are widely used in areas such as transport. This discounted by £30. project shows that, using robust scenarios, the methodology can also be applied to complex abstract concepts.

EUROPE

www.rand.org/randeurope

RA n D A nn u a l R epo rt 2 0 1 0 25 PARDEE RAND GRADUATE SCHOOL

Versatility, imagination, energy, and intellect. These are the traits of great policy leaders and of all who enter the Pardee RAND Graduate School (PRGS), the policy analysis doctoral program based at RAND’s headquarters campus in Santa Monica. PRGS’s role is to build a new generation of policy leaders who can lead and create change locally and around the world. Leaders who can be the answer to the most vexing challenges of our time.

The entering cohort of students in 2010 comprised for National Security and Counterterrorism, Beth Israel 21 individuals diverse in academic and professional Medical Center, Planned Parenthood, and the Aerospace background, knowledgeable about a broad range of Systems Design Laboratory at Georgia Tech. areas, and passionate about policy. Roughly two- thirds of the cohort already hold an advanced degree. Founded in 1970 as one of eight graduate programs in public They come to PRGS from an impressive array of policy created to train future leaders in the public and private sectors in policy analysis, PRGS is the only such program organizations and academic institutions including based at a public policy research organization and the only one the National Economic Council of Israel, the Boeing specializing exclusively in the doctorate degree. The five-year Company, the U.S. Mission to NATO, the New York program is designed to produce an elite class of policy leaders Department of Health and Mental Hygiene, the whose careers will be distinguished by the caliber of their Harvard Kennedy School, the Center for Strategic and thoughts, reason, and actions. With 110 students, PRGS is International Studies, the U.S. Air Force, the Institute the largest doctoral program in policy analysis.

The PRGS community comprises graduate students from 26 countries.

Afghanistan Italy Austria Nepal Bosnia Pakistan Burkina Faso Peru Canada Russia China South Korea Colombia Taiwan EI Salvador Togo France Turkey Georgia United Kingdom Germany United States India Uzbekistan Israel Vietnam

26 foc u s on mak ing a dif ference PRGS 40th Anniversary

In 2010, PRGS observed its 40th anniversary. A to be the answer: the United Nations, the World celebration weekend—filled with events both festive Bank, the U.S. Air Force, the Republic of Korea Air and scholarly—culminated with a commencement Force, Bulgaria’s Ministry of Finance, the Centers for address by Admiral Mike Mullen, chairman of the Disease Control and Prevention and the Centers for Joint Chiefs of Staff. Medicare and Medicaid Services; private-sector firms such as Abt Associates, Amgen, Inc., and Ipsos; and The commemoration brought together alumni, faculty, prestigious educational institutions such as Harvard current students, and friends and supporters of the Graduate School of Education, University of British school and began with two timely policy discussions Columbia, University of California, Berkeley, University featuring experienced policymakers and leading of California, Los Angeles, Defense Acquisition thinkers. Be the Answer: The Role of Analysis University, and Zirve University in Turkey. in Policymaking was moderated by Dean Susan L. Marquis, and featured a conversation among Albert Carnesale, chancellor emeritus of UCLA; Ann McLaughlin Korologos, RAND trustee and former U.S. Secretary of Labor; and Admiral Mullen. The education you have earned Be the Answer: A Case Study in Health Care Quality was moderated by assistant dean Jeffrey here has positioned you to lead Wasserman, and featured PRGS alumnus Elizabeth the changes of the future. We need A. McGlynn, former distinguished chair in health quality at RAND; Pedro José Greer, Jr., a member of leaders with strength of character, the PRGS Board of Governors and recent recipient broad perspective, and sharp of the Presidential Medal of Freedom; PRGS fellow Sean O’Neill; and PRGS alumnus Neeraj Sood of the insight. Simply put, we need you. Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California. “To really help us ... analysis must

The next day, 33 doctoral degrees and 30 master’s be timely, nonpartisan, adaptive, degrees were awarded during commencement and objective, all in keeping with our ceremonies. Carnesale, Korologos, and Mullen received honorary degrees, and Mullen delivered the volatile security environment, our commencement address, speaking about how PRGS unpredictable world, and its broad graduates’ analysis can make a real-world impact on global security during today’s times of great change. range of actors and cultures.”

Members of the class of 2010 have accepted —Admiral Mike Mullen, impressive posts in government, major research commencement address organizations, and the private sector. Among the organizations where PRGS graduates will be working

RA n D A nn u a l R epo rt 2 0 1 0 27 PARDEE RAND GRADUATE SCHOOL

Collaborations

African First Ladies. This year, PRGS created PRGS–Southwestern Law School Joint the African First Ladies Fellowship Program, Certificate Programs. PRGS, in conjunction with which, in partnership with Women’s Campaign Southwestern Law School, has launched two public International, aims to strengthen the capacity of policy certificate programs to provide law students Africa’s first ladies and their offices to address and public policy Ph.D. students the opportunity to health and social problems across Africa. The complement their degree programs with a unique program helps first ladies and their staffs develop understanding of the interplay between the law and skills for managing an effective first lady’s office public policy. Qualified students at PRGS can take and learn practical policy analysis techniques. courses at Southwestern, leading to a Certificate in Over a two-year period, PRGS fellows will work Legal Studies, and qualified students at Southwestern with first ladies to develop and implement a plan can take courses in public policy at PRGS, leading addressing one of their nation’s top challenges, to a Certificate in Public Policy. No other policy Ph.D. such as maternal and child health, women’s issues, program offers students this opportunity to bridge the or education. gap between policy and legal education.

PRGS graduates become the rare leaders who can shape effective solutions from the messy realities of our times because they aspire

Participants at a program workshop held in 2010 for a better, smarter, and more included chiefs of staff and other advisers to first humane policy environment. One in ladies from Angola, Burkina Faso, Kenya, Lesotho, Mozambique, Namibia, Sierra Leone, Tanzania, which decisions are made not for and Zambia. Other workshop participants included political expedience or partisan gain, Jocelyn Frye, deputy assistant to President Obama for domestic policy and director of policy and but because they are rational and projects for first lady Michelle Obama; Melanne informed; based on facts, analysis, Verveer, U.S. ambassador-at-large for global women’s issues; Anita McBride, chief of staff to first and best practices; and guided by lady Laura Bush from 2005 to 2009; and Marjorie a vision of what could be.” Margolies, president and founder of Women’s Campaign International. PRGS faculty, as well as — James A. Thomson, collaborators from American University, provided President and Chief Executive Officer, instruction and follow-on mentoring. RAND Corporation

28 foc u s on mak ing a dif ference The Washington Experience. Recognizing Capacity-Building in Qatar. PRGS is the importance of learning opportunities outside of partnering with the RAND-Qatar Policy Institute the classroom, PRGS introduced The Washington (RQPI) to conduct the Policy Analysis Capacity- Experience in 2010, an experiential learning program Building Seminar for Qatar’s Supreme Council that provides students a firsthand understanding of for Family Affairs (SCFA). Recent legislation has the federal policymaking environment and culture provided SCFA with a new mission: to create a through extended exposure to, and interaction with, national strategy for family affairs that will help Qatar members of the government and related organizations achieve its National Vision 2030, which focuses in Washington, D.C. In addition, the program helps on economic, environmental, human, and social introduce our Santa Monica–based students to RAND’s development. Washington office research staff, fostering their ability The Capacity-Building Seminar, taught in Doha to collaborate remotely upon returning to California. by PRGS faculty members, aims to provide senior Four students were selected to participate in five- SCFA staff with tools that will lead to improved month assignments. These students took a special decisionmaking and resource allocation. The course on the federal budget taught by RAND program acquaints participants with key principles researcher and PRGS alum Kathi Webb; contributed of policy analysis, program evaluation, research research support to a range of projects for federal design, and quantitative methods. clients; participated in an extensive orientation session on Congress; and hosted several guest speakers from federal agencies.

Gifts to RAND’s Investment in People and Ideas program support The Washington Experience.

RA n D A nn u a l R epo rt 2 0 1 0 29 PARDEE RAND GRADUATE SCHOOL

Scholarships

Scholarships are an essential part of the support we provide our students. We aspire to one day provide full scholarships for all of our students and to help reduce debt buildup among our graduates to facilitate public service careers. Thanks to continued support from past and present members of the PRGS Board of Gov- ernors, we offered full or partial scholarships to nearly three-quarters of the entering cohort in 2010.

Dean’s Leadership Circle Dean’s Dinners Created in 2010 by Dean At Dean’s Dinners, friends Susan Marquis, the Circle and supporters of PRGS provides an opportunity come together in an for special engagement informal atmosphere with with PRGS to those students and faculty who who have demonstrated are working on issues commitment and support at the forefront of policy to PRGS’s ideals. Circle debates. The dinners, members include donors, often hosted by a member alumni, former members of the Board of Governors, of the Board of Governors, have been held in current and former RAND private homes and other trustees, and other distinctive settings in Los supporters. Angeles, New York, and Miami, and have spanned a range of topics from health care reform and K–12 education challenges to Afghanistan and climate change.

30 foc u s on mak ing a dif ference Also in 2010, PRGS passed the halfway mark in our Longtime PRGS supporters Eugene and Maxine Rosenfeld efforts to raise $1,000,000 in support of the Jeremy are deeply concerned about the future of developing economies in Asia. The Rosenfelds recognized a unique R. Azrael Memorial Endowed Scholarship. The talent in PRGS faculty member Krishna Kumar (above)— Azrael Scholarship will provide a full scholarship who has studied a range of topics from entrepreneurship annually to a PRGS fellow from a former Soviet and human capital accumulation to the Indian and Chinese education systems. Through the Rosenfeld Program in state. Jeremy Azrael was a trailblazing figure in Asian Economic Development—a generous multiyear U.S.–Soviet and U.S.–Russian relations whose commitment to provide funding for dissertation research career at RAND spanned more than three decades. and to support Kumar’s research and mentorship of fellows interested in international development issues and The endowed scholarship campaign in his name policies—the Rosenfelds are helping PRGS and RAND was begun in 2009 upon Azrael’s passing. improve the lives of those in developing countries through research and analysis.

Dissertation Support

Donor-supported dissertation awards are vital to PRGS fellows. The generosity of PRGS board members and other friends of PRGS enabled us Generous gifts to PRGS in 2010 helped support an impressively diverse array of dissertation topics to award almost $400,000 in dissertation support including in 2010. Community Health Clinics, Chronic Illness, and PRGS is fortunate to have one fully endowed Disparity of Health dissertation fund, The Anne and James Determinants of Agricultural Productivity in Rothenberg Dissertation Awards. In addition, China and India we have a renewable commitment from John Does Local Control of Schools Enhance Cazier to annually support dissertations related Learning? An Investigation of ’s to sustainability; a grant from Frederick S. Pardee Empowerment Schools to support multination regional analysis; and a Ensuring the Vitality of Symphony Orchestras multiyear gift from Eugene Rosenfeld as part of a The Equity Implications of Mileage-Based larger program on Asian Economic Development. Highway User Charges In 2010, we received additional support from the JL Evaluating the Los Angeles Police Academy Foundation, Charles Wolf, Ellen Palevsky, Harold Magnet Schools Program Brown, the Los Angeles Police Academy Magnet How to Sustain Social Security Systems and Maintain Standards of Living in Aging Societies Schools Program, and the Susan Way-Smith Memorial Fund. Long-Term Care for the Elderly: What Can We Learn from International Experience?

PRGS students also compete for a variety of Nuclear Power Generation: A Sustainable Option dissertation grants made available by external for Reducing Greenhouse Gas Emissions in Russia organizations. Private Saving Decisions and the Role of Public- and Private-Sector Policies in Financial Decisionmaking

In 2010, RAND Project AIR FORCE (PAF) recognized four Understanding China’s Actions in the South PRGS fellows as part of its annual PAF-PRGS Fellowship China Sea Program: Kenneth Grosselin, Eric Jesse, Deborah Lai, What’s on the Menu? Exploring the Restaurant and Jordan Ostwald. PAF fellowship awards support Industry’s Role in Obesity research related to U.S. national security and which informs processes or decisionmaking in the U.S. Air Force.

RA n D A nn u a l R epo rt 2 0 1 0 31 Philanthropy at RAND

At a time when creative, crosscutting solutions to complex challenges are needed most—yet resources for generating innovative ideas are increasingly hard to come by—our philanthropic supporters enable RAND to continue to take on the biggest questions, apply the long view, and attract and engage the most talented individuals to be a part of that effort. Through generous contributions of financial resources and the volunteer leadership of distinguished advisors, RAND is able to • develop new, innovative ideas for addressing critical, but often underappreciated policy areas; and • attract top intellectual talent from around the world and support their efforts to address complex matters for the public good.

Philanthropic support is vital to RAND and the Pardee RAND Graduate School and has made possible some of our most visionary work. Scan the code to explore more research supported by RAND’s Investment in People and Ideas program.

32 foc u s on mak ing a dif ference Supporting Talent

RAND uses philanthropy to support distinguished Also made possible by philanthropic support, RAND chairs for outstanding researchers recognized President’s Awards provide outstanding staff with as world-class among peers. Distinguished time to pursue exploratory research and career chairs—listed below—conduct innovative research, development activities (see page 38 for a list of this outreach, and mentoring of junior policy analysts. year’s recipients). European Security RAND corporate fellows are individuals who have Steve Larrabee completed distinguished government or other policy Health Care Services analysis service and, as a result of philanthropic Robert H. Brook support, are available to devote a portion of their International Economics time to RAND research activities. Our newest Charles Wolf, Jr. corporate fellow, Admiral Thad Allen, joined RAND in October 2010. Labor Markets and Demographic Studies James P. Smith Paul O’Neill Alcoa Chair in Policy Analysis RAND corporate fellow Arthur Kellermann Admiral Thad Allen discusses PNC Chair in Policy Analysis disaster preparedness and response issues at a RAND Dan McCaffrey Gulf States Policy Institute Policy Analysis event in New Orleans. Just prior to joining RAND, Susan L. Marquis Allen had served as the Samueli Institute Chair in Policy for presidentially appointed National Incident Commander Integrative Medicine for the unified response to Ian Coulter the Deepwater Horizon oil spill.

Inspiring Ideas

Philanthropic contributions, combined with earnings from RAND’s endowment, make possible RAND’s Investment in People and Ideas program, which is used to support innovative research on issues crucial to the policy debate but that reach beyond the boundaries of traditional client funding. The following are just three of the dozens of projects funded by this program in 2010:

Managing Spent Nuclear Fuel: Building Security in the The Role of Faith-Based Strategy Alternatives and Policy Persian Gulf Organizations in HIV Prevention Implications and Care in Central America

RA n D A nn u a l R epo rt 2 0 1 0 33 Setting Politics Aside

Following the U.S. mid-term elections in November, RAND hosted Politics Aside—a three-day retreat that brought together policymakers, opinion leaders, philanthropists, and RAND’s leading thinkers for a nonpartisan examination of pressing policy challenges.

The event featured dozens of renowned and accomplished policymakers and experts from across the political spectrum. Participation in the weekend was limited to promote candor and intimate discussion. The agenda included panel sessions and seminars at RAND’s headquarters campus in Santa Monica, dinner discussions in distinctive homes throughout Los Angeles (see page 37), a reception and dialogue at Sony Pictures Entertainment, and an exclusive screening of the education documentary Waiting for “Superman” at Creative Artists Agency. (Above) Journalist Proceeds from Politics Aside support RAND’s Michael Portillo, a trustee of RAND Europe and former Investment in People and Ideas program, our vehicle member of the British for funding research inquiries into critical but often Parliament, with former underappreciated policy areas and attracting the U.S. ambassador Paula Dobriansky, discussing world’s top talent to focus on these challenges. recent global shifts in power; (left) Dennis Miller, shown with RAND trustee and Politics Aside cochair the agenda Michael Lynton, moderated a discussion on media’s role Today’s Polarized Politics: Is Ideology Getting in the in informing policy. Way of What Works? Beyond the Map: The Post-Geographic World Order The New Public Square: A Changing Media’s Role in Informing Policy Policy Perspectives from the Frontlines of Afghanistan Taking the Lead on Climate Challenges America’s Public Education System in Crisis Managing the Unexpected: Catastrophe Preparation, Response, and Rebuilding The Real Cost of Crime A Nuclear Iran: Implications for Israel and the Region Pay for Performance: Is Executive Compensation Reform Working? Democracy Promotion and U.S. Foreign Policy America’s Economic Future: Making the Tough Calls Has Nation-Building Become a Dirty Word? Mexico and the United States: Ties That Bind, Issues That Divide al Qaeda: The Tenacious Adversary Women and Leadership: Are We There Yet? Health Care: Doing Better Than “Do No Harm” California at the Leading Edge: Precipice or Opportunity?

34 foc u s on mak ing a dif ference Admiral Thad Allen (left), a senior fellow at RAND, engages participants at the opening night reception.

(Clockwise, from left) RAND trustee Bonnie Hill joined the board in 2010 and attended Politics Aside with her husband, Walter; RAND political scientist Seth Jones leads an engaging discussion on Afghanistan, where he spent much of 2010; Jonathan Alter, senior editor of Newsweek, in a panel discussion on education reform; RAND’s Lindsey Kozberg, vice president for external affairs, and Jim Thomson, president and CEO, address political polarization and its effect on public policy; RAND trustee and Politics Aside cochair Ann McLaughlin Korologos.

Politics Aside is a biennial event. The first Politics Aside was held following the 2008 presidential election.

RA n D A nn u a l R epo rt 2 0 1 0 35 RAND is grateful to the Politics Aside 2010 Event Committee and dinner hosts for their generous donations of time, talent, and support.

Politics Aside Event Committee

Cochairs Ann McLaughlin Janine and Peter Korologos Lowy Michael Lynton Lili Lynton and Michael Ryan

Sharon and Sharyar Michael and Jamie Baradaran * Lynton Sheri and Les Biller * James and Cheryl Miller Brad D. Brian Jane and Ron Olson Skip Brittenham and Heather Thomas Paul M. Pohl Lee and Lawrence J. Marcia and (Top right) Los Angeles City Ramer Janet Crown and Steve Council president Eric Garcetti Robinson * Antony P. Ressler moderates the opening night Arnie and Judy Richard and Alison discussion; (above) John Van Fishman * Ressler * de Kamp, a member of the RAND Infrastructure, Safety, Arthur N. Greenberg * Donald and Susan Rice * and Environment Advisory Jay Greer Board, with former White House Laura and Tom Chief of Staff Joshua Bolten. Mary Ann and Kip Rockwell * Hagopian * Sharon and Jim Rohr Ellis Jones Maxine and Gene Pat Kandel Rosenfeld * Marilyn and Jeffrey Tom Rothman and Katzenberg Jessica Harper Gregory Keever * Daniel I. Schlessinger Brad Brian, chair of the RAND Institute for Civil Betsy and Bud Knapp * Anne and Robert Justice Board of Overseers, Ann McLaughlin Simonds * poses a question during Korologos and Tom Darlene and Jim a Q&A segment. Korologos Thomson Joanne and Roger Andrea and John Kozberg Van de Kamp

* dinner hosts

36 foc u s on mak ing a dif ference Conversations begun during daytime seminars and panel discussions continued over dinner in private homes in Bel Air, Beverly Hills, Brentwood, Century City, Holmby Hills, Malibu, and Westwood.

RA n D A nn u a l R epo rt 2 0 1 0 37 President’s Awards

President’s Awards recognize individuals whose work exemplifies RAND’s two core values of quality and objectivity and who have also recently made exemplary contributions to the RAND community through new business development or fund-raising initiatives, outstanding outreach and dissemination efforts, or effective participation in internal activities aimed at improving the efficiency of RAND’s research environment. Made possible by the generosity of donors, the awards provide staff with research time and support to pursue activities related to career development or exploratory research. 2010 award winners are

Kurt Card, legislative Lara Schmidt, senior statisti- analyst, for his skill in cian, associate director of the helping RAND anticipate Force Modernization and Employ- the information needs of ment Program in RAND Project members of Congress AIR FORCE, and member of the and key committee and PRGS faculty, for her innovative personal staff and meeting research on issues related to those needs with research Air Force operations and space and expertise from RAND’s assets and her extensive efforts national security programs to build the nation’s capabilities in and centers. the field of defense statistics.

Christine Eibner, economist, Michael Vazquez, Santa for her intellectual contributions Monica facilities operations to the development of the manager, for the technical COMPARE initiative, a knowledge, problem-solving multidimensional analytical ability, strategic thinking, and resource for evaluating health interpersonal skills that he policy reforms; her effectiveness has brought to ensuring the in using COMPARE’s analytical functional utility and resource tools to evaluate specific reform efficiency of RAND’s Santa proposals; and her ability to Monica office. convey the findings to diverse external audiences.

Beau Kilmer, policy Jeffrey Wasserman, senior researcher, codirector of the policy researcher, coleader of the RAND Drug Policy Research COMPARE initiative, and assistant Center, and member of the dean for academic programs at Pardee RAND Graduate School PRGS, for his extensive analytical (PRGS) faculty, for his creativity contributions to the U.S. National and initiative in conceiving, Health Security Strategy, the intel- performing, and disseminating lectual leadership he has provided analyses of marijuana legaliza- to RAND’s public health research tion in California, which shaped agenda, and his effectiveness in and informed the public debate. his many roles at PRGS.

Michael Lostumbo, senior Henry Willis, senior policy defense research analyst and researcher, associate director associate director of the Inter- of the Homeland Security and national Security and Defense Defense Center (part of the RAND Policy Center in the RAND National Security Research National Security Research Division and RAND Infrastructure, Division, for his growing body Safety, and Environment), and of research on Asian security member of the PRGS faculty, issues and his outstanding for his creative research on risk management of research on analysis and management in long-range strike capabilities many public policy domains, his for the Office of the Secretary growing international reputation, of Defense. and his extensive mentoring of PRGS fellows.

38 foc u s on mak ing a dif ference Investing in People and Ideas

RAND’s Investment in People and Ideas program combines philanthropic funds from individuals, foundations, and private-sector firms with earnings from RAND’s endowment and operations to support research on issues that reach beyond the scope of traditional client sponsorship. RAND gratefully acknowledges gifts made by the following donors during calendar year 2010. These donors are members of the RAND Policy Circle and receive opportunities throughout the year to engage with RAND’s leading experts on timely policy issues—through private events, conference calls, and other activities.

Marcia and Frank C. William J. Recker Carlucci Paul N. Roth, Shulte Roth Chey Tae-won & Zabel LLP Coalition for Litigation John J. Rydzewski Justice, Inc. Leonard D. Schaeffer COPIC Medical Foundation Hasan Shirazi Company Victoria and Ronald Simms, Michael Critelli The Simms/Mann Family The Crown Family Foundation The Doctors Company Lucille Ellis Simon Foundation Jacques E. and Carine Dubois David Singer Thomas Epley and Linnae Douglas J. Smith The Hauser Foundation $500,000 + Anderson Joseph P. and Carol Z. Hewlett-Packard Company The Global Markets Institute Fannie Mae Sullivan at Susan and Tod Hullin Michael W. Ferro, Jr. Swiss Reinsurance Johnson & Johnson JL Foundation Company Judy and Arnie Fishman Anne and James F. Karen L. Katen Suzanne S. and Michael E. The Funari Family Rothenberg Tennenbaum Bud and Betsy Knapp Foundation $100,000–$499,999 Maiden Re A. Frederick Gerstell Bonnie McElveen-Hunter Greater Kansas City Anonymous Merck & Co., Inc. Community Foundation & Allstate Foundation Affiliated Trusts Michael G. Mills Allstate Insurance Company Gerald Greenwald Munich Re Chartis Insurance Ellen Hancock Paul H. and Nancy J. O’Neill ExxonMobil Corporation Leslie Hill PNC Financial Services GlaxoSmithKline Ann and Steve Hinchliffe Donald B. and Susan F. Rice The Martin Foundation Benny T. Hu James E. and Pfizer, Inc Sharon C. Rohr Suzanne Nora Johnson The PNC Foundation The SahanDaywi Foundation Juridica Investments Ltd. Maxine and Sony Pictures Entertainment Spencer H. Kim Enzo Viscusi, ENI Eugene S. Rosenfeld Wal-Mart Stores, Inc. Joseph and Mirit The Walt Disney Company State Farm Insurance Konowiecki Theresa and David I. J. Wang Ann and Tom Korologos $50,000–$99,999 Charles Wolf, Jr. Roberta Weintraub and Ira Lawrence Zicklin Kraft Foods, Inc. Krinsky American Association for Steven Lazarus Suzanne and Bob Wright Justice $25,000–$49,999 William R. Loomis, Jr. Daniel Yun Amgen Richard A. Abdoo James B. Lovelace Zenith Insurance Company Annenberg Foundation Ahmanson Foundation Dana G. Mead The Harold and Colene $10,000–$24,999 Brown Family Foundation Alcoa Inc. Santiago Morales Anonymous John M. Cazier Neal Baer Peter Norton Robert J. Abernethy The Chubb Corporation Daniel M. Bradbury Occidental Petroleum Corporation Academic Exchange Mary Kay and Brad D. Brian James D. Farley Reza Bundy Ralph M. Parsons S. Ward Atterbury Foundation Farmers Insurance Group/ Burford Group LLC Ambassador and Mrs. Frank Zurich U.S. Paul M. Pohl E. Baxter

RA n D A nn u a l R epo rt 2 0 1 0 39 Elizabeth Glaser Pediatric Edward McKinley and AIDS Foundation Kathleen Lavidge Ed and Connie Engler Thomas L. McNaugher Mimi and Ralph Falbo Jimmy and Cheryl Miller Karen Wolk Feinstein and Molly Munger and Stephen Steven Feinstein R. English The Fine Foundation, Sheila Sue and James Oates and Milton Fine William A. Owens Thomas E. Graham Patton Boggs LLP William B. Graham Estate Lee and Lawrence J. Ramer Daniel Grunfeld Ressler/Gertz Family Kip and Mary Ann Hagopian Foundation Edward R. Harshberger Stephen G. Robinson Cordell Haymon Daniel and Marcy Schlessinger Kenneth and Teri Hertz The H. Russell Smith Bonnie and Walter Hill Gurminder S. Bedi Philadelphia Police Foundation Foundation Henry and Elsie Hillman Bingham McCutchen LLP Gerald J. Sullivan Edward R. Pope Joan and John Hotchkis Marcia Bird Donald Tang PricewaterhouseCoopers Roy A. Hunt Foundation Donna C. Boehme Robert and Marjorie Paul D. Rheingold Sally and William H. Hurt George N. Chammas Templeton The Helena Rubinstein Ellis Jones Chicago Police Department Darlene and James A. Foundation Paul G. Kaminski Thomson City National Bank Brent Scowcroft Matthew D. Kanin Christine J. Toretti Cooley LLP Lee Sorenson Sally and Paul R. Kanin John and Andrea de Beaumont Foundation Leland R. Speed Van de Kamp Michael and Terri Kaplan Dickstein Shapiro LLP U.S. Chamber of Commerce Towers Watson Jeffrey and Marilyn The Dow Chemical United Health Foundation Katzenberg Westfield Corporation, Inc. Company The Gail and Lois Warden Sabrina Kay Charitable Todd Wilcox James Ewing Fund Foundation Willis Group The Family Connection John A. Wright Richard and Suzanne Kayne Partnership, Inc. David and Claudia Zuercher Joanne and Roger Kozberg Charles J. Zwick Kenneth R. Feinberg $5,000–$9,999 John H. O. La Gatta The Rosalinde and Arthur Anonymous $1,000–$4,999 Gilbert Foundation John L. Letham Odeh F. Aburdene Robert E. Grady Lili Lynton and Michael Anonymous Robert and Peggy Alspaugh Ryan James A. Greer David G. Adishian Julia Azrael Michael and Jamie Lynton Peter Griffith Robert L. Adler Paul Baran Dwight and Rhoda Makoff Hartford Financial Services Alpern Rosenthal Group Barbara M. Barrett Martha and Kent McElhattan American Legal Finance Frank Holder Mark Benjamin Association, Inc. The Robert and Ardis James Vivian and William Benter Foundation The Sheri and Les Biller Thomas V. Jones Family Foundation Philip Lader Bituminous Insurance Companies Arthur and Marylin Levitt Lynn A. Booth Andrey N. Likhachev Brent and Linda Bradley Los Angeles County Sheriff’s Department BridgePoint Financial Services Inc. Munger, Tolles & Olson LLP Bridgeway Software, Inc. Y&S Nazarian Family Foundation Skip Brittenham and Heather Thomas Robert B. Oehler Charles R. Burke Jr. Jane and Ronald L. Olson Margery A. Colloff Owens-Illinois, Inc. Richard Danzig

40 foc u s on mak ing a dif ference William E. Mayer Tracy and Hui Wang R. Preston McAfee Betsy A. Way Elan Melamid Glenn C. Weirick R. King Milling Tracy Weirick Joel R. Mogy Donna and Jason Weiss Jamie L. Morikawa Varina Whitener Lloyd and Mary Morrisett Nadine Wilck Gregory J. Morrow James Q. Wilson Dennis F. Moss Angela and Daniel Yergin Edward R. Muller and Zhuang Jianzhong Patricia E. Bauer Noël M. Newell Matching Gifts were David Apgar and AnnMarie Ann Dugan—Institute for Norton Rose LLP received from the Moeller Entrepreneurial Excellence Ambassador Rene Nyberg following Mr. and Mrs. Bobbi Elliott Christopher (CJ) Oates David A. Armstrong AK Steel Foundation Glenn and Jack Ellis Jerold Oshinsky Ian Ballon Compuware Corporation Philip J. Ethington Ellen Palevsky Drs. Sharon and Sharyar The Home Depot, Inc. Martha Fling Baradaran Malcolm A. Palmatier Sempra Energy Mr. and Mrs. H. M. Goern Richard A. Bayer Frederick S. Pardee Unihealth Foundation Arthur N. Greenberg Dorothy B. and G. Nicholas Jai and Gitanjali Pathak Yum! Brands Foundation, Inc. Eugene C. and Gwendolyn Beckwith, III Vicki Reynolds Pepper and O. Gritton Gale and Jane Bensussen Murray Pepper Bonnie and Mervyn Hecht Gifts were given Bill and Pamela Bohnert John D. Pinder in honor and in Rex S. Heinke Louis L. Borick Arnold Pinkston appreciation of the Jeffrey Hiday following Joel Brand and Kristina Debra E. Pole The Hillman Company Deutsch Michael K. Powell Gwen Adams Craig Holden Mary and Michael Brennan Samantha Ravich Bob Brook Katie and Phil Holthouse James L. Brown Richard and Alison Ressler Natalie Crawford John L. Hult G. Edward Bryan Debra Granfield and Brian Jenkins Rory Hume Waldo and Jean Burnside Michael D. Rich Arthur Kellermann Richard Hundley CAP-MPT Jack Riley and Karen Yuhas Nazarian Family’s Leadership IMF Australia Ltd. James T. Capretz Philip J. Romero Peter Norton Harry J. Johnson Louis M. and Jane John J. Rosati RAND’s lectures Castruccio, Castruccio Lina Kay Louis N. Rowell Family Foundation U.S. Armed Forces Alexander Kendall Henry and Beverly Rowen Lee Cheng Lydia Kennard Charles A. Schliebs Chevron Corporation Gifts were given in Ann Kerr-Adams Rita Schreiber memory of the following Lovida H. Coleman David M. Konheim Margaret Schumacher Richard P. and Bridget Mary Anderson William E. Kovacic David Scott Cooley Jeremy Azrael Lindsey C. Kozberg Michael Segal, Fred Segal Country Insurance & Hal Boren Financial Services Rini and Arthur D. Kraus Santa Monica Irv Cohen Gordon B. Crary Karen J. Kubin Donald W. Seldin Glenn Gotz Natalie W. Crawford Eve Kurtin and Michael Anne and Robert Simonds Elwyn Harris Steinberg Richard J. and Mildred M. The H. Russell Smith Gerry Hickey Cross Ana LaDou Foundation Ethel Louise Ince Gregory and Simin Curtis Brian E. Leverich Babette Sobel Bob Levine Kate Dewey—McCrory & Jonathan R. Levey Will Steger McDowell Kevin Lewis Litigation Resolution Group John and Jennifer Stein Rich and Carole DiClaudio LLC Mary-Christine Sungaila Richard Moorsteen Mary Jane Digby Leon S. Loeb Curtis S. Tamkin Nancy Nimitz J. Christopher Donahue, John Lu Karen and Gregory Bob Perry Federated Investors, Inc. Stephanie and Treverton Richard E. Sherwood Drollinger Family Charitable Thomas C. Malayil Roberta and Terry Turkat Joe Smith Foundation Linda G. Martin Susan Way-Smith Peter H. Mason

RA n D A nn u a l R epo rt 2 0 1 0 41 RAND Advisory Boards

Members of RAND advisory boards enrich RAND by adding their diverse experience, perspective, and knowledge to our efforts to improve public policy. Our advisory boards include distinguished individuals in the public and private sectors who have demonstrated leadership and a commitment to transcending partisan conflicts and political ideologies. Their balanced input supports our mission to help improve policy and decisionmaking through research and analysis.

Pardee RAND Graduate School Board of Governors

Robert E. Grady Dana G. Mead Partner, Cheyenne Capital Fund Chairman Emeritus, The MIT Corporation Pedro José Greer, Jr., M.D. Assistant Dean of Academic Affairs, Santiago Morales Florida International University President, Maxiforce Inc. College of Medicine; Trustee, RAND Corporation Frederick S. Pardee Investor Daniel Grunfeld Partner, Kaye Scholer LLP Samantha Ravich Senior Vice President, Institute for B. Kipling Hagopian Physical Sciences Managing Director, Apple Oaks Partners, LLC Eugene S. Rosenfeld President, ForestLane Group James B. Lovelace Director, Capital Group Companies, Faye Wattleton Inc.; Senior Vice President, Capital Managing Director, Alvarez & Marsal Research Global Investors Donald B. Rice (Chair) Jane Cavalier James Q. Wilson Retired President and Chief Founder and Chief Executive Officer, Michael Lynton Senior Fellow, Clough Center for the Executive Officer, Agensys, Inc.; BrightMark Corporate Directioning Chairman and Chief Executive Study of Constitutional Democracy, Former U.S. Secretary of the Air and Brand Consulting Officer, Sony Pictures Force; Trustee, RAND Corporation Entertainment; Trustee, Thomas E. Epley RAND Corporation Gurminder S. Bedi Partner, Vance Street Capital E x O f f i c i o Retired Vice President, Ford North LLC; Chief Executive Officer, Carol M. Mangione America Truck Semicoa Corporation; Chairman, Professor of Medicine and Public James A. Thomson Secure Communications Systems Health, University of California, President and Chief Executive Kakha Bendukidze Corporation; Chairman, Micross Los Angeles Officer, RAND Corporation Founder, Knowledge Fund Components Corporation R. Preston McAfee as of december 2 0 1 0 Michael J. Boskin Francisco Gil Díaz Vice President and Research Senior Fellow, Hoover Institution; Chief Executive Officer, Telefónica Fellow, Yahoo! Research; Visiting T.M. Friedman Professor of Moviles Mexico S.A. de C.V. Professor of Economics, California Economics, Stanford University Institute of Technology

Promising Practices Network on Children, Families and Communities Board of Advisors

James A. Thomson (Chair) Bill Dent Nancy Martinez Susan Mitchell-Herzfeld President and Chief Executive Manager, Missouri Community Director, Strategic Planning and Director, Bureau of Evaluation and Officer, RAND Corporation Partnerships; Staff Director, The Policy Development, New York Research, New York State Office of Family and Community Trust State Office of Children and Family Children and Family Services Gary Brunk Services President and Chief Executive Catherine Gautier Gaye Morris Smith Officer, Kansas Action for Children Executive Director, Hands On Stephanie McGencey Executive Director, Georgia Family Mississippi Executive Director, Grantmakers for Connection Partnership Shannon Cotsoradis Children, Youth and Families Executive Vice President and Chief William H. Isler as of december 2 0 1 0 Operating Officer, Kansas Action for Executive Director, Family Children Communications, Inc.

42 foc u s on mak ing a dif ference RAND Center for Asia Pacific Policy Advisory Board

G. Chris Andersen Robert Oehler Michael Tennenbaum Daniel Yun Partner, G. C. Andersen Partners, President and Chief Executive Senior Managing Partner, Managing Partner and Founder, LLC Officer, Pacific Alliance Bank Tennenbaum Capital Partners, Belstar Group LLC Chey Tae-won William Owens Jianzhong Zhuang Chairman and Chief Executive Chairman and Chief Executive Marsha Vande-Berg Professor and Vice Director, Officer, SK Holdings CompanyL td. Officer, AEA Holdings Asia Chief Executive Officer, Pacific Shanghai Jiao Tong University Pension Institute Roy Doumani Anthony N. Pritzker as of december 2 0 1 0 Professor, Molecular and Medical President and Chief Executive Linda Tsao Yang Pharmacology, University of Officer, The Pritzker Company Chairman, Asian Corporate California, Los Angeles Governance Association Eugene S. Rosenfeld Lalita D. Gupte President, ForestLane Group Chair, ICICI Venture Funds Management Co. Ltd. George Siguler Managing Director, Siguler Guff & Benny T. Hu Company Chairman, CDIB BioScience Venture Management, Inc. Donald Tang Chief Executive Officer, CITIC Wyatt R. Hume Securities International Partners; Provost, United Arab Emirates Trustee, RAND Corporation University Michael Tang Spencer Kim Chief Executive Officer, National Chairman, CBOL Corporation Material L.P.

William R. Loomis, Jr. Corporate Financial Advisor

RAND Center for Corporate Ethics and Governance Advisory Board

Larry Zicklin (Chair) Robert J. Jackson Bradley Lucido Steve Strongin Clinical Professor of Business Ethics, Associate Professor of Law, Chief Compliance Officer, Managing Director and Head of Leonard N. Stern School of Business, Columbia Law School; Former MassMutual Financial Group Global Investment Research, The New York University; Member, Board Deputy Special Master of TARP Goldman Sachs Group, Inc. of Directors, and Former Chairman, Executive Compensation, U.S. Cindy Moehring Neuberger Berman LLC Department of the Treasury Vice President, Chief Ethics Officer, Richard Thornburgh Wal-Mart Stores, Inc. Former Attorney General and Donna Boehme Jack Jacobs Governor, Commonwealth of Principal, Compliance Strategists Justice, Delaware Supreme Court Christopher Petitt Pennsylvania; General Counsel, LLC Founder, Blue Haystack Inc. Kirkpatrick & Lockhart LLP Jeanine Jiganti Lovida H. Coleman, Jr. Vice President, Chief Compliance Paul N. Roth Lynne Yowell Director, RiskMetrics Group, Inc. Officer, Takeda Pharmaceuticals Founding Partner, Schulte Roth & Associate General Counsel, State Zabel LLP Farm Insurance Robert Deutschman Matthew Lepore Vice Chairman, Cappello Group, Inc. Vice President and Corporate Kenin Spivak as of december 2 0 1 0 Secretary, Chief Counsel – Corporate Chairman and Chief Executive Governance, Pfizer Inc Officer, Spivak Management Inc.

Arthur Levitt Former Chairman, U.S. Securities and Exchange Commission

RA n D A nn u a l R epo rt 2 0 1 0 43 RAND Advisory Boards

RAND Center for Global Risk and Security Advisory Board

Harold Brown (Chair) Albert Carnesale Tod Hullin Robert Simonds Counselor, Center for Strategic Former Chancellor, University of Chairman, Arrowwood Partners, LLC Chairman, The Robert Simonds and International Studies; Former California, Los Angeles Company U.S. Secretary of Defense; Trustee Henry Kissinger Emeritus, RAND Corporation Carl Covitz Former U.S. Secretary of State Matt Wollman President and Chief Executive Chairman and Chief Executive Robert Abernethy Officer,L andmark Capital Cleon “Bud” T. Knapp Officer, Strategic Services President, American Standard Chief Executive Officer and International, Inc. Development Co. Jacques Dubois President, Talwood Corporation Former Chairman, Swiss Re America as of december 2 0 1 0 Holding Corporation Peter Norton President, Norton Family Office

Ronald Simms President, Simms Commercial Development, Vice President and Treasurer, The Simms/Mann Family Foundation

RAND Center for Health and Safety in the Workplace Advisory Board

Christine Baker John Howard, M.D. Kimberly Tum Suden Mike Wright Executive Officer, California Director, National Institute for Manager of Facility Safety, Walt Director, Health, Safety, and Commission on Health and Safety Occupational Safety and Health Disney Parks & Resorts Worldwide Environment, United Steelworkers and Workers’ Compensation Cameron Mustard Ken Wengert Connie Bayne President, Institute for Work and Safety Director, Kraft Inc. as of december 2 0 1 0 Vice President and General Health Manager, Risk Quality Assessment, Frank White Liberty Mutual Insurance Group Jeff Shockey Senior Vice President, ORC Director, Safety and Regional Worldwide Services, Alcoa

44 foc u s on mak ing a dif ference RAND Center for Middle East Public Policy Advisory Board

Richard A. Abdoo George N. Chammas Ray R. Irani David K. Richards President, R. A. Abdoo & Co., LLC Co-President and Chief Financial Chairman and Chief Executive Private Investor Officer, NavLink Inc. Officer, Occidental Petroleum Odeh F. Aburdene Corporation Hasan Shirazi President, OAI Advisors Arnie Fishman Managing Director, Citi Private Bank Chairman and Founder, Lieberman Ann Kerr-Adams Nancy A. Aossey Research Worldwide Fulbright Coordinator, UCLA Donald Ellis Simon President and Chief Executive International Institute President, The Lucille Ellis Simon Officer, International Medical Corps Marc Ginsberg Foundation Senior Vice President, APCO Zalmay Khalilzad William F. Benter Worldwide; President, Layalina Chairman and Chief Executive Enzo Viscusi Chairman and International Chief Productions Officer, Khalilzad Associates,LL C Group Senior Vice President, ENI Executive Officer, Acusis Americas Guilford Glazer Younes Nazarian L. Paul Bremer Chairman, Guilford Glazer President, The Nazarian as of december 2 0 1 0 Former Presidential Envoy to Iraq Associated Companies Companies

Alexander L. Cappello Edward R. Pope Chairman and Chief Executive Chairman and Chief Executive Officer, Cappello Group Inc. Officer, DexM Corporation

William Recker Managing Partner, Iron Bridge

RAND Gulf States Policy Institute Advisory Board

Reuben V. Anderson Cordell Haymon R. King Milling Leland Speed Senior Partner, Phelps Dunbar LLP Senior Vice President, SGS Retired President, Whitney National Chairman, East Group Properties Petroleum Service Corp. Bank; Retired Vice Chairman, Donald “Boysie” Bollinger Board of Directors, Whitney Vera B. Triplett Chairman, President, and Chief Beverly Wade Hogan National Bank Chief Operating Officer, Capital One- Executive Officer, Bollinger President, Tougaloo College UNO Charter School Network Shipyards, Inc. John N. Palmer John J. Kallenborn Chairman, GulfSouth Capital, Inc.; as of december 2 0 1 0 Kim M. Boyle President New Orleans Region, JP Former U.S. Ambassador to Partner, Phelps Dunbar LLP Morgan Chase Bank, NA Portugal

Oliver H. Delchamps, Jr. Michael B. Lee Sean Reilly Retired Chairman Emeritus, President, Page & Jones, Inc. Chief Operating Officer,L amar Delchamps, Inc. Advertising Diana Lewis Civic Leader, New Orleans, Louisiana

Alden J. McDonald, Jr. President and Chief Executive Officer,L iberty Bank and Trust Company

RA n D A nn u a l R epo rt 2 0 1 0 45 RAND Advisory Boards

RAND Health Board of Advisors

Joseph P. Sullivan (Chair) Private Investor

John J. Rydzewski (Vice Chair) Managing Director, Christofferson, Robb & Company, LLC

Neal A. Baer, MD Executive Producer, Law & Order: Special Victims Unit

Daniel M. Bradbury President and Chief Executive Officer, Amylin Pharmaceuticals, Inc.

David Brailer, MD Chairman, Health Evolution Partners

Denis A. Cortese, MD Director, Health Care Delivery and Policy Program, Arizona State University; Foundation Professor, W.P. Carey School of Business and Ira A. Fulton School of Engineering, Arizona State University Suzanne Nora Johnson Paul H. O’Neill William C. Weldon Michael Critelli Former Vice Chairman, The Former U.S. Secretary of Chairman, Board of Directors, and Executive Chairman, Pitney Goldman Sachs Group, Inc. the Treasury; Trustee, RAND Chief Executive Officer, Johnson & Bowes, Inc. Corporation Johnson Karen L. Katen Mary Kay Farley Senior Advisor, Essex Woodlands Sir Michael Rawlins, MD Phyllis M. Wise, PhD Trustee, Hospital for Special Health Ventures; Retired Vice Chairman, National Institute for Interim President, University of Surgery, New York; Northern Chairman, Pfizer Inc Health and Clinical Excellence Washington Michigan Hospital Foundation Cleon “Bud” T. Knapp David K. Richards Michael W. Ferro, Jr. Chief Executive Officer and Private Investor as of december 2 0 1 0 Chairman and Chief Executive President, Talwood Corporation Officer, Merrick VenturesLL C Marshall A. “Tom” Rockwell, Joseph S. Konowiecki MD Robert G. Funari Managing Partner, Moriah Partners, General Partner, Cyrcon Builders Chairman and Chief Executive LLC Officer, Crescent Healthcare Leonard D. Schaeffer Sherry Lansing Senior Advisor, TPG Capital, LP Pedro José Greer, Jr., MD Founder and Chief Executive Assistant Dean of Academic Officer, The SherryL ansing David B. Singer Affairs, Florida International Foundation Limited Partner, Maverick Capital, University College of Medicine Ltd. David M. Lawrence, MD Karen Hein, MD Retired Chairman and Chief Patrick Soon-Shiong, MD Immediate Past President, William Executive Officer, Kaiser Founder, Chairman, and Chief T. Grant Foundation Foundation Health Plan, Inc. and Executive Officer, Abraxis Kaiser Foundation Hospitals BioScience, Inc. Susan Hullin Managing Partner, Hullin Metz & Steven Lazarus Gail L. Warden Co. LLC Managing Director Emeritus, ARCH President Emeritus, Henry Ford Venture Partners Health System

Frank Litvack, MD, FACC Interventional Cardiologist

Mary D. Naylor, PhD, FAAN Director, NewCourtland Center for Transitions and Health, University of Pennsylvania School of Nursing

46 foc u s on mak ing a dif ference RAND Infrastructure, Safety, and Environment Advisory Board

Gerald Greenwald (Chair) Margery Colloff Ellen M. Hancock Rodney E. Slater Managing Partner, Greenbriar Partner, Emmet, Marvin & Martin, Former Chairman and Chief Partner, Patton Boggs, LLP; Equity Group LLC LLP Executive Officer, Exodus Former U.S. Secretary of Communications Transportation S. Ward Atterbury Janet Crown Partner, Mergers & Acquisitions Owner, Burn 60 Fitness Studio Leslie Hill Douglas J. Smith Practice, White & Case LLP Airline Captain, retired, American Director of Construction and A. Frederick Gerstell Airlines; Former Director, Dow Facilities Management, Jons Harold Brown Former Chairman and Chief Jones & Company, Inc. Marketplace Counselor, Center for Strategic Executive Officer, CalMat Co. & International Studies; Former Stephen F. Hinchliffe, Jr. John K. Van de Kamp U.S. Secretary of Defense; Trustee Scott M. Gordon Chairman and Chief Executive Former Attorney General, Emeritus, RAND Corporation Judge, Los Angeles Superior Officer, BHH Management, Inc. State of California; Of Counsel, Court Dewey & LeBoeuf LLP Lovida H. Coleman, Jr. Frank Holder Director, RiskMetrics Group, Inc. President, FTI Consulting as of december 2 0 1 0 Michael I. Schneider Managing Partner, InfraConsult LLC

RAND Institute for Civil Justice Board of Overseers

Brad D. Brian (Chair) Dan C. Dunmoyer Bradley E. Lerman Paul D. Rheingold Partner, Munger, Tolles & Olson Senior Vice President, Government Senior Vice President and Partner, Rheingold, Valet, LLP and Industry Affairs, Head of State Associate General Counsel, Pfizer Rheingold, Shkolnik & Legislative and Regulatory Affairs, Inc McCartney LLP Paul M. Pohl (Vice Chair) USA, Zurich and Farmers Financial Partner, Jones Day Services Charles Lifland Dino E. Robusto Partner, O’Melveny & Myers LLP Executive Vice President and Richard E. Anderson Kenneth R. Feinberg Chief Administrative Officer, Chairman and Chief Executive Founder and Managing Partner, Christopher C. Mansfield The Chubb Corporation Officer, The Doctors Company Feinberg Rozen LLP Senior Vice President and General Counsel, Liberty Mutual Insurance Lee H. Rosenthal S. Jack Balagia, Jr. Richard W. Fields Company District Judge, U.S. District Vice President and General Chief Executive Officer, Juridica Court, Southern District of Counsel, ExxonMobil Corporation Capital Management Limited Consuelo B. Marshall Texas, Houston Division District Judge, U.S. District Court, Sheila L. Birnbaum Deborah E. Greenspan Central District of California Charles R. Schader Partner, Skadden, Arps, Slate, Partner, Dickstein Shapiro LLP Senior Vice President and Meagher & Flom LLP Michele Coleman Mayes Chief Claims Officer, Chartis James A. Greer II Senior Vice President and General Insurance James L. Brown Counsel, The Allstate Corporation Director, Center for Consumer Robert W. Hammesfahr John F. Schultz Affairs, University of Wisconsin– Managing Director, Claims & Robert E. McGarrah, Jr. Vice President and Deputy Milwaukee Liabilities, Swiss Reinsurance Counsel, Office of Investment, General Counsel, Litigation, Company Ltd AFL-CIO Hewlett-Packard Company Kim M. Brunner Executive Vice President, Chief Patrick E. Higginbotham Michael G. Mills Hemant H. Shah Legal Officer, and Secretary, State Circuit Judge, U.S. Court of Partner, Freehills President and Chief Executive Farm Insurance Appeals, Fifth Circuit Officer, Risk Management Robert S. Peck Solutions, Inc. Robert A. Clifford Alan J. Kreczko President, Center for Constitutional Partner, Clifford Law Offices, P.C. Executive Vice President and Litigation John R. Tunheim General Counsel, The Hartford District Judge, U.S. District Alexander Dimitrief Kathleen Flynn Peterson Court, District of Minnesota Vice President and Senior Carolyn B. Kuhl Partner, Robins, Kaplan, Miller & Counsel, Litigation and Legal Superior Court Judge, Los Angeles Ciresi LLP Georgene M. Vairo Policy, General Electric Company County Superior Court Professor of Law and William Arturo Raschbaum M. Rains Fellow, Loyola Law Bruce N. Kuhlik Chief Executive Officer, Maiden Re School Executive Vice President and General Counsel, Merck & Co., Inc. E x O f f i c i o Christian Lahnstein Head of the Department, Risk, James N. Dertouzos Liability & Insurance, Munich Re Director, RAND Institute for Civil Justice

as of december 2 0 1 0

RA n D A nn u a l R epo rt 2 0 1 0 47 Oversight Boards

These are the oversight boards for the federally funded research and development centers (FFRDCs) at RAND, all three of which are sponsored by the U.S. Department of Defense. FFRDCs are independent entities that assist the United States government with scientific research, analysis, and development.

Arroyo Center Policy Committee

GEN Peter W. Chiarelli GEN Ann E. Dunwoody LTG Benjamin C. Freakley LTG Mitchell H. Stevenson (Cochair) Commanding General, U.S. Army Commanding General, U.S. Army Deputy Chief of Staff, G-4, Vice Chief of Staff, U.S. Army Materiel Command Accessions Command U.S. Army

Malcolm R. O’Neill GEN James D. Thurman LTG Robert P. Lennox LTG Jack C. Stultz, Jr. (Cochair) Commanding General, U.S. Army Deputy Chief of Staff, G-8, Chief, Army Reserve/Commanding Assistant Secretary of the Army Forces Command U.S. Army General, U.S. Army Reserve (Acquisition, Logistics, and Command Technology) and Army Acquisition Michael Krieger LTG Rick Lynch Executive Acting Chief Information Officer/G-6, Assistant Chief of Staff for Installation LTG Richard P. Zahner U.S. Army Management/Commanding Deputy Chief of Staff, G-2, Thomas R. Lamont General, Installation Management U.S. Army Assistant Secretary of the Army Terrence C. Salt Command, U.S. Army (Manpower and Reserve Affairs) Principal Deputy Assistant Secretary MG Joseph E. Martz of the Army (Civil Works)/Deputy LTG John F. Mulholland, Jr. (Executive Agent) Mary Sally Matiella Assistant Secretary of the Army Commanding General, U.S. Army Director, Program Analysis and Assistant Secretary of the Army (Legislation) Special Operations Command Evaluation (Financial Management and Comptroller) LTG Daniel P. Bolger LTG Eric B. Schoomaker as of december 2 0 1 0 Deputy Chief of Staff, G-3/5/7, Commanding General, U.S. Army GEN Martin E. Dempsey U.S. Army Medical Command/The Surgeon Commanding General, U.S. Army General Training and Doctrine Command LTG Thomas P. Bostick Deputy Chief of Staff, G-1, U.S. Army

RAND National Defense Research Institute Advisory Board

Ashton Carter (Chair) Christine Fox Cheryl Roby Laura Stubbs Under Secretary of Defense for Director, Cost Assessment and Acting Assistant Secretary of Defense Director of Requirements and Acquisition, Technology, Program Evaluation, Office of the for Networks and Information Strategic Integration, OUSD(P&R) and Logistics Secretary of Defense Integration as of december 2 0 1 0 Arthur “Trip” Barber Mark Krzysko Philip Rodgers Deputy Director, Assessments Deputy Director, Enterprise Principal Deputy Director, Acquisition Division, N81, Office of the Deputy Information & OSD Studies, Resources and Analysis, Office of Chief of Naval Operations OUSD(AT&L) the Under Secretary of Defense for Acquisition, Technology, and Laurence Burgess James Miller Logistics Deputy Undersecretary of Defense, Principal Deputy Under Secretary, HUMINT Counterintelligence & Office of the Under Secretary for Nancy Spruill (Executive Security Policy Agent) Director, Acquisition Resources Lisa Disbrow Benjamin Riley and Analysis, Office of theU nder Vice Director, Force Structure, Principal Deputy, Rapid Fielding Secretary of Defense for Acquisition, Resources and Assessment (J-8), Directorate Technology, and Logistics Joint Staff

USAF Project AIR FORCE Steering Group

Gen Carroll H. Chandler Lt Gen Mark D. Shackelford Lt Gen (Dr.) Charles B. Green Maj Gen Richard C. (Chairman) Military Deputy, Office of the Surgeon General of the Air Force, Johnston (Executive Agent) Vice Chief of Staff, Headquarters Assistant Secretary of the Air Force Headquarters U.S. Air Force Director, Strategic Planning, U.S. Air Force for Acquisition, The Pentagon Deputy Chief of Staff for Strategic Lt Gen Christopher D. Miller Plans and Programs, Headquarters Gen (S) William L. Shelton Lt Gen Loren M. Reno Deputy Chief of Staff for Strategic U.S. Air Force Assistant Vice Chief of Staff Deputy Chief of Staff for Logistics, Plans and Programs, Headquarters and Director, Air Force Staff, Installations and Mission Support, U.S. Air Force Jacqueline R. Henningsen Headquarters U.S. Air Force Headquarters U.S. Air Force Director for Studies and Analyses, TBD Assessments and Lessons Gen (S) Philip M. Breedlove Lt Gen William T. Lord Deputy Chief of Staff for Intelligence, Learned, Headquarters Deputy Chief of Staff for Operations, Chief of Warfighting Integration and Surveillance and Reconnaissance, U.S. Air Force Plans and Requirements, Chief Information Officer, Office of Headquarters U.S. Air Force Headquarters U.S. Air Force the Secretary of the Air Force, as of december 2 0 1 0 The Pentagon Maj Gen William A. Lt Gen Richard Y. Newton III Chambers Deputy Chief of Staff for Manpower Assistant Chief of Staff, Strategic and Personnel, Headquarters Deterrence and Nuclear Integration, U.S. Air Force Headquarters U.S. Air Force

48 foc u s on mak ing a dif ference RAND Europe is an independent, not-for-profit subsidiary of the RAND Corporation with offices in Cambridge, United Kingdom, and Brussels, Belgium.

RAND Europe Board of Trustees

James A. Thomson Philippa Foster Back OBE (Chairman) Director, Institute of President and Chief Executive Business Ethics, United Kingdom Officer, RAND Corporation Frank Kelly FRS Sir John Boyd KCMG Master, Christ’s College, Chairman, Asia House; Retired University of Cambridge, United Master, Churchill College, Kingdom University of Cambridge; Former British Ambassador to Japan Rt Hon Neil Kinnock Former Leader of the Labour Laurens Jan Brinkhorst Party; Former Vice President Professor of International of the European Commission; and European Law, University Member of the House of Lords, of Leiden; Former Deputy United Kingdom Prime Minister, The Netherlands Gunvor Kronman Lord Crisp KCB Chief Executive Officer, Independent Crossbench Member Hanaholmen – Cultural Philip Lader Michael Portillo of the House of Lords, United Cooperation Center for Finland Chairman, The WPP Group; Former Cabinet Minister, United Kingdom and Sweden Former U.S. Ambassador to the Kingdom Court of St. James’s; Trustee, RAND Corporation as of december 2 0 1 0

The RAND-Qatar Policy Institute (RQPI) is a collaboration between the RAND Corporation and the Qatar Foundation that is focused on helping to improve policy and decisionmaking across the Middle East, North Africa, and South Asia. The Qatar Foundation for Education, Science and Community Development is a private, chartered, nonprofit organization with a mission to prepare the people of Qatar and the region to meet the challenges of an ever-changing world.

RAND-Qatar Policy Institute Board of Overseers

Michael Rich (Cochair) Odeh F. Aburdene Karen Elliott House E x O f f i c i o Executive Vice President, President, OAI Advisors Former Publisher, The Wall Street RAND Corporation Journal; Former Senior Vice Rashid Al Naimi His Excellency Dr. Hamad President, Dow Jones Vice President for Administration, Mohammad Fathy Saoud Abdulaziz Al-Kawari and Company, Inc. Qatar Foundation (Cochair) Minister of Culture, Arts, President, Qatar Foundation and Heritage, State of Qatar Bruce Nardulli I ndependent Me m b e r Director, RAND-Qatar Policy Institute Her Highness Sheikha Sheikh Hamad Bin Faisal Vacant Mozah Bint Nasser Al Bin Thani Al-Thani Missned (Cochair Emeritus) Chairman, Al Khalij as of december 2 0 1 0 Chairperson, Qatar Foundation Commercial Bank

RA n D A nn u a l R epo rt 2 0 1 0 49 Clients and Grantors

U.S. Government Centers for Disease Control Intelligence Community Government Office for and Prevention Science Administrative Office of the Medicare Payment Advisory U.S. Courts National Institute for Commission Home Office Occupational Safety and Local Better Regulation Department of Agriculture Health National Aeronautics and Office Space Administration U.S. Forest Service National Institutes of Health Ministry of Defence National Science Foundation Department of Commerce Eunice Kennedy Shriver Ministry of Justice National Institute of National Institute of Child Health and Human Social Security Administration Standards and Technology Development U.S.–China Economic and International National Oceanic and National Cancer Institute Security Review Commission Organizations Atmospheric Administration National Heart, Lung, and World Bank Department of Defense Blood Institute Non-U.S. Governments, Defense Logistics Agency National Institute on Aging Agencies, and Ministries Department of the Air Force National Institute on U.S. State and Local Commonwealth of Australia Governments Department of the Army Alcohol Abuse and Alcoholism Transport Data Centre Medical Research State of California Acquisition Activity National Institute of Allergy and Infectious Diseases European Agency for Safety California Earthquake Department of the Navy and Health at Work Authority National Institute of Marine Corps Diabetes and Digestive European Commission California Energy Commission Joint Staff and Kidney Diseases Directorate-General for Commission on Health National Defense National Institute on Drug Health & Consumers Abuse and Safety and Workers’ University Directorate-General for Compensation National Institute of Information Society and Office of the Secretary of Department of Corrections Defense Environmental Health Media Sciences and Rehabilitation Assistant Secretary of Directorate-General for National Institute of Mental Justice, Freedom, and Department of Water Defense for Networks and Resources Information Integration Health Security National Institute on Directorate-General for Metropolitan Water District of Deputy Secretary of Southern California Defense Minority Health and Health Research & Innovation Disparities Office of the Director, France California Municipal Agencies Cost Assessment and National Institute of Agence Française de Los Angeles County Program Evaluation Nursing Research Developpement Los Angeles County Under Secretary of Office of the National Probation Department Defense for Acquisition, Coordinator for Health Instituto de Nutrición de Centro Technology, and Logistics Information Technology América y Panamá (INCAP) City of Cincinnati Defense Advanced Department of Homeland Iraq Commonwealth of Research Projects Security Kurdistan Regional Massachusetts Agency U.S. Coast Guard Government Commonwealth of Pennsylvania Under Secretary of Defense for Personnel Department of Justice Israel Pittsburgh Public Schools and Readiness Federal Bureau of Israel Ministry of Foreign The Pittsburgh Promise Investigation Affairs Under Secretary of District of Columbia Defense for Policy National Institute of Justice Republic of Singapore Department of Mental Health Unified Combatant Office of Justice Programs Institute of Mental Health Commands State of Hawaii Department of Labor Ministry of Defence Department of Education The Research Corporation of Department of the Treasury State of Qatar the University of Hawaii Institute of Education Sciences Department of Veterans Affairs Qatar National Food Security State of Louisiana Programme Department of Energy Sepulveda VA Medical Department of Natural Center Supreme Council for Family Resources National Renewable Energy Affairs Laboratory Office of Coastal Protection Environmental Protection Supreme Council of Health Agency and Restoration Department of Health and Supreme Education Council Human Services Federal Communications New York City United Arab Emirates Administration for Children Commission Department of Education and Families Court of the Crown Prince, Federal Reserve Bank of Abu Dhabi Office of Planning, Boston Colleges and Universities Research, and Evaluation Environment Agency–Abu Federal Reserve Bank of Dhabi Agency for Healthcare Boston University New York Health Authority of Abu Research and Quality Carnegie Mellon University Dhabi Centers for Medicare and Columbia University Medicaid Services United Kingdom Medical Center Department of Health Department for Transport

50 foc u s on mak ing a dif ference Dartmouth College Communities Foundation Guardians of Honor, LLC Consumer Healthcare Products of Texas Association The George Washington Health Services Advisory Group University Medical Center The Ford Foundation Council for Aid to Education ICF International Georgetown University Bill and Melinda Gates Dana-Farber Cancer Institute Foundation IMPAQ International ECRI Institute Graham Boeckh Foundation James Bell Associates Infectious Diseases Institute– Educational Testing Service Makerere University The John A. Hartford Joint Commission International Foundation Eisenhower Medical Center The Johns Hopkins University KRA Corporation The Health Foundation Filene Research Institute National University Mathematica Policy Research Foundation for Informed of Singapore The William and Flora Hewlett MWH Americas Foundation Medical Decision Making Qatar University Optimer Pharmaceuticals Humanity United The Fund for Public Schools Temple University NeuroComp Systems, Inc. Japan Foundation HelpMeSee Inc. Tilburg University, CentERdata Ortho-McNeil Janssen Institute for Healthcare The Robert Wood Johnson Scientific Affairs, LLC Tulane University Foundation Improvement Philips International B.V. University of Arizona Dirk and Charlene Kabcenell Integrated Healthcare Associates University of Arizona, Tuscon Foundation Pfizer Inc Jet Propulsion Laboratory University of Arkansas Ewing Marion Kauffman PowerTrain Foundation Los Alamos National Laboratory University of California Resource Systems Group, Inc. Lila Wallace–Reader’s Digest Risk Management Solutions Massachusetts General University of California, Fund Hospital Berkeley MacArthur Foundation RSG Inc. University of California, Merck Childhood Asthma Los Angeles New York City Police STERIS Corporation Network, Inc. University of California, Foundation UnitedHealthcare Services Inc. Missouri Foundation for Health San Diego New York State Health Vanguard Health Systems The MITRE Corporation University of Cambridge Foundation National Academy of Sciences University of Florida The David and Lucile Packard Foundation Professional National Bureau of Economic The University of Georgia Associations Research The Pew Charitable Trusts American Medical Association National Military Family Qatar Foundation Association University of North Carolina, Kidney Disease Program of Chapel Hill Quantum Foundation Glendale National Quality Forum University of North Texas The Mehlman Vogel Castagnetti Inc. New England Medical Center Hospitals University of Pennsylvania Rosenberg Foundation The Real Estate Roundtable University of Pittsburgh Sandler Foundation New Leaders for New Schools University of Rochester The Stanton Foundation Pacific Business Group on Other Nonprofit Health University of Southern United Health Foundation Organizations California Plastic Surgery Educational Wallace Foundation Altarum Institute Foundation University of Texas at Dallas Wellcome Trust American Council on Education Primary Care Coalition of Montgomery County Vanderbilt University American Red Cross Public Health Foundation Industry Arkansas Tobacco Settlement Enterprises Foundations Commission Amgen, Inc. Public Policy Institute of Association of Public Health Aetna Foundation California Aspen Environmental Group Laboratories The Lance Armstrong Samueli Institute Foundation Brown and Caldwell Beaver Valley Intermediate Unit Seattle Children’s Research Cambridge Systematics, Inc. Blue Cross and Blue Shield Buffett Early Childhood Fund Institute Camp, Dresser and McKee Association The California Endowment SRI International CIGNA Healthcare Brookings Institution California HealthCare Stockholm Environment Institute Foundation Ethicon Endo-Surgery Inc. Children’s Hospital Boston UPMC for You Carnegie Corporation of GlaxoSmithKline Children’s National Medical New York Center The Commonwealth Fund Community Care Behavioral Health Organization

RA n D A nn u a l R epo rt 2 0 1 0 51

Financial Report

RA n D A nn u a l R epo rt 2 0 1 0 53 The RAND Corporation consolidated STATEMENTS OF FINANCIAL POSITIOn with summarized financial information for the year ended September 27, 2009 (in thousands)

September 26, 2010 September 27, 2009

ASSETS Current assets Cash and cash equivalents $ 32,063 $ 29,501 Receivables, net Billed and unbilled costs and fees 45,260 41,200 Other receivables 3,018 3,153 Prepaid expenses and other current assets 4,417 3,953 Total current assets 84,758 77,807 Property and equipment Land 1,334 1,334 Buildings and improvements 109,755 108,702 Leasehold improvements 15,521 15,279 Equipment 54,949 51,600 Construction in progress 4,189 3,249 185,748 180,164 Less: Accumulated depreciation and amortization (63,069) (54,776) Net property and equipment 122,679 125,388

Long-term investments 184,910 174,516 Building project fund investments — 1,114 Other assets 3,355 5,382 Total assets $ 395,702 $ 384,207

LIABILITIES AND NET ASSETS Current liabilities Accounts payable and other liabilities $ 18,418 $ 17,682 Unexpended portion of grants and contracts received 12,540 12,192 Accrued compensation and vacation 16,378 15,833 Current portion of long-term debt 1,930 1,845 Total current liabilities 49,266 47,552 Deferred rent 9,109 10,509 Accrued postretirement benefit liability 17,031 16,211 Other long-term liabilities 19,091 14,256 Long-term debt, less current portion 122,805 124,735 Total liabilities 217,302 213,263 Net assets Unrestricted Operations — — Designated for investment 112,030 104,901 Designated for special use 3,694 3,486 Total unrestricted 115,724 108,387

Temporarily restricted 19,505 18,873 Permanently restricted 43,171 43,684 Total net assets 178,400 170,944 Total liabilities and net assets $ 395,702 $ 384,207

The accompanying notes are an integral part of these consolidated financial statements.

54 RA n D A nn u a l R epo rt 2 0 1 0 — — — 3,422 2,445 9,596 (5,592) (5,639) (6,186) (3,774) 10,159 64,362 Total (15,599) 230,622 250,652 191,929 256,291 186,543 170,944

September 27, 2009

— — — (360) 3,290 1,057 8,243 7,456 (4,866) 10,335 13,464 67,490 12,682 246,531 $ 282,920 202,748 270,238 170,944 178,400 $ Total

— — $ — — ­ — — — — — — — 258 258 771 771 (513) (513) 43,684 43,171 $ Restricted Permanently

— — $ — — — — — — 159 632 1,030 3,844 2,282 1,830 1,830 (5,485) (1,198) 18,873 19,505 $ Restricted Temporarily Temporarily

For the Years For Ended the Years ETS — 898 (360) ASS 2,260 9,620 5,703 5,485 1,198 7,337

(4,866) 66,719 11,365 10,335 246,531 $ 280,832 202,748 269,467 108,387 115,724 $ September 26, 2010 Total Total NET

Unrestricted

IN

ES —— $ — — — — — — — 898 648 G 2,260 9,620 6,689 6,689 7,337 (6,089) 108,387 115,724 $ AN H C

AND

— — — — — — $ 550 (360) 5,703 6,089 5,485 4,676 ES (4,866) 66,719 10,335 246,531 $ 274,143 202,748 269,467 ITI V I Operations Designated

$

$ ACT

F The accompanying notes are an integral part of these consolidated financial statements. O

S ENT (Note 7) M TE 2) net periodic postretirement benefit (losses) on investments STA

from restrictions gains, and other support (Note 2) on investments value of derivative instruments beginning of year end of year designated net assets assets before other items assets to operations (Note Total revenues, Total Total expenses Total liability (other than postretirement benefit cost) Contracts and grants Investment income, net Fees Net realized gains Net unrealized gains Contributions Transfer of Transfer Net assets released Research Management and general Change in fair Net asset transfers Adjustment to accrued Net assets at Net assets at REVENUE, GAINS, AND OTHER SUPPORT

EXPENSES AND LOSSES

Change in net Other items:

Change in net

The RAND Corporation CONSOLIDATED with summarized financial information for the year ended September 27, 2009 (in thousands)

RA n D A nn u a l R epo rt 2 0 1 0 55 The RAND Corporation consolidated STATEMENTS OF CASH FLOWS with summarized financial information for the year ended September 27, 2009 (in thousands) For the Year Ended For the Year Ended September 26, 2010 September 27, 2009 Cash flows from operating activities: Change in net assets $ 7,456 $ (15,599) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 8,628 8,548 Net realized/unrealized (gains) losses (14,521) 3,147 Permanently restricted contribution revenue (258) (1,376) Change in fair value of derivative instruments 4,866 6,186 Foreign exchange loss (gain) 84 (4) Loss on disposition of property and equipment 4 — Changes in assets and liabilities: Increase in billed and unbilled costs and fees (4,060) (128) Decrease in other receivables 141 157 (Increase) decrease in prepaid and other current assets (464) 11 Decrease in other long-term assets 1,987 543 Increase in accounts payable and other liabilities 705 102 Increase (decrease) in unexpended portion of grants and contracts received 348 (2,314) Increase in accrued compensation and vacation 545 808 Decrease in deferred rent (1,400) (1,556) Increase in postretirement benefit liability 820 4,075 Net cash provided by operating activities 4,881 2,600

Cash flows from investing activities: Purchases of investments (24,964) (54,048) Sales of investments 30,204 60,128 Purchases of property and equipment (5,881) (5,421) Net cash (used in) provided by investing activities (641) 659

Cash flows from financing activities: Principal payments on long-term debt (1,845) (1,560) Permanently restricted contributions received in cash 258 691 Net cash used in financing activities (1,587) (869) Effect of currency exchange rate changes on cash (91) 19 Net increase in cash and cash equivalents 2,562 2,409 Cash and cash equivalents at beginning of year 29,501 27,092 Cash and cash equivalents at end of year $ 32,063 $ 29,501

The accompanying notes are an integral part of these consolidated financial statements.

56 RA n D A nn u a l R epo rt 2 0 1 0 The RAND Corporation Notes to consolidated financial statementS 1. Corporate Organization: RAND Corporation (RAND) is a nonprofit, tax-exempt corporation performing research and analysis funded primarily by contracts, grants, and contributions. In addition, RAND conducts educational programs that provide graduate training. The consolidated financial statements of RAND include the accounts of a controlled affiliate: RAND Europe, a charity domiciled in the United Kingdom. All intercompany balances and transactions have been eliminated in consolidation. 2. Summary of Significant Accounting Policies: Fiscal Year. RAND’s fiscal year is based on a 52- or 53-week year ending on the Sunday closest to September 30. Fiscal years 2010 and 2009 were based on a 52-week period. Basis of Presentation. The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets are classified into three categories according to donor-imposed restrictions, as follows: Permanently restricted—Net assets subject to donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or removed by actions of RAND. Temporarily restricted—Net assets whose use by RAND is subject to donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of RAND. Unrestricted—Net assets that are not subject to donor-imposed stipulations. The financial statements include certain prior year summarized comparative information in total but not by net asset category. Such prior year information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with RAND’s financial statements for the year ended September 27, 2009, from which the summarized financial information was derived.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amount of revenues, expenses, or other changes in net assets during the reporting period. Actual results could differ from these estimates. Revenue and Expense Recognition. Revenues from contracts and grants, including fees, are recognized as the related services are performed in accordance with the terms of the contract or grant. Such revenues are reported as increases to unrestricted net assets from operations. Contributions, including unconditional promises to give, are recognized as revenue in the period received and are reported as increases in the appropriate category of net assets. Donor-restricted contributions that are received and spent within the same fiscal year are reported as increases to unrestricted net assets from operations. Board-approved transfers from the unrestricted portion of RAND’s Long-Term Investment Fund (the LTIF) to be used for operations are reported as decreases to board-designated unrestricted net assets and increases to unrestricted net assets from operations. Board-approved transfers from the restricted portion of the LTIF to be used for operations plus contributions received in prior years and spent in the current year are reported as decreases to temporarily restricted net assets and increases to unrestricted net assets from operations. Expenses (research expenses as well as management and general expenses) are generally reported as decreases in unrestricted net assets from operations. Change in Net Assets from Operations (Before Other Items). Change in net assets from operations (before other items) for fiscal year 2010 was $4,676,000. This represents revenue less expenses from operations (as described above) and is comprised of the following: revenue from contracts and grants (including fees), plus contributions spent in the current fiscal year, plus all board-approved transfers for operations, less all research and management and general expenses. Concentrations of Risk. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and therefore bear minimal credit risk. RAND derived 83 percent and 80 percent of its research revenues in fiscal years 2010 and 2009, respectively, from contracts, grants, and fees with agencies of the federal government.

Cash and Cash Equivalents. RAND considers all highly liquid financial instruments purchased with an original maturity of three months or less, and whose purpose is not restricted, to be cash equivalents.

RA n D A nn u a l R epo rt 2 0 1 0 57 Property and Equipment. Property and equipment is stated at cost. Depreciation is computed by the straight-line method over the following estimated useful lives of the assets: 5 to 40 years for buildings and improvements and 3 to 20 years for equipment. Leasehold improvements are amortized by the straight-line method over the shorter of the estimated useful lives of the assets or the term of the lease. Construction in progress will be amortized over the estimated useful lives of the respective assets when they are ready for their intended use. Certain computer systems and software are internally developed. Costs associated with the application development stage are capitalized and depreciated over the useful life of the system or software. All other costs are expensed as incurred. Included in Equipment on the Consolidated Statements of Financial Position was $9,245,000 and $8,649,000 of computer systems and software at September 26, 2010, and September 27, 2009, respectively. When assets are retired, the assets and related allowances for depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations. As of September 26, 2010, and September 27, 2009, approximately $24,393,000 and $19,789,000, respectively, of fully depreciated assets were in use. Investments. All investments of permanently restricted net assets, board-designated unrestricted net assets, and certain temporarily restricted net assets are pooled in the LTIF. Income on the LTIF is allocated to individual funds based on the average balance for each fund. The percentage of board-designated funds distributed for unrestricted use was approximately 4.5 and 5.0 percent in fiscal years 2010 and 2009 based on the average of the trailing 12-quarter market values of the funds. The total net distribution was $6,089,000 and $7,180,000 for fiscal years 2010 and 2009, respectively. Gains and losses on investments and investment income are reported as increases or decreases in unrestricted net assets and temporarily restricted net assets, unless otherwise stipulated by the donor. Income Tax Status. RAND is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code and corresponding California provisions and has qualified for the 50 percent charitable contributions limitation. RAND has been classified as an organization that is not a private foundation under Section 509(a)(1) and has been designated a “publicly supported” organization under Section 170(b)(1)(A)(vi) of the U.S. Internal Revenue Code. Foreign Currency Translation. The assets and liabilities of RAND Europe are translated at year-end exchange rates; transactions are translated at the average exchange rates during the year. The effects from the translation of foreign currencies in the current and prior year are cumulatively immaterial to the consolidated financial statements. Supplemental Cash Flow Information. Cash paid for interest was $3,060,000 in fiscal year 2010 and $3,299,000 in fiscal year 2009. Net Asset Transfers. Noncash transfers from unrestricted net assets designated for investment to unrestricted net assets from operations totaling $550,000 and $4,014,000 were required during fiscal years 2010 and 2009, respectively, due primarily to the change in fair value of derivative instruments (see Note 8) and the adjustment to accrued postretirement benefit liability (see Note 7). An additional noncash transfer of $2,096,000 from unrestricted net assets designated for investment to temporarily restricted net assets was recorded during fiscal year 2008, as the decline in the market value of investments for certain funds resulted in the value of those funds being lower than the amount donated. Current and prior year noncash net asset transfers are reversed as unrestricted net assets from operations become available and as the market value of the investments recovers. During fiscal years 2010 and 2009, $1,198,000 and $182,000 of temporarily restricted net assets were transferred back to unrestricted net assets designated for investment due to market value recovery of the investments. Reclassifications. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. These include a reclassification of fee revenue to contracts and grants revenue. These reclassifications had no effect on net assets. Subsequent Events. Subsequent events have been evaluated through January 27, 2011, the date the financial statements were issued.

3. Billed and Unbilled Costs and Fees: The following table summarizes the components of billed and unbilled contract and grant costs and fees (in thousands): September 26, 2010 September 27, 2009 U.S. government agencies Billed $ 11,363 $ 13,894 Unbilled 20,598 13,296 31,961 27,190 State, local, and private sponsors Billed 7,259 6,874 Unbilled 6,292 7,388 13,551 14,262 Allowance for bad debt (252) (252) $ 45,260 $ 41,200

58 RA n D A nn u a l R epo rt 2 0 1 0 Unbilled amounts principally represent recoverable costs and accrued fees billed in the first quarter of fiscal year 2011 and fiscal year 2010, respectively. No significant contract terminations are anticipated at present, and past contract terminations have not resulted in significant unreimbursed costs.

4. Contributions Receivable: Unconditional promises to give were $2,644,000 and $4,691,000 at September 26, 2010, and September 27, 2009, respectively. The receivables are recorded net of the discount for future cash flows, and allowance for bad debt using the credit-adjusted rate of return appropriate for the expected term of the promise to give determined at the time the unconditional promise to give is initially recognized. Receivables expected in one year or less are included in Other receivables and receivables expected after one year are included in Other assets on the Consolidated Statements of Financial Position. The carrying amount of the receivables is deemed a reasonable estimate of their fair value. Realization of the pledges is expected in the following periods (in thousands):

September 26, 2010 September 27, 2009 In one year or less $ 2,587 $ 2,832 Between one year and five years 248 2,180 2,835 5,012 Less discount (16) (146) Allowance for bad debt (175) (175) $ 2,644 $ 4,691

As more fully described in Note 11, contributions receivable are primarily intended for the following uses (in thousands):

September 26, 2010 September 27, 2009 Temporarily restricted $ 2,525 $ 3,767 Permanently restricted 119 924 $ 2,644 $ 4,691

During the fiscal year ended September 26, 2010, RAND received payments of prior year pledges in the amount of $1,307,000. Donors have made conditional promises to give of $2,700,000 and $2,933,000 as of September 26, 2010, and September 27, 2009, respectively. These conditional pledges, which include revocable deferred gifts, are not recorded in these consolidated financial statements.

5. Long-Term Investments: Cash and cash equivalents included in long-term investments consist of cash in bank and money market funds and are carried at fair value. Long-term investments are presented at fair value and all related transactions are recorded on the trade date. The investments consist of cash and money market funds, domestic and foreign equity funds, bond funds, and alternative investments. Approximately 32 percent of the long-term investments consist of foreign investment holdings. As of September 26, 2010, RAND had commitments outstanding to purchase alternative investments of $15,839,000; of these commitments, approximately $4,400,000 is due within one year. Investment income is shown net of related expenses of $358,000 and $321,000, for the fiscal years ended September 26, 2010, and September 27, 2009, respectively. Long-term investments consist of the following (in thousands):

September 26, 2010 September 27, 2009

Cash and cash equivalents $ 2,193 $ 2,648 Shares of fixed income funds, at fair value (cost, 2010—$56,759, and 2009—$60,946) 59,957 61,102 Shares of equity funds, at fair value (cost, 2010—$69,749, and 2009—$68,162) 73,493 65,351 Alternative investments (cost, 2010—$40,355, and 2009—$40,370) 49,267 45,415 $ 184,910 $ 174,516

RA n D A nn u a l R epo rt 2 0 1 0 59 6. Fair Value Measurements: The authoritative accounting guidance for fair value measurement clarifies the definition of fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands the required disclosures about the use of fair value measurements. Under the guidance, fair value is defined as the price that would be received to sell an asset (or paid to transfer a liability), or the “exit price.” The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into levels: Level 1 – Quoted prices for identical instruments in active markets. Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or other inputs that are observable or whose significant value drivers are observable. Level 3 – Significant inputs are supported by little or no market activity and are thus unobservable. As required by the guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. RAND’s assessment of the significance of particular inputs to the fair value measurement requires judgment and may affect the selection of the hierarchy level and the valuation itself. RAND’s own creditworthiness has been considered in the fair value measurements contained herein. Long-Term Investments – RAND’s portfolio of long-term investments consists of cash/money market funds, fixed income funds, equity funds, and alternative investments. Quoted market prices are used to determine fair value for fixed income funds and equity funds when available. All such funds are considered Level 1. Certain equity funds are not actively traded but the underlying investments have inputs that are observable. Such funds are considered Level 2. Alternative investments include RAND’s share of private equity funds and limited partnership arrangements, which are not actively traded. Identical or similar instruments are difficult to identify as underlying investment components may not be publicly available. Some of these investments have restrictions that limit RAND’s ability to withdraw funds as specified in the arrangements. Fair value measurement for alternative investments considers all available information for each investment fund, including its annual audited financial statements, known activity subsequent to its financial statement date, and valuation information from the fund manager. All alternative investments are considered Level 3. Derivative Financial Instruments – RAND uses two interest rate swaps to fix the interest rate on its 2008A and 2008B variable rate bonds. Dealer quotes, based on cash flow models discounted at relevant market interest rates, are used to determine the fair value of the swaps, both of which are considered Level 2. RAND’s assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of September 26, 2010, were as follows (in thousands): Balance as of Level 1 Level 2 Level 3 September 26, 2010

Assets Investments Cash/Money Market Funds $ 2,193 $ — $ — $ 2,193 Equity and Fixed Income Funds Equity Funds – U.S. 13,424 22,771 — 36,195 Equity Funds – Non-U.S. 16,584 15,873 — 32,457 Equity Fund – Global 4,841 — — 4,841 Fixed Income Funds – U.S. Government 24,893 — — 24,893 Fixed Income Funds – Intermediate Term 18,310 — — 18,310 Fixed Income Funds – Multisector 10,168 — — 10,168 FIxed Income Funds – Global 6,586 — — 6,586 Alternative Investments Private Equity — — 5,615 5,615 Real Assets — — 1,890 1,890 Multi-Strategy — — 34,199 34,199 Distressed Assets — — 2,632 2,632 Long/Short Equity — — 4,931 4,931 Total Assets $ 96,999 $ 38,644 $ 49,267 $ 184,910

Liabilities Derivatives $ — $ 19,091 $ — $ 19,091

60 RA n D A nn u a l R epo rt 2 0 1 0 Changes in Level 3 assets measured at fair value on a recurring basis for the fiscal year ended September 26, 2010, were as follows (in thousands): Realized and Unrealized Purchases and Beginning Balance Gains (Losses) Sales Ending Balance Private Equity $ 3,984 $ 182 $ 1,449 $ 5,615 Real Assets 795 (145) 1,240 1,890 Multi-Strategy 34,092 3,241 (3,134) 34,199 Distressed Assets 2,111 521 — 2,632 Long/Short Equity 4,433 498 — 4,931 Total $ 45,415 $ 4,297 $ (445) $ 49,267

RAND uses the Net Asset Value (NAV) or its equivalent to determine the fair value of all the underlying investments that (i) do not have a readily determinable fair value and (ii) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company (Levels 2 and 3, as previously discussed). The following table lists these investments by major category (in thousands):

Timing Unfunded to Draw Investment Down Category of Remaining Commit- Commit- Terms and Conditions to Redeem Investment Strategy NAV Life ments ments Investment Private Venture, buyout $ 5,615 1 to 10 $ 9,049 1 to 9 Interest in the fund can be sold only Equity and special years years with the consent of the fund manager. situations, in U.S. and International Real Assets Real estate and 1,890 12 to 13 6,790 4 to 7 Interest in the fund can be sold only natural resources, years years with the consent of the fund manager. in U.S. and International U.S. Equity Replicates the 22,771 N/A — N/A Daily redemption permitted Russell 3,000 equity index Interna- Value- and 15,873 N/A — N/A Monthly redemption permitted tional growth-oriented Equity non-U.S. equities

Multi- Global multi- 34,199 N/A — N/A 39%* have lock up provisions, 61%* Strategy strategy funds have side pocket arrangements but that employ liquid accounts can be redeemed various and quarterly to annually. multiple techniques (e.g., fixed income arbitrage, structured credit, event- driven, distressed investments) Distressed Corporate 2,632 N/A — N/A After an initial one-year lock up Assets high-yield and period, redemptions from the liquid distressed debt, account are permitted each December mortgage- 31 with 180 days advance notice. backed securities, capital structure arbitrage Long-Short Global long-short 4,931 N/A — N/A Redemptions permitted after 5-year Equity equity hedge initial lock up with subsequent rolling fund 5 year lock up with 60 days advance notice. Redemptions outside lock up periods are allowed, subject to redemption fees and account adjustments.

$ 87,911 $ 15,839

*Reflects fair value of investments based on NAV.

RA n D A nn u a l R epo rt 2 0 1 0 61 7. Postretirement Benefits Other Than Pensions: In addition to providing certain other retirement benefits, RAND provides health care benefits to certain employees who retire having met the required age and years of service with RAND. This coverage also applies to their dependents. Retirees may elect coverage under the Preferred Provider Organization, various HMOs, or reimbursement of individually purchased Medigap policies. Medicare becomes the primary coverage for retirees when they reach age 65. Retirees and dependents share substantially in the cost of coverage. RAND retains the right, subject to existing agreements, to change or eliminate these benefits. RAND’s retiree medical program includes prescription drug coverage for retirees over age 65 that equals or exceeds the benefit provided by Medicare. As long as the retirees remain in the Company medical plan rather than enrolling in the new Medicare prescription drug coverage, Medicare will share the cost of the plan with the Company and the employees. RAND’s share of the obligations for future retiree medical benefits is reduced due to this subsidy from Medicare. The following table sets forth the plan’s funded status as shown in the Consolidated Statements of Financial Position (in thousands):

September 26, 2010 September 27, 2009 Change in benefit obligation Benefit obligation at beginning of year $ 23,912 $ 19,088 Service cost 974 634 Increase due to passage of time 1,292 1,400 Plan participants’ contributions 537 523 Actuarial loss (gain) 547 3,446 Benefits paid (1,084) (1,179) Benefit obligation at end of year 26,178 23,912 Change in plan assets Fair value of plan assets at beginning of year 7,701 6,952 Actual return on plan assets 697 231 Employer contributions 1,296 1,174 Plan participants’ contributions 537 523 Benefits paid (1,084) (1,179) Fair value of plan assets at end of year 9,147 7,701 Unfunded obligation $ 17,031 $ 16,211

The following table provides the relevant weighted-average assumptions used: September 26, 2010 September 27, 2009

Discount rate used to determine benefit obligation 5.00% 5.50% Discount rate used to determine net periodic postretirement benefit cost 5.50% 7.50% Long-term rate of return on plan assets 7.50% 8.00%

Assumed health care cost trend rates are as follows: September 26, 2010 September 27, 2009

Health care cost trend rate assumed for next year 8.50% 9.50%

Rate to which the cost trend rate is assumed to decline 5.00% 5.00% Year that the rate reaches the ultimate trend rate 2017 2015 The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rate by one percentage point would increase by $445,000 the service cost and passage-of-time components of the fiscal year 2010 expense and increase by $4,003,000 the accumulated postretirement benefit obligation as of September 26, 2010. Decreasing the assumed health care cost trend rate by one percentage point

62 RA n D A nn u a l R epo rt 2 0 1 0 would decrease by $355,000 the service cost and passage-of-time components of the fiscal year 2010 expense and decrease by $3,299,000 the accumulated postretirement benefit obligation as of September 26, 2010. The net periodic postretirement benefit cost for fiscal years ended September 26, 2010, and September 27,2009, included the following components (in thousands):

2010 2009 Service cost-benefits attributed to service during the period $ 974 $ 634 Increase in the accumulated postretirement benefit obligation to recognize the effects of the passage of time 1,292 1,400 Expected return on plan assets (585) (561) Recognition of prior service cost and net gain/loss on amortization 75 2 Net periodic postretirement benefit cost $ 1,756 $ 1,475

As required annually by the authoritative accounting guidance, RAND recorded an adjustment to the accrued postretirement benefit liability (other than net periodic postretirement benefit cost) in Other items onthe Consolidated Statements of Activities and Changes in Net Assets for the period ended September 26, 2010, a net loss of $360,000. The corresponding adjustment for the period ended September 27, 2009, was a net loss of $3,774,000. Both adustments were driven primarily by the change to the associated discount rates.

The following benefit payments, which reflect expected future service and Medicare Part D subsidies, as appropriate, are expected to be paid (in thousands):

Gross Benefit Medicare Part Net Benefit Payments D Subsidies Payments 2011 $ 912 $ 57 $ 855 2012 1,009 70 939 2013 1,096 85 1,011 2014 1,202 98 1,104 2015 1,264 112 1,152 Next five years 7,926 774 7,152

Asset allocations of plan assets at September 26, 2010, and September 27, 2009, by asset category are as follows:

2010 2009 Cash and short term 8.7% 13.5% Shares of bond funds, at fair value 31.0 32.2 Shares of equity funds, at fair value 32.0 34.8 Alternative investments 28.3 19.5 100.0% 100.0%

RAND contributes to a Voluntary Employee Benefit Association irrevocable trust that is used to partially fund health care benefits for future retirees. In general, retiree health benefits are paid as covered expenses are incurred.

8. Borrowing Arrangements: Revenue Bonds. In 2002, RAND issued $130,000,000 of tax-exempt revenue bonds to finance the construction of its Santa Monica headquarters facility ($32,500,000 Series 2002A fixed rate and $97,500,000 Series 2002B variable rate). During fiscal year 2007, RAND refinanced its 2002A fixed rate bonds resulting in the issuance of $34,975,000 of variable rate tax-exempt revenue bonds (Series 2007) and the defeasance of the original Series 2002A bonds. The proceeds from the Series 2007 bonds, net of issuance costs of $1,006,000, were irrevocably deposited into an escrow fund and invested in U.S. Treasury Securities in an amount sufficient to service the principal and interest payments on the Series 2002A bonds through the redemption date of April 1, 2012. In 2008, RAND issued $34,575,000 of tax-exempt variable rate revenue bonds (Series 2008A) to refinance the Series 2007 tax-exempt variable rate revenue bonds. Costs incurred in connection with the issuance of the Series 2008A bonds of approximately $379,000 were paid by RAND. The initial rate of interest was 1.65% and annual principal payments ranging from $450,000 to $1,825,000 are due from April 1, 2009 to April 1, 2042.

RA n D A nn u a l R epo rt 2 0 1 0 63 Also in 2008, RAND issued $93,565,000 of tax-exempt variable rate revenue bonds (Series 2008B) to refinance the Series 2002B tax-exempt variable rate revenue bonds. Included in the par amount of the Series 2008B bonds was approximately $1,035,000 of costs incurred in connection with issuance. The initial rate of interest was 1.15% and annual principal payments ranging from $1,110,000 to $4,935,000 are due from April 1, 2009 to April 1, 2042. The Series 2008A and Series 2008B bonds contain various covenants including compliance with the following financial measures: maximum debt-to-capitalization ratio, and either a minimum debt service coverage ratio or a minimum liquidity level. RAND is in compliance with all covenants as of September 26, 2010. The payment of principal and interest on both the Series 2008A and Series 2008B bonds is collateralized by direct-pay letters of credit.

Interest Rate Swaps. Concurrent with the issuance of the Series 2007 variable rate bonds, RAND entered into an interest rate swap agreement with a counterparty whereby RAND agreed to pay the counterparty a fixed rate of interest of 3.955% and the counterparty agreed to pay RAND the Series 2007 variable rate until April 1, 2012, and 67% of one-month LIBOR thereafter. Simultaneously, RAND entered into an additional interest rate swap agreement with another counterparty for $42,350,000 of its Series 2002B variable rate bonds whereby RAND agreed to pay the counterparty a fixed rate of interest of 3.955% and the counterparty agreed to pay RAND 67% of one-month LIBOR. Both swaps remain in effect with the new Series 2008A and Series 2008B bonds, with the same terms (except the first counterparty has agreed to pay RAND the Series 2008A variable rate in place of the Series 2007 variable rate) and terminate on April 1, 2042, the maturity date of the Series 2008A and Series 2008B bonds. Included in Other items on the Consolidated Statements of Activities and Changes in Net Assets and in Other long-term liabilities on the Consolidated Statements of Financial Position is $4,866,000 and $6,186,000, for fiscal years 2010 and 2009, respectively, recognized as the change in fair value of these derivative instruments. Long-term debt is as follows (in thousands):

September 26, September 27, 2010 2009 California Infrastructure and Economic Development Bank Variable Rate Revenue Bonds, Series 2008A, issued in the original principal amount of $34,575,000, in connection with the refunding of the Series 2007 bonds, in May 2008; average interest rate of 0.23% and 0.66% for the fiscal years ending September 26, 2010, and September 27, 2009, respectively; annual principal payments ranging from $450,000 to $1,825,000, beginning April 1, 2009, and ending April 1, 2042 $ 33,650 $ 34,125 California Infrastructure and Economic Development Bank Variable Rate Revenue Bonds, Series 2008B, issued in the original principal amount of $93,565,000, in connection with the refunding of the Series 2002B bonds, in June 2008; average interest rate of 0.20% and 0.40% for the fiscal years ending September 26, 2010, and September 27, 2009, respectively; annual principal payments ranging from $1,110,000 to $4,866,002, beginning April 1, 2009, and ending April 1, 2042 91,085 92,455 124,735 126,580 Less current portion (1,930) (1,845) $ 122,805 $ 124,735

Annual bond principal payments are required in the following fiscal years (in thousands): 2011 $ 1,930 2012 2,005 2013 2,130 2014 2,215 2015 2,305 Thereafter 114,150

$ 124,735

Accrued interest payable relating to the bonds was $255,000 and $256,000 as of September 26, 2010, and September 27, 2009, respectively. RAND’s total interest expense was $3,061,000 and $3,109,000 for the fiscal years ended September 26, 2010, and September 27, 2009, respectively. The fair value of RAND’s revenue bonds approximates par value as all of RAND’s revenue bonds are variable rate bonds.

Line of Credit. RAND has an uncollateralized line of credit in the principal amount of $18,000,000 at September 26, 2010, which expires in August 2012. The line of credit contains covenants that require RAND to achieve the same financial measures as the Series 2008A and 2008B revenue bonds. There were no amounts outstanding at September 26, 2010, and September 27, 2009. Under the terms of the credit agreement, interest is payable monthly at (i) the prime rate less .75 percent, (ii) the LIBOR rate plus 1.5 percent, or (iii) the IBOR rate plus 1.5 percent as selected by RAND. No amounts were drawn on the line of credit agreement in fiscal years 2010 or 2009.

64 RA n D A nn u a l R epo rt 2 0 1 0 9. Commitments and Contingencies: Lease Commitments. Operating lease commitments, net of $8,369,000 representing subleases, are as follows (in thousands): 2011 $ 7,840 2012 7,293 2013 7,286 2014 7,252 2015 5,187 Thereafter 1,265 $ 36,123

Future minimum rentals are comprised of office leases. Certain of RAND’s office leases contain rent escalation clauses and fair-market renewal options. All property leases generally require RAND to pay for utilities, insurance, taxes, and maintenance. RAND’s net rental expense was $8,168,000 and $7,967,000 for the fiscal years ended September 26, 2010, and September 27, 2009, respectively.

Other Commitments. Contract costs billed to government clients are subject to audit by the Defense Contract Audit Agency (“DCAA”). Resulting indirect cost adjustments, if any, are prorated to all contracts. Contract costs billed prior to September 27, 2009, have been audited and accepted. To date, there have been no significant cost disallowances. In the opinion of management, contract costs billed subsequent to September 27, 2009, are allowable, and any potential cost disallowance would not materially affect RAND’s consolidated financial position, results of operations, or cash flows. RAND has certain contingent liabilities with respect to claims arising from the ordinary course of business. In the opinion of management, such contingent liabilities will not result in any loss that would materially affect RAND’s financial position, results of operations, or cash flows.

Environmental Remediation. Under the terms of an agreement with the City of Santa Monica (the “City”) for the sale of land owned by RAND, RAND was responsible for the demolition of existing buildings on the site and environmental remediation with respect to the underlying land. Under the terms of the agreement with the City, RAND must indemnify the City for claims related to the presence of hazardous materials at the site for a period until ten years after the demolition of the old buildings and completion of soil and groundwater remediation. There can be no assurance that future claims for indemnity will not have a material adverse effect on RAND’s Consolidated Statements of Activities or of Cash Flows.

10. Endowment: RAND’s endowment consists of approximately 30 individual funds established for a variety of purposes. It has both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowment funds. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Absent explicit donor stipulations to the contrary, RAND classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment. The remaining portion of the donor-restricted endowment fund that is not classified as permanently restricted—all investment earnings and temporarily restricted gifts—is classified as temporarily restricted until those amounts are appropriated for expenditure by RAND in a manner consistent with the standard of prudence prescribed by the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The following table summarizes the components of the endowment by net asset class as of September 26, 2010: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted funds $ — $ 10,760 $ 43,074 $ 53,834 Board-designated funds 131,076 — — 131,076

End of year $ 131,076 $ 10,760 $ 43,074 $ 184,910

RA n D A nn u a l R epo rt 2 0 1 0 65 The following table summarizes the activity in the endowment during fiscal year 2010: Temporarily Permanently Unrestricted Restricted Restricted Total

Beginning of year $ 122,682 $ 9,018 $ 42,816 $ 174,516 Investment return 12,816 5,268 — 18,084 Contributions — — 258 258 Appropriations (5,620) (2,328) — (7,948) Other changes—net asset transfer 1,198 (1,198) — —

End of year $ 131,076 $ 10,760 $ 43,074 $ 184,910

Investment and Spending Policies. RAND’s investment and spending policies are in compliance with UPMIFA. In accordance with UPMIFA, RAND considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: the duration and preservation of the fund, the mission of RAND, general economic conditions, the possible effect of inflation and deflation, the expected total return from income and the appreciation of investments, the investment policies of the organization, and RAND’s other resources.

Per RAND’s investment policy, endowment assets are invested in a manner that is intended to produce results that exceed the Employment Cost Index plus 5.5%. RAND relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). RAND targets a diversified asset allocation to achieve its long-term return objectives within prudent risk constraints.

Per RAND’s spending policy, a percentage of its endowment fund’s average fair value over the prior 12 quarters through June 30 is appropriated for distribution each year. In establishing this policy, RAND considered the long-term expected return on its endowment. Accordingly, over the long term, RAND expects the current spending policy to allow its endowment to grow at a rate equal to or in excess of inflation.

Funds with Deficiencies. From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires RAND to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, deficiencies of this nature that are reported in unrestricted net assets were $715,000 and $1,913,000 as of September 26, 2010, and September 27, 2009, respectively (see also Note 2, Net Asset Transfers). These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs that was deemed prudent by the Board of Trustees.

11. Net Assets: Board-Designated Net Assets. Board-designated net assets (net of cumulative net asset transfers) are available for the following purposes (in thousands):

September 26, 2010 September 27, 2009

Designated for investment $ 112,030 $ 104,901

Designated for special use: RAND Education 3,462 3,235 Bing Center for Health Economics 232 251 3,694 3,486

$ 115,724 $ 108,387

66 RA n D A nn u a l R epo rt 2 0 1 0 Temporarily Restricted Net Assets. Temporarily restricted net assets (both within and outside of the endowment and including net asset transfers) are available for the following purposes (in thousands):

September 26, 2010 September 27, 2009 National Security Research and Training $ 3,615 $ 3,181 Pardee RAND Graduate School 2,241 2,506 RAND Institute for Civil Justice 2,027 1,811 RAND General 1,554 1,071 President’s Fund 1,263 1,616 Bing Center for Health Economics 1,062 1,043 RAND Center for Middle East Public Policy 1,028 1,262 RAND Health 916 921 Other 5,799 5,462 $ 19,505 $ 18,873

Permanently Restricted Net Assets. Permanently restricted assets (including pledges) are shown below by the purpose designated by the donor. The assets are invested in perpetuity and the income is available to support the restricted activities (in thousands):

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$ 43,171 $ 43,684

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RA n D A nn u a l R epo rt 2 0 1 0 67 References

To find out more about the 2010 research or activities highlighted on pages 4–19, see the following— available unless otherwise noted, at www.rand.org

Multinational Challenges “Could We Have Covered The Air Force Officer Teacher Pay for Performance: More People at Less Cost? Qualifying Test: Validity, Experimental Evidence from Building a More Resilient Technically, Yes; Politically, Fairness, and Bias, Chaitra the Project on Incentives Haitian State, Keith Crane, Probably Not,” Elizabeth A. M. Hardison, Carra S. Sims, in Teaching, Matthew G. James Dobbins, Laurel McGlynn, Amado Cordova, and Eunice C. Wong, Springer, Dale Ballou, Laura E. Miller, Charles P. Ries, Jeffrey Wasserman, and RAND Corporation, 2010 S. Hamilton, Vi-Nhuan Le, Christopher S. Chivvis, Marla Federico Girosi, Health J. R. Lockwood, Daniel F. C. Haims, Marco Overhaus, Affairs, Vol. 29, No. 6, June Cash Incentives and Military McCaffrey, Matthew Pepper, Heather L. Schwartz, and 2010, pp. 1142–1146 Enlistment, Attrition, and and Brian M. Stecher, Elizabeth Wilke, RAND Reenlistment, Beth J. Asch, Nashville, Tenn.: National Corporation, 2010 Is Better Patient Safety Paul Heaton, James Hosek, Center on Performance Associated with Less Francisco Martorell, Curtis Incentives, Vanderbilt Counterinsurgency in Malpractice Activity? Simon, and John T. Warner, University, 2010 Pakistan, Seth G. Jones Evidence from California, RAND Corporation, 2010 and C. Christine Fair, RAND Michael D. Greenberg, “Teacher Qualifications and Corporation, 2010 Amelia M. Haviland, J. Scott Saving the Government Student Achievement in Ashwood, and Regan Main, Money: Examples Urban Elementary Schools,” Afghanistan’s Local War: RAND Corporation, 2010 from RAND’s Federally Richard Buddin and Gema Building Local Defense Funded Research and Zamarro, Journal of Urban Forces, Seth G. Jones Seasonal Influenza Vaccine Development Centers, Economics, Vol. 66, No. and Arturo Munoz, RAND Use by Adults in the U.S.: RAND Corporation, 2010 2, September 2009, pp. Corporation, 2010 A Snapshot from the End 103–115 of the 2009–2010 Vaccination New Equipping Strategies Risking NATO: Testing the Season, Katherine M. Harris, for Combat Support “Why We Need to Study Limits of the Alliance in Juergen Maurer, and Hospitals, Matthew W. Lewis, the Tutors,” Megan Beckett, Afghanistan, Andrew R. Lori Uscher-Pines, Aimee Bower, Mishaw T. Education Week, January Hoehn and Sarah Harting, RAND Corporation, 2010 Cuyler, Rick Eden, Ronald 20, 2010 RAND Corporation, 2010 E. Harper, Kristy Gonzalez “Associations Between Morganti, Adam C. Resnick, Reauthorizing No Child Physician Characteristics Healthy Societies Elizabeth D. Steiner, and Left Behind: Facts and and Quality of Care,” Rachel Rupa S. Valdez, RAND Recommendations, Brian M. International Benchmarking O. Reid, Mark William Corporation, 2010 Stecher, Georges Vernez, of Healthcare Quality: Friedberg, John L. Adams, and Paul Steinberg, A Review of the Literature, Elizabeth A. McGlynn, and A Repair Network Concept RAND Corporation, 2010 Ellen Nolte, RAND Ateev Mehrotra, Archives of for Air Force Maintenance: Corporation, 2010 Internal Medicine, Vol. 170, Conclusions from Analysis “Are Public-Service No. 16, September 13, 2010, of C-130, F-16, and KC-135 Subsidies Good for the pp. 1442–1449 “Disease Prevalence, Fleets, Robert S. Tripp, Public?” Jennifer L. Steele, Disease Incidence, and Ronald G. McGarvey, Ben D. Richard J. Murnane, and Mortality in the United “Comparing Costs and Van Roo, James M. Masters, John B. Willett, Education States and in England,” Quality of Care at Retail and Jerry M. Sollinger, RAND Week, July 14, 2010 James Banks, Alastair Clinics with That of Other Corporation, 2010 Muriel, and James P. Smith, Medical Settings for 3 Service Members in Demography, Volume 47, Common Illnesses,” Ateev Views from the Homefront: School: Military Veterans’ Supplement, 2010 Mehrotra, John L. Adams, The Experiences of Youth Experiences Using the Post- Margaret C. Wang, Judith and Spouses from Military 9/11 GI Bill and Pursuing Lave, N. Marcus Thygeson, Understanding the Public Families, Anita Chandra, Postsecondary Education, Leif I. Solberg, Elizabeth A. Health Implications of Sandraluz Lara-Cinisomo, Jennifer L. Steele, Nicholas McGlynn, Annals of Internal Prisoner Reentry in California: Lisa H. Jaycox, Terri Salcedo, and James Coley, Medicine, Vol. 151, No. 5, Phase I Report, Lois M. Tanielian, Bing Han, Rachel RAND Corporation, 2011 September 1, 2009, pp. Davis, Nancy Nicosia, M. Burns, and Teague Ruder, 321–328 Adrian Overton, Lisa RAND Corporation, 2011 Hours of Opportunity, Miyashiro, Kathryn Pitkin Volume 1: Lessons from Five Derose, Terry Fain, Susan Forces and Resources Education Cities on Building Systems Turner, Paul Steinberg, to Improve After-School, and Eugene Williams, Sexual Orientation and U.S. Designing Effective Summer School, and RAND Corporation, 2009 Military Personnel Policy: Pay-for-Performance in K–12 Other Out-of-School-Time An Update of RAND’s 1993 Education, Laura S. Hamilton, Programs, Susan J. Bodilly, Study, Bernard D. Rostker RAND Corporation, 2009 Jennifer Sloan McCombs, (study director) et al., Nate Orr, Ethan Scherer, RAND Corporation, 2010 Louay Constant, and Daniel Gershwin, RAND Corporation, 2010

68 foc u s on mak ing a dif ference Hours of Opportunity, Does the Social Security Today’s Police and Sheriff Terrorism Volume 2: The Power of Data Statement Improve Recruits: Insights from to Improve After-School Americans’ Knowledge of the Newest Members Would-Be Warriors: Programs Citywide, Jennifer Their Retirement Benefits? of America’s Law Incidents of Jihadist Sloan McCombs, Nate Andrew G. Biggs, RAND Enforcement Community, Terrorist Radicalization in Orr, Susan J. Bodilly, Scott Corporation, 2010 Laura Werber Castaneda the United States Since Naftel, Louay Constant, and Greg Ridgeway, September 11, 2001, Brian Michael Jenkins, Ethan Scherer, and Financial Decision Making RAND Corporation, 2010 RAND Corporation, 2010 Daniel Gershwin, RAND and Cognition in a Corporation, 2010 Family Context, James Security, At What Cost? P. Smith, John McArdle, Quantifying People’s Trade- No Path to Glory: Deterring Hours of Opportunity, and Robert Willis, RAND Offs Across Liberty, Privacy Homegrown Terrorism, Volume 3: Profiles of Five Corporation, 2010 and Security, Neil Robinson, Brian Michael Jenkins, Cities Improving After- Dimitris Potoglou, Chong RAND Corporation, 2010 School Programs Through a Directors as Guardians of Woo Kim, Peter Burge, and Systems Approach, Jennifer Compliance and Ethics Richard Warnes, RAND An Economic Analysis of Sloan McCombs, Susan Within the Corporate Citadel: Corporation, 2010 the Financial Records of J. Bodilly, Nate Orr, Ethan What the Policy Community al-Qa’ida in Iraq, Benjamin Scherer, Louay Constant, , Michael Bahney, Howard J. Shatz, Should Know Infrastructure & and Daniel Gershwin, RAND D. Greenberg, RAND Carroll Ganier, Renny Environment Corporation, 2010 Corporation, 2010 McPherson, Barbara Sude, Sara Beth Elson, and System Trials to Demonstrate Ghassan Schbley, RAND Financial Stability Mileage-Based Road Use Safety and Justice Corporation, 2010 Charges, Paul Sorensen, “How Longer Work Altered State? Assessing Martin Wachs, and Liisa Lives Ease the Crunch How Marijuana Legalization Ecola, National Cooperative Before Disaster Strikes: of Population Aging,” in California Could Influence Highway Research Program, Imperatives for Enhancing Nicole Maestas and Julie Marijuana Consumption and National Academy of Defense Support of Civil , Report of Zissimopoulos, Journal of Public Budgets, Beau Kilmer, Sciences, 2010 Authorities Economic Perspectives, Jonathan P. Caulkins, the Advisory Panel on Vol. 24, No. 1, Winter 2010, Rosalie Liccardo Pacula, “After the Motor Fuel Tax: Department of Defense pp. 139–160 Robert J. MacCoun, and Reshaping Transportation Capabilities for Support Peter H. Reuter, RAND Financing,” Martin Wachs, of Civil Authorities After Certain Incidents to the “Mental Retirement,” Susann Corporation, 2010 Issues in Science and Secretary of Defense Rohwedder and Robert J. Technology, Vol. 25, No. 4, and the Chairmen Willis, Journal of Economic Reducing Drug Trafficking Summer 2009, pp. 85–88 and Ranking Minority Perspectives, Vol. 24, No. 1, Revenues and Violence in Members, Committees Winter 2010, pp. 119–138 Mexico: Would Legalizing Implementable Strategies on Armed Services, U.S. Marijuana in California Help? for Shifting to Direct Senate and U.S. House “Trends in Disability and Beau Kilmer, Jonathan P. Usage-Based Charges for of Representatives, Related Chronic Conditions Caulkins, Brittany M. Bond, Transportation Funding, September 15, 2010 Among People Ages Fifty to and Peter H. Reuter, RAND Paul Sorensen, Liisa Ecola, Sixty-Four,” Linda G. Martin, Corporation, 2010 Martin Wachs, Max Donath, Vicki A. Freedman, Robert Lee Munnich, and Betty Deradicalizing Islamist Extremists, Angel Rabasa, F. Schoeni, and Patricia M. Hidden in Plain Sight: What Serian, National Cooperative Stacie L. Pettyjohn, Andreski, Health Affairs, Vol. Cost-of-Crime Research Can Highway Research Program, Jeremy J. Ghez, and 29, No. 4, April 2010, pp. Tell Us About Investing in National Academy of Christopher Boucek, RAND 725-731 Police, Paul Heaton, RAND Sciences, 2009 Corporation, 2010 Corporation, 2010 How Much Do People Know The Impact of Air Quality on Long-Term Effects of Law About Social Security? Police Recruitment and Hospital Spending, John A. Enforcement’s Post-9/11 Mathew Greenwald, Arie Retention for the New Romley, Andrew Hackbarth, Focus on Counterterrorism Kapteyn, Olivia Mitchell, Millennium: The State and Dana P. Goldman, and Homeland Security, and Lisa Schneider, RAND of Knowledge, Jeremy RAND Corporation, 2010 Lois M. Davis, Michael Corporation, 2010 M. Wilson, Erin Dalton, Pollard, Kevin Ward, Charles Scheer, and Clifford Confronting Space Debris: Jeremy M. Wilson, Danielle What Influences New Hires to A. Grammich, RAND Strategies and Warnings M. Varda, Lydia Hansell, Save for Retirement? Robert Corporation, 2010 from Comparable Examples and Paul Steinberg, RAND Clark and Melinda Morrill, Including Deepwater Corporation, 2010 RAND Corporation, 2010 Recruiting and Retaining Horizon, Dave Baiocchi America’s Finest: Evidence- and William Welser, RAND Based Lessons for Police Corporation, 2010 Workforce Planning, Jeremy M. Wilson, Bernard D. Rostker, and Cha-Chi Fan, RAND Corporation, 2010

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