State suspicious of UW System balances
May 9, 2013
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The University of Wisconsin System received negative backlash from the Legislative Fiscal Bureau over program revenue balances.
The Legislative Fiscal Bureau, a predominantly Republican sector of Wisconsin government, accused UW System and System President Kevin Reilly of stockpiling money and of a lack of transparency in how the money will be spent.
The Bureau has said it will seek to freeze tuition for the next two years and possibly revoke $181 million in funds set aside for UW Systems in Governor Walker’s budget.
In addition to a possible tuition freeze and revocation of state funds, UW System will also face yearly audits according to a memo from Joint Audit Committee members Senator Robert Cowles and Representative Samantha Kerkman to State Auditor Joe Chrisman.
“In Feb. 2013, the Joint Legislative Audit Committee unanimously introduced legislation relating to the statutatory requirements and responsibilities of the Legislative Audit Bureau. Included in 2013 Wisconsin Act 8 was a statutatory requirement for an annual financial audit of UW System,” the memo said. “The decision to create this statuatory requirement was based on concerns that UW System’s administration of its payroll and benefits process and a need to ensure ongoing oversight of UW System’s financial management.”
In a memo from UW System’s Associate Vice President for Budget and Planning Freda Harris and Associate Vice President for Financial Administration Julie Gordon to Legislative Fiscal Bureau supervisor Dave Loppnow and Bureau member Emily Pope, UW Systems state the balances are below those of other institutions.
“The National Association of College and University Business Officers, which supports the business practices of the higher education industry, recommends a reserve level of 40 percent, which is on the high end of reserve recommendations,” the memo said.
“The Government Finance Officers Association, which promotes appropriate financial management of government organizations in general, recommends a 17 percent reserve. Because higher education operates in a more business-like market than traditional government agencies, this recommendation is low. A ratio of approximately 25 percent may be more appropriate for the UW System, and would be more in line with what we understand to be the reserve policies of other higher education systems.”
University of Wisconsin-Platteville chancellor Denis Shields said in a campus-wide email that UW-Platteville, which has an appropriation balance of $24.5 million, has been extremely transparent in its budgets and financial planning.
“The characterization that this university is sitting on extra money is not accurate; rather, we have been diligent in planning for the future financial needs of the university,” Shields’ email said. “UW-Platteville did end the 2011-12 fiscal year with approximately $24.5 million in fund balances. This is money maintained in anticipation of UW-Platteville fiscal needs and has been pointed out in a number of campus-wide budget presentations since August.”
If the Bureau goes forward with the tuition freeze, many of the plans UW-Platteville had made will need to change, business and accounting department chair Susan Hansen said.
“If you carry out the $24.5 million, it is only sufficient to make sure we cover our obligations,” Hansen said. “The plan to meet our obligations included a tuition increase. If the state freezes tuition, we will have to change those plans.”
Hansen, who is also a member of the University Academic Budget Commission, said the appropriation fund balance pays a variety of obligations, such as attracting and hiring new faculty.
“When we hire a new professor and plan to tenure that professor, the university has many years of obligations to that professor in terms of salary,” Hansen said.
UW System schools have seen a 5.5 percent tuition hike during the last two years. Vice chancellor Rob Cramer said the current model for the 2013-14 academic year predicts a three percent increase in tuition at UW-Platteville.
“In terms of UW-Platteville, the state provided about 22 percent of revenues to the university this year and students, both on campus and online, provided about 75 percent (versus the 22 percent), so it’s important that the university work with student government on financial planning,” Cramer said.
Cramer said it is important that students understand that the balances have accumulated over several years, not just one fiscal year.
United Council member Jonathan Predaina said he has read about the appropriation balance in the news and said tuition freeze could be a good thing for students.
“I think it would be fair to say all students would be happy to see the tuition cap being discussed come to life,” Predaina said. “We haven’t gone a year without a tuition increase since before I started at Platteville.”
Both Shields’ email and Cramer encourage students to stay abreast of the topic.
“The issue of university finances will continue to be debated through the state budget process in May and into June, so I would encourage students to continue to pay attention,” Cramer said.
For more information about UW-Platteville’s budget and balances go to uwplatt.edu/budget/presentations.html. For information on UW Systems budget and balances go to wisconsin.edu/news/2013/r130426.htm.