EDUCATION

UW cash balances that drew fire in 2013 continue to both grow and be spent down

Karen Herzog

Milwaukee Journal Sentinel

The University of Wisconsin System is still building cash balances in thousands of fund accounts and carrying them from year to year.

But it's also spending down money.

Each campus has its own story to tell, and it is complicated.

The UW System closed the books on the last fiscal year with a total $906.9 million in unrestricted fund balances — money left after all expenses were paid as of June 30.

This is money the central administration and campuses have discretion to spend within certain parameters, according to an annual report to be discussed Thursday by the UW System Board of Regents when it meets at UW-Parkside in Kenosha.

The $906 million is down $189.1 million (17.3 percent) from the $1.05 billion that outraged Republican state lawmakers when they discovered in 2013 that money set aside and carried from one year to the next was not being clearly disclosed in the UW System's financial reporting.

Lawmakers ordered an audit to examine how much money was being carried over, in which accounts and for what purpose.

Lawmakers then ordered the UW System to show them the money.

So UW System at the end of each fiscal year prepares detailed, annual accounting on a campus-by-campus basis of cash balances, plus a breakdown of how much is earmarked for obligated, planned, designated and undesignated purposes.

Some campuses report they have mostly spent down their cash balances. Other campuses have built up balances in some accounts because they set aside money for specific purposes. A new residence hall or another building project would be examples.

UW increasingly has been relying on program revenue — money that does not come from state taxes or federal appropriations — to support the enterprise. Program revenue include tuition, student fees, housing and dining services revenue, parking revenue, gifts, federal grants and contracts.

In 1998, program revenue made up 65.6 percent of total funding for the UW System. Today, it's 82 percent.

Overall, state tax dollars make up 17.2 percent of the UW System's operating budget.

What was all the fuss about a few years ago?

The UW System was not accused of doing anything illegal.

But Republican lawmakers strongly criticized the public university system in 2013 for continuing to raise tuition by 5.5 percent year after year, asking for more state funding, and at the same time, building up large tuition carryovers not clearly disclosed or explained.

Trying to balance damage control and candor, UW System officials acknowledged they had been less than forthcoming and vowed to improve transparency and accountability.

Before the annual fund balance report started a few years ago, only one line in the UW System's financial report hinted at cash carryover. It did not explain which revenue sources contributed to the balance, how much was earmarked for what uses and at which campuses the cash was kept.

To force campuses to spend down money carried forward after all expenses were paid, the Legislature froze undergraduate resident tuition starting in fall 2013 and continuing indefinitely.

Lawmakers also cut state funding.

Tuition balances are the most controversial

Tuition balances at UW System campuses are down $6.9 million, compared with a year ago.

However, a $30.5 million balance increase exists at UW System administration to account for variances in costs such as utilities and fringe benefits, according to UW officials.

All told, the UW System and its campuses have cut unspent tuition money carried from year to year by 23.9 percent — from $395.4 million in fiscal 2014 to $300.9 million in the fiscal year that ended June 30.

UW officials say that $95 million reduction is significant.

UW-Madison carried over $66.8 million in unspent tuition balances at the end of the last fiscal year in June. That's about $2.9 million more than the year before, or an increase of 4.5 percent.

Total unrestricted program revenue carried over into the new fiscal year by UW-Madison was nearly $353.6 million. That's about $16.86 million more than the prior year, or an increase of 5 percent, according to UW System's reporting.

UW System says it needs to keep money on hand to cover unexpected shortfalls or expenses — shortfalls tied to drops in student enrollment, for example.

The administration notes in its report that 68.7 percent of tuition money left after all expenses were paid last fiscal year was either obligated for a specific future purpose or set aside through planning for a future expense.

Also, the report states that the tuition fund balance would provide 43.6 days of operating expenses in an emergency for unforeseen circumstances.

Is there a slush fund?

There is no pot of money. Money is kept in more than a thousand accounts on campuses across the state and in central UW System accounts.

Campuses set aside some "reserves" to cover an unexpected emergency.

All told, UW System has $94 million in "reserves" and an additional $52 million that is considered uncommitted.

The current accounting practice creates a report for each campus that tells its own story.

UW-Madison, for example, for the past two years has been carrying cash balances equal to 6.5% of program revenue expenditures, or $353.6 million. Total expenditures were nearly $2.14 billion last fiscal year.

The single largest priority for money set aside toward capital projects at UW-Madison was $35 million for major renovations of Sellery Residence Hall, according to the report.

That money is sitting in what's called an auxiliary operations fund. The fund holds money from services provided for a fee to students and employees. Things like housing, food service and parking.

UW-Milwaukee's unrestricted cash balances — a total of $97.2 million — added up to 20.5 percent of its total $473.1 million expenditures for the last fiscal year.

The school carried over $44 million in tuition balances — the equivalent of 13% of total expenditures.