Page 2 of the LFB report issued Friday explains where the surpluses come from. It's based on "Program Revenue" (PR) funds, which means they are not paid by general taxes (GPR), but other sources like tuition, fees, licensing, and related "business-type" operations. And the largest sources of this surplus PR revenue come from people who attend the UW System schools, and from the UW facilities themselves.
Sources of accumulated UW Program Revenue surplus
Tuition and fees $414.1 million
Aux. Enterprises (i.e. Housing, food service, student unions) $184.0 million
General Operations Recceipts $138.0 million
Federal Aid/ Indirect Costs $119.9 million
Gifts and Non-federal grants and contracts $93.1 million
Student Fees UW Extension $45.4 million
Other $50.6 million
If you look at the UW System's budget over the years, you'll see that taxpayer funded GPR has been lowered as a share of total revenues throughout the years, and Program Revenue has often been the place the UW System has utilized to make up the difference. On Page 19 of the LFB's budget paper on the UW System, it shows that UW System enrollment has gone up by 10% since 2002, but GPR has only been increased by barely more than 5% (just under $55 million). That's before inflation is taken into account, and that includes a cut in the last budget that put GPR back to 2008 levels.
By comparison, Federal Grants and contracts are now the largest source of UW System revenues, increasing by more than $1 billion and nearly tripling in the last 11 years. Total tuition paid has more than doubled, which is well beyond the 10% increase in enrollment, and even the aux. revenues are up nearly 50% since 2002. The LFB notes that the UW System's strategy of relying on tuition increases and auxiliary revenues to make up for cuts from the Legislature means students have been paying much more of the actual costs of instruction and school attendance.
In 2002-03, students paid between 30% and 42% of their instructional costs while in 2012-13 students pay between 49% and 88% of their instructional costs.So a lot of this excess PR balance comes directly back from choices made in the Legislature to not fund the UW, and the UW's attempt to maintain quality and a similar level of investment in the face of these choices. As the UW System and LFB both point out, much of this alleged surplus in PR is actually money being set aside for specific purposes and future expenses. The LFB says
In addition to tuition charges, all students are assessed segregated fees to finance a wide variety of student activities including parking and transportation services, student activities, student unions and student centers, and intramural and intercollegiate athletics. Unlike tuition rates, segregated fees are determined by institution. In 2012- 13, segregated fees at the four-year campuses range from $859 at Whitewater to $1,363 at Superior, while fees at the UW Colleges range from $267 to $402.
Substantially all of the unrestricted net assets have been designated by the Board of Regents for purposes to fulfill the University of Wisconsin System's fiduciary responsibility, including academic and research programs and capital projects." LFB and LAB staff requested that UW System identify the purposes for which these funds have been designated by appropriation. Of the $648.2 million balance as of June 30, 2012 [in categories other than auxiliary revenues, Federal Aids and gifts]... the UW System Administration has identified expenditure purposes that would utilize $441.2 million of the balance.Among those set-aside expenditures include over $144 million for the UW System's "growth agenda/ strategic funds", $48.7 million for capital building an other large-cost items, over $44 million for financial aid (since Fall Semester starts in September, this wouldn't be disbursed by June 30), $27.7 million for veterans remissions (again, could be based on academic year), and $20 million in matching funds for incentive grants. It also includes $13.3 million for the new "flexible option" program, which was announced in June 2012 and backed by Governor Walker, in an initiative to give adult students a "self-paced" program that makes it easier for them to pick up degrees in high-need fields like nursing and IT.
So it sounds like the UW System followed the advice of what right-wing legislators have asked for when they say government should be "run like a business." They've looked for other revenue sources outside of general taxpayer dollars by relying more on tuition and other user fees. They've spent conservatively, and set funds aside in a way that prepares for any further cutbacks that may come. So what does the UW System get for running things more like a for-profit business? They get bitched out by GOP members of the Legislature and accused of using the extra PR money as a "slush fund."
I'm not saying the legislators don't have any argument to give. They're right to ask that the UW System have a policy in place that gives guidance on a proper amount of reserves, allowing them to budget accordingly (since apparently the legislators think that having $1 billion in reserve on a $5.9 billion system is excessive). And since they find the PR balance to be excessive, they have a right to adjust the funding of the UW for the next 2 years accordingly- especially given that we already know that this Walker budget has large built-in deficits, especially with the sequester and new NEMT contract raising costs beyond the original budget. We also know there are major borrowing and asset sell-offs in the transportation budget that will cost the state millions down the road.
Now if the Legislature wants to use this surplus to make the UW System not raise in-state tuition for the next year or two because of these extra funds, I'd approve, because in-state tuition at the four-year UW schools has more than doubled since 2002, making college unaffordable for many, and helping to lead to the obscene explosion of student loan debt. One Wisconsin Now's excellent report on student debt shows how the increased amount graduates owe are hampering our economy due to depressed demand after they get out of school. But like many things in GOP-world, it's their own previous actions that helped cause this problem, due to their anti-education stance and budget-cutting over the last decade-plus. These same politicians also have the nerve to hold a bitch session when the UW System reacts to solve that problem, apparently because the UW System chose to do so in a manner that's not to their liking.
I find that part of today's hearing pathetic, and it also illustrates why we need to be very skeptical of the motives behind this coordinated attack on the UW System. This situation allows redneck Republicans to go after "them smarty-pants eju-kated types" that run the UW System (always a good way to get the "vote against your own economic interests" crowd on your side). And given the horrible state jobs numbers, reports showing once again that voucher schools don't measure up to public schools, and the soon-to-explode redistricting scandal, it seems like now would be a good time for WisGOP to try to do a misdirection play. And the LFB revealing the UW System's big PR suplus was an inviting target to allow WisGOPs to do just that.
Added edit- UW-Madison Chancellor David Ward also spoke yesterday in an interesting interview with the Milwaukee Business Journal. He had this to say about the UW System's hearing.
“It was a very difficult morning and I’m not sure everything is cool [at the Capitol],” he mused. “They have a 15 percent equity interest, but they think they own UW-Madison and are the only shareholder. Fortunately, (many) understand that we are a partnership and we have multiple revenue flows.Gee, another TeaBag budget cut that endangers the UW's ability to compete. Funny how that works.
“We are really a public-private (institution) and not just a public utility. I’ve been trying to convey that in the two years I’ve been back, but it’s not been easy.” ...
Ward -- a native of England -- said it is remarkable that this state is home to one of the nation’s top research universities. He said this is due in no small part to funding from the Wisconsin Alumni Research Foundation, which licenses UW-Madison intellectual property, and the federal government’s support of pure research.
But he said there is anxiety over the future of UW-Madison, which has many new “remarkable” scientific facilities built largely with private funding (around 80 percent).
“The only hang-up we have now is (federal) sequestration, which will cut research funding,” he said. “For us, this could be a very big deal.”