If you read the news, you might have heard that the UW system had a whopping 648 million dollars in cash balance, and the legislature is up in arms because we are supposedly sitting on that cash — so they may withhold funding increases and withhold flexibility in spending that was promised in the past. To many, it sounds like the UW system isn’t being honest about how much money it actually needs and spends.
But really, this hoopla should not be a story at all.
Let’s put that cash balance in perspective. UW-Eau Claire’s Chancellor emailed faculty today explaining UWEC’s share of that reserve cash: UWEC does have a $52.9 million cash balance, a seemingly surprising number until you realize that “$46.3 million of that amount already is committed, leaving a cash balance of $2.35 million and reserves of $4.25 million for a total of $6.6 million, or 3.1 percent, of our overall budget.” The Chancellor compares this to your own personal checking account: You often have a cash balance that is bigger than it might be because you haven’t paid certain bills yet or because you are waiting for checks to be cashed. He claims, justly so, I think, “We believe this is a reasonable and responsible amount to have in our reserves, as it gives us the flexibility to respond to opportunities and challenges that we cannot predict in advance.”
That the legislature is considering both blocking a bill for $181 million in funding increase and blocking local flexibility in spending is an irresponsible response. Ten years ago tuition accounted for 38% of UWEC’s instructional budget. Now, those tuition dollars support 62% of the instructional budget. When such a large portion of your budget depends on student tuition (which it shouldn’t, but as we know, state funding has decreased drastically over time), it makes sense to keep a small amount of money on reserve (3.1% of a budget is not really that much) in case enrollment drops.[1] And enrollment dropping is a strong possibility, as rural Wisconsin is producing fewer high school students. So the legislature’s response to threaten witholding funding: An asshole response to a non-problem.
And it doesn’t help how media like the Journal-Sentinel, linked above, are pretty much repeating legislators’ complaints, rather than articulating how in fact much of that money is committed already, and how, in fact, having this cash balance is completely normal. As the the story states, “Lawmakers were unsatisfied with many of [University of Wisconsin System President Kevin] Reilly’s explanations, saying they created more questions. They said they were skeptical of his claims the system had plans on how to spend $441 million of the $648 million.” But no where in the story are those plans articulated. And language used in these stories, like “squirreled away,” makes normal practices (compare peer institutions) seem like deception.
This is nothing more than legislators, with the assistance of the news, making a story out of a non-story, in order to continue to de-fund public education.
[1] From the Chancellor’s email: “The National Association of College and University Business Officers recommends a reserve ratio of 40 percent, probably too high for a public institution such as UW-Eau Claire. The Government Finance Officers Association recommends a reserve sufficient to cover at least two months (17 percent) of operations.” Three percent relatively a pitance.
