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‘CPA Caucus’ found UW System doom and gloom didn’t add up

By   /   May 8, 2013  /   4 Comments

By M.D. Kittle | Wisconsin Reporter

MADISON – They’re known as the “CPA Caucus,” and this gang of  number-crunching lawmakers was instrumental in uncovering the University of Wisconsin Systems arguably heftier-than-expected reserve.

The Republican lawmakers – Reps. Chris Kapenga of Delafield, John Klenke of Green Bay, Dale Kooyenga of Brookfield and Howard Marklein of Spring Green – all certified public accountants at their “day jobs,” found something just didn’t add up in the system’s financials.

At least the numbers didn’t seem to square with the doom-and-gloom picture the system had painted for the legislature, Kooyenga said.

“We read the comprehensive financial report that details the system’s finances, and everything we were hearing was that the system was struggling,” Kooyenga told Wisconsin Reporter. “We looked at the financials and found that was not the case. “

A group of Republican CPA's in the Assembly known as the CPA Caucus says it keeps a close eye on the state books, including a higher than expected reserve in the University of Wisconsin System.

NUMBER-CRUNCHING: A group of Republican CPAs in the Assembly known as the “CPA Caucus” says it keeps a close eye on the state books, including a higher than expected reserve in the University of Wisconsin System.

It seemed the deeper the CPA Caucus looked, the more questions they had about the actual state of the system’s finances.

“As we keep asking questions, we keep getting more and more money everywhere,” Kooyenga said.

Last month, a memo by the Legislative Fiscal Bureau revealed the system had cash reserves of $648 million at the end of the last fiscal year.

The nonpartisan fiscal bureau detailed a $1.05 billion balance in the UW System reserve accounts. That included the system’s tuition balance of $414.1 million, compared to a tuition balance of $212.8 million on June 30, 2009.

Much of those funds are restricted in how they can be used.

UW System President Kevin Reilly said just $207 million in the system’s cash balances were uncommitted or unrestricted.

Democrats and liberal organizations have taken aim at Republicans’ righteous indignation and what they see as political grandstanding following the financial release.

Paul Fanlund, editor of Madison’s progressive Capital Times, this week opines that the UW System is the latest target of GOP demonization. He said the Republican “howl” is unfounded.

“What has been uncovered is, well, solid proof of prudent financial management,” Fanlund writes. Later in his column he declares that, “Upon examination, there is not only no smoking gun, there is no gun at all.” He does concede some “political naivete by UW officials in misreading the public relations peril.”

Kooyenga counters the problem isn’t the fact that the UW System has a healthy reserve, noting what he says are the positive effects of public sector collective bargaining reform, entrepreneurial incentives for individual UW schools and effective tuition programs.

The real issue, the lawmaker said, is the lack of transparency and the politicking the system engaged in during the previous state budget cycle. System officials warned Wisconsin’s public colleges and universities would struggle mightily under the weight of a $250 million cut in the 2011-13 budget, and $66 million in lapses subsequently added to the austerity measure. The Republican-led budget did grant the system the authority to hike tuition by 5.5 percent over the past two years to help offset the losses, an allowance the system took without complaint.

“The disturbing part is that they never disclosed (the extent of the reserve) at any time during the request,” Marklein said. “It’s no different than a nonprofit misleading someone that they need more money when they’ve got more money than they say they do.”

Reilly as late as March testified before members of the legislature’s Committee on Joint Finance that cuts over the past four years have hit salaries hard, putting the system at a competitive disadvantage.

“We had eight years of furlough in each of the years of the previous biennium, and in the current biennium, with the higher payments for healthcare, the higher payments for retirement, the total compensation has gone down,” Reilly said, as reported by the Wisconsin Radio Network.

That kind of assessment comes across as disingenuous to critics, who question why the system sat on such a surplus as they lamented tight finances.

UW System officials and supporters say it’s not so simple, that unrestricted funds come with obligations, too.

“The criticism directed at the Wisconsin system echoes a debate that occurred in several states in 2011, when lawmakers investigated universities for having large amounts of ‘unrestricted net assets’ on their annual financial statements,” writes Kevin Kiley in an April 26 post for Inside Higher Ed, an online news organization that covers the higher education issues.

“That term, which many business officers say is misleading, applies to any money an institution has after expenses and restricted assets – typically gifts and contracts that have legal restrictions on how they can be spent – are subtracted from revenues. Like the Wisconsin balance, unrestricted net assets could include a range of funds set aside for designated purposes,” Kiley added.

The issue of transparency remains, however.

UW System spokesman David Giroux said system officials are working on new policies and procedures to address issues of communication and transparency.

“We will do a better job of explaining how it is that our campuses end the fiscal year with (a reserve), how those monies are being used and how it all ties in with our total budget picture,” Giroux said.

Republicans have called for a tuition freeze, and Gov. Scott Walker this week said he would move some of the $181 million additional funds his proposed budget marked for the UW System to K-12 public education and to pay for a tax cut.

Just how much, Walker said, remains in flux.

Kooyenga supports checking the system’s funding, but he said the legislature must do so in a prudent manner. He said it is “intellectually dishonest” to talk about funding across the board.

Giroux noted some cuts would be easier to manage than others. He said effectively fixed costs, such as compensation, fringe benefits, utility expenses and debt service, are harder to work around.

The UW Board of Regents is scheduled to meet next month to address the reserve and to discuss its transparency plan.

The CPA Caucus says its number crunching will go on.

“We also need to sit down and ask: In how many other places in state government is this happening?” Marklein said.

Contact Kittle @wisconsinreporter.com

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M.D. Kittle is national First Amendment reporter at Watchdog.org. Contact him at mkittle@watchdog.org.

  • sensible taxpayer

    you’d think a group of CPAs would realize that any business needs some reserves. With the economy declining, the legislature out to defund the UW, it’s prudent to keep cash reserves. This was never hidden, there is a CAFR and a UW system financial statement published annually, it you choose not to read it; well don’t blame the UW. You can lead a legislature to water but you can’t make them drink (unless of course a lobbyist has paid for the water). This is a big to do about nothing; why don’t they focus on agencies who can’t seem to manage the money they get, instead of bashing those agencies which do manage their money properly. All this is going to do is lead to a spend it or lose it mentality like at other agencies, which is a waste of tax payer dollars.

  • http://www.facebook.com/richard.linehart Richard Linehart

    As long as the republicans control everything no other state agency will be put under the microscope. Republicans have to get over their two-faced view of the UW. They say it’s a huge benefit to the state in education and more importantly innovation and jobs and then they turn around and whack it everytime they can. On the other hand Kevin Reilly needs to go. Tone deaf does not begin to describe it. I believe he’s done a decent job leading the system, but he’s a horrible politician and that is a HUGE part of the job.

  • FantasiaWHT

    Kooyenga put it exactly right – the issue is not the existence of the reserves. The size of the reserves may be an issue, but not more than a tiny one. The real issues are (a) the lack of transparency; and (b) the UW system crying pauper and asking for more money and tuition raises while sitting on a healthy pile of cash.

  • disqus_HaZYtdW90L

    You said it all FantasiaWHT. We need to support more CPA’s at a local level for office. They are the ones who can shine a light in all the dark corners. It is not what UW had…it is how they hid it while crying poor with a ham under one arm and loaf of bread under the other!

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