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April 23, 2013 9:41 PM Why Are Wisconsin Colleges Saving Money?

By Daniel Luzer

Wisconsin policymakers are very irritated at the University of Wisconsin system’s financial priorities.

They’re not annoyed that the system is spending too much, however; the problem is the system seems to be saving money.

According to an article in the Milwaukee Journal Sentinel:

Trying to balance damage control and candor, University of Wisconsin System officials acknowledged Monday they had been less than forthcoming about $648 million in cash spread over hundreds - perhaps thousands - of accounts at individual campuses.
Outraged legislators, still reeling from a report that found the system had squirreled away more than a quarter of its unrestricted budget, clambered for a two-year freeze on tax support and tuition - a move that would reduce by $210 million what the system had hoped for in the next two years.

The system had $648 million spread over so many accounts, it explained, because it was saving for “cushions against future enrollment losses and revenue volatility.”

Nearly two-thirds ($414 million) of the total $648 million squirreled away in accounts on the campuses and in the system office came from tuition, according to the state report. Resident tuition increased 5.5% each of the past six years, generating about $35 million in new money each year for the UW system at the same time enrollments were growing.

UW President Kevin Reilly explained that “More folks on the campuses have gotten used to the notion of we’d better save up some money because the long-term trend is we’re going to have to do more for ourselves.”

The trouble is that Wisconsin’s savings accounts were, well, sort of mysterious. The university system had argued in recent years that it needed more money because of state budget cuts. But meanwhile colleges were also squirreling cash it derived from student tuition.

Was this wrong? Sen. Alberta Darling, the Republican co-chair of Wisconsin’s budget-writing Joint Finance Committee, asked rhetorically if it was “incompetence or arrogance on the part of the UW System?” that lead to the current situation. “It seems like it’s a case of both.”

Well, perhaps. But maybe it’s just some prudent financial behavior. If you run an institution and you’re worried that a major funding stream is going to dry up, isn’t it a good time to store up some cash reserves?

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer