At a Board of Regents meeting held at the University of Wisconsin-Milwaukee Thursday, representatives discussed the controversy surrounding the UW System’s $648 million budget surplus, which many called a “teachable moment” in respect to the way the board communicates about finances with legislators and Wisconsin citizens.
The UW System came under fire after reports surfaced that it held large cash reserves, which according to a Legislative Fiscal Bureau report, totaled approximately $648 million.
Due in part to the existence of these reserves, the Joint Finance Committee voted in May to amend Gov. Scott Walker’s 2013-'15 biennial UW System budget, eliminating a $181.3 million funding increase and instating an additional $2.5 million funding cut. It also enacted a two-year tuition freeze.
According to David Miller, associate vice president of the advisory Capital Planning and Budget office, the cuts will leave the UW System with $202.6 million in unfunded obligations. This means the system will have to eliminate funding in areas where money was already committed or planned.
In the wake of the cash reserves controversy, many regents said there was a need for greater transparency surrounding finances. Although the board reported the money held in reserves, many regents said the amounts were not explained and broken down in an understandable way.
Regent Tim Higgins said the controversy presented an opportunity to “make lemonade out of lemons” and work to improve communication about the budget with the legislature and Wisconsin citizens.
“We’re learning a hard lesson,” Higgins said.
UW System President Kevin Reilly also said he saw a need to find new ways to explain the budget, saying the system employed a complex financial model much different from those in the past.
“We can simplify the explanation and get the people out there to understand how we’re using the money that they pay in tuition and … taxes,” Reilly said.
Some regents, however, said they did not see a transparency issue. Regent José Vásquez said the budget information had always been available. In addition, Vásquez said he saw a widespread misconception about the purpose of the reserves, saying they were not accumulated without reason.
“When I say we have a reserve, it doesn’t mean that I’ve got a pot of money that is just sitting there for anything and everything that I want,” Vásquez said. “You build reserves because … you’re projecting, you’re anticipating, you’re planning well.”
In addition to the budget cuts, some regents took issue with other parts of the budget. Regent John Drew condemned a provision that prevents the Center for Investigative Journalism from operating in its current offices in Vilas Hall at the University of Wisconsin-Madison.
He also expressed disapproval over an amendment to the budget that prevents tuition fees from funding the UW System's student-advocacy group, United Council, unless students individually opt into paying. In past years, tuition dollars funded UC automatically unless students requested to opt out.
“Changing from an ‘opt-out’ to an ‘opt-in’ to me was strictly an attack on student voices,” Drew said.
The budget also delayed a human resources plan that had been in the works for two years and postponed a recommendation to allow the Board of Regents to establish compensation plans without legislative approval.
Reilly said he wanted to improve teaching salaries at UW schools, which he said are at least 18 percent lower than peer institutions.
“This leaves us with a growing threat to the health and vitality of our institution,” Reilly said. “The quality of the UW diploma is the product of quality people … and that quality is being undermined because we are not closing that compensation gap.”
Overall, Miller said the budget presented many challenges to the Board of Regents but believed the board would be able to make the necessary decisions about what it could and could not fund.
“We can manage this, we can and we will,” Miller said. “It will not be easy.”
