Students, taxpayers, legislators and citizens are understandably concerned about program revenue balances held by the University of Wisconsin System and its institutions.
Most large institutions – public and private – end each fiscal year with some fund balances. This reflects prudent financial management. Comparing year-end balances to operating expenses, the Legislative Fiscal Bureau (LFB) reports that UW System’s “primary reserve ratio” was about 25% on June 30, 2012. This label is misleading, however, since only a small fraction of program revenue balances can be considered “reserve” funds. The majority of program revenue balances are restricted or committed.
Information about program revenue balances is published in UW’s audited annual financial reports and in the State’s Combined Annual Financial Reports. Those consolidated reports do not contain details about which institutions or departments have balances, or how those funds are being used. In fact, most of these balances reside at the campus level, and most are restricted or committed.
The UW System will do more to highlight these issues in the future. The UW will develop a new policy on balances and reserves, including clear guidelines about how these funds should be monitored and reported.
Enrollment growth is one main reason why these balances have grown. UW’s increased reliance on non-taxpayer funds is another. Beyond those two big trends, there are hundreds of reasons why campuses, schools, and departments have set aside funds for specific mission-related needs.
The LFB report shows UW System with a year-end balance of $648 million, excluding all “restricted” funds, such as dollars from federal aid, gifts, grants and contracts, and auxiliary enterprises. Any balance remaining in those restricted accounts must be used for its intended purpose.
UW institutions identified $441 million of that $648 million that is already committed for specific purposes. One-time program revenue balances help campuses address a variety of mission-critical needs. For example, this money might be used to provide seed money for innovative new programs and services. Funds could be used to provide “start-up packages” for newly hired faculty members, to provide equipment, research assistants, and support. About $27 million of these balances are set aside to cover Wisconsin GI Bill tuition remissions for veterans, and $12.3 million will be used for new UW Flexible Option degree programs.
That leaves $207 million in program revenue balances, including $80 million from tuition.
When setting tuition, or submitting budget requests to the State, UW leaders look at permanent ongoing expenses and long-term needs. One-time program revenue balances do not typically factor into that process, since those balances cannot be relied upon to cover ongoing fixed costs like utilities, salaries, and fringe benefits. The use of one-time resources to cover these ongoing needs would create a structural imbalance that might impair UW’s ability to serve future students.
How do UW System’s 2012 program revenue balances compare to others?
The Legislative Fiscal Bureau noted the importance of viewing fund balances in the context of UW System’s overall budget. Using a standard accounting methodology, and data from publicly available financial statements, the following table compares UW System’s “primary reserve ratio” with peer universities.
| Total Available Net Assets, FY2012 |
Total Expenses FY2012 |
Primary Reserve Ratio |
|
| UW System | $1,134,389,217 | $4,482,909,778 | 25.30% |
| University of California System | $5,404,834,000 | $26,293,792,000 | 20.56% |
| University of Texas System | $12,988,540,653 | $13,735,388,331 | 94.56% |
| University of Georgia System | ($348,889,401) | $6,916,054,103 | -5.04% |
| Minnesota State Colleges & Univ. | $547,446,000 | $1,903,985,000 | 28.75% |
| University of Illinois | $1,640,290,000 | $4,871,109,000 | 33.67% |
| UW-Madison | $541,858,740 | $2,351,452,486 | 23.04% |
| Indiana University | $1,479,392,000 | $2,670,227,000 | 55.40% |
| Michigan State University | $1,319,735,000 | $1,988,166,000 | 66.38% |
| Ohio State University | $2,210,887,000 | $4,636,450,000 | 47.68% |
| Purdue University | $2,019,304,000 | $1,860,009,000 | 108.56% |
| UC-Berkeley | $2,695,410,000 | $2,300,143,000 | 117.18% |
| UC-Los Angeles | $1,474,392,000 | $5,625,273,000 | 26.21% |
| University of Michigan | $5,809,798,000 | $5,887,158,000 | 98.69% |
| University of Minnesota | $1,511,791,000 | $2,993,694,000 | 50.50% |
| University of Texas-Austin | $2,503,864,959 | $2,442,850,728 | 102.50% |
| University of Washington | $2,512,516,000 | $3,970,537,000 | 63.28% |
| University of Iowa | $1,465,591,000 | $2,575,001,000 | 56.92% |
| Penn State University | $4,721,860,000 | $4,587,163,000 | 102.94% |
| UW-Milwaukee | $85,318,505 | $509,504,256 | 16.75% |
| Cleveland State University | $105,986,859 | $289,139,002 | 36.66% |
| Georgia State University | $132,893,734 | $593,195,429 | 22.40% |
| Rutgers* | $1,136,834,000 | $1,802,440,000 | 63.07% |
| Temple University | $1,525,400,000 | $2,292,842,000 | 66.53% |
| University of Cincinnati | $393,104,000 | $1,039,172,000 | 37.83% |
| Wayne State University* | $371,955,659 | $839,986,736 | 44.28% |
* From FY 2011 statements. FY 2012 statements not posted online
Campus Statements
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