Unrestricted funds dropped slightly to $867 million but COVID-19 closures has yet to impact audit figures

By Ola Lisowski for the MacIver Institute

The University of Wisconsin System holds $1.33 billion in reserve balances, according to a new audit report. Of the fund, $866.6 million is made up of unrestricted balances, and $468 million is restricted balances.

The audit, released by the nonpartisan Legislative Audit Bureau on July 30, shows total program revenue balances have increased by 0.8 percent since the previous year, when the system held $1.32 billion total. While restricted balances increased from $417 million to $468 million this year, unrestricted balances fell from $906.9 million to $866.6 million.

The figures reflect balances as of June 30, 2019, and therefore do not include the impact of the COVID-19 pandemic. University instruction went fully remote in March through the remainder of the spring semester.

A new program revenue report that reflects the pandemic’s effect on balances is forthcoming for the October 2020 meeting of the Board of Regents. At its June meeting, the UW System Administration reported that unrestricted program revenue balances are estimated to be $650 million as of June 30, 2020, according to the audit.

Restricted balances are primarily made up of gifts, nonfederal grants and contracts, and federal grants and contracts. Like the label suggests, such balances have restrictions on their use.

Unrestricted balances, however, do not have restrictions on their use. Those balances come from tuition, auxiliary operations, general operations, federal indirect cost reimbursements, and other sources.

Unrestricted balances came to be known as the UW System’s “slush fund” following 2013 revelations that the system held more than a billion dollars in unrestricted balances, even though students had faced 5.6 percent annual tuition increases for years. Then-Gov. Scott Walker implemented a system-wide tuition freeze for in-state undergraduate students thereafter, and the Legislature ordered the UW System to spend down its balances.

In the years following the 2013 slush fund scandal, the UW System indeed spent down its unrestricted balances, though the figures have fluctuated. Total balances are larger today than they were in 2013, at $1.33 billion today compared to $1.27 billion in 2013. However, the proportion of unrestricted to restricted balances has shifted considerably. Where 86 percent of the UW System’s program revenue balances were unrestricted in 2013, 64 percent are today.

The audit also shows the UW System has a total net position of $5.4 billion, the same as the year before but lower than prior years.

Gov. Tony Evers recently announced that his administration would cut state agency spending by $250 million in response to lower-than-expected revenues. In response, System President Tommy Thompson urged the Governor to spare the UW System, writing that it “has already born a disproportionate share of state cuts to date.”

Ola Lisowski is a Research Director at the MacIver Institute who focuses on education and tax policy. Reposted with permission.

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