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Information about UW System Program Revenue Balances and Reserves (Apr 26, 2013)

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April 26, 2013

Information about UW System Program Revenue Balances and Reserves

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

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Media Contact:
David Giroux
UW System
608-262-4464