Wisconsin Spotlight | June 8, 2020
MADISON — Hit hard by a double punch of the pandemic and Gov. Tony Evers’ lockdown of higher ed, the University of Wisconsin-System is coming hat in hand to the Legislature.
System President Ray Cross last week asked lawmakers to convene a special session to help Wisconsin’s colleges and universities out of its current financial jam.
“As we plan for fall semester, our universities are determined to find creative solutions to safely deliver quality education to students on-campus and through alternative delivery models. However, we face significant financial and operational challenges that are made much worse by the ever-changing nature of the pandemic,” Cross wrote in a letter.
The system seeks a law change to create a state-sourced line of credit it could tap into.
It would permit system schools to “use a tool” employed in the private sector and other private institutions of higher ed, “to assist with our cash flow,” Cross wrote.
Legislative conservatives see a massive bailout, potentially leaving taxpayers or students on the hook.
State Sen. Steve Nass has serious concerns about the proposal. The Whitewater Republican said the massive line of credit, potentially hundreds of millions of dollars, would be tied to a funding source, a common practice in issuing debt to public institutions.
“In the case of of the UW-System, this debt would either have to be guaranteed by the state or would be guaranteed by tuition and fees,” said Nass, vice chairman of the Senate Committee on Universities, Technical Colleges, Children and Families. “Such an action could set the course for potentially huge increases in tuition and fees on financially strapped families to retire this debt over many years.”
UW System in-state students have enjoyed a tuition freeze, locked in by the Republican-controlled Legislature and then-Republican Gov. Scott Walker in 2013. The current biennial budget, passed last year, extended the freeze.
Tuition relief followed a report by the nonpartisan Legislative Fiscal Bureau showing the system had stored up a massive cash reserve — a slush fund, as it’s been called.
While the system’s unrestricted fund balances have declined from about $1.06 billion in 2013, it still counted north of $750 million in reserves last year.
Cross is seeking a number of “creative” funding solutions.
“Some of these ideas are items that the UW System has been pushing for, even prior to the pandemic,” said Senate Majority Leader Scott Fitzgerald (R-Juneau) in a statement. “The Senate has had concerns in the past about lack of financial oversight. These are complicated issues that I’ll be discussing with our caucus before determining if it’s necessary to move forward.”
In March, the University of Michigan approved “stand-by” lines of credit for up to $1 billion to be used for general operating purposes in the event of a financial emergency.
Kevin Hegarty, the university’s executive vice president and chief financial officer, said the university would first look to balance sheet reserves to fund its operations, but …
“To be clear, the university would hope to not have to draw on these lines,” said Hegarty, according to The Detroit News. “But in the event of a financial emergency, having $1 billion in standby lines would be a highly-valued addition to our safety net.”
Nass said he fears the debt taken on would be abused by the UW System “to avoid necessary reforms and adopting cost saving measures.”
“It is simply too early in this economic crisis to consider drastic levels of debt for operational purposes,” the senator said. “Such an action should only be considered as a last resort and not rushed for political expediency.”