Gov. Scott Walker and his fellow Republicans in the Legislature called for freezing tuition for two years Friday after a state review revealed that the University of Wisconsin System had cash reserves of nearly $650 million at the end of the last fiscal year.
While the UW System said the amount of uncommitted cash was much less than that, the disclosure infuriated Republican lawmakers just as they begin deliberations on the next two-year budget.
Republicans questioned whether Kevin Reilly should remain as president of the UW System, and Assembly Speaker Robin Vos (R-Rochester) said he was unsure the system should get any of the $181 million increase in taxpayer funds Walker had previously recommended, including $20 million for new initiatives.
Reilly could not be reached for comment, nor could UW System Regents President Brent Smith.
Vos said it was too early to say whether Reilly should remain as the head of the UW System, but said he saw a pattern of financial mismanagement during Reilly's tenure.
"I have serious concerns about whether the credibility of the UW System can recover with the current leadership in place," Vos said.
In the past, Vos has supported giving UW-Madison more flexibility, but that has changed because of Friday's disclosure, he said.
"They have now pushed me entirely in the opposite direction," Voss said of UW System leaders.
In all, the UW System had a $1.05 billion balance when the fiscal year ended June 30, according to the nonpartisan Legislative Fiscal Bureau. The bureau subtracted gifts, grants and federal aid from that sum because UW System officials have little control over how that money can be spent. Of the remaining $648 million reserve account, the UW System said it already had commitments for $441.2 million.
"If you have $450 million in your piggy bank, I can't see why you need another nickel," Vos said in an interview.
The UW System said in a statement released shortly before 6 p.m. Friday that only about $207 million of the cash balance was unrestricted or uncommitted.
As reported by the state review, the reserve fund would account for one quarter of last year's unrestricted budget for the UW System, which has 181,000 students at 26 campuses. Cash reserves swelled even though the university system faced sharp reductions in state tax money it receives.
"It is very concerning to learn the UW System has been running a surplus balance of this size, especially at a time when students, families, and lawmakers have continually heard from the UW System about the need for more money to offset 'devastating cuts,' " said a statement Walker issued.
Vos and other GOP leaders in the Legislature issued a statement calling for a tuition freeze just before Walker said he backed the idea.
"We are outraged with the mishandling of taxpayer dollars and the pattern of incompetence shown by university system administrators," said the GOP leaders' statement.
"It is not only unfair to the students and their parents who keep getting hit with tuition hikes; it's unfair to the taxpayers of Wisconsin."
The GOP statement came from Vos and four other powerful lawmakers - Assembly Majority Leader Scott Suder (R-Abbotsford), Senate Majority Leader Scott Fitzgerald (R-Juneau), Rep. John Nygren (R-Marinette) and Sen. Alberta Darling (R-River Hills). Nygren and Darling are co-chairs of the budget-writing Joint Finance Committee.
While the state review identified $414.1 million of the cash reserves as tuition, the UW System said tuition accounted for $82 million, taking into account restrictions and existing commitments.
The state's $414 million figure would be twice the amount of tuition money in reserve three years earlier, at a time when tuition was rising 5.5% each year. The 5.5% tuition increases raised an additional $35 million in each of the three fiscal years from 2009 to 2012.
"Tuition money should be going into the classroom to serve students, not going unused in a reserve account," said Geoff Murray, president of United Council of UW Students and a UW-Stevens Point student. He noted tuition has increased far more than inflation nearly every year.
Reilly responded only to concerns about how large the UW System's cash reserves should be when the UW System released its statement at the end of the day.
"We welcome a conversation about the appropriate levels of fund balances, how those funds should be used to benefit students and the state, and what level of unrestricted reserves should be maintained as we manage a complex higher education enterprise in uncertain times," Reilly said in the statement.
The cash reserves identified by the state review would make up 25.7% of the $2.47 billion the UW System had in its unrestricted budget in 2011-'12.
The reserve fund was discovered after the Assembly's "CPA caucus" - a group of accountants who serve in the Assembly - raised questions about numbers they found in a state audit. The fiscal bureau and the Legislative Audit Bureau then went to the UW System to get answers.
The UW System has always had a cash balance in reserve, UW System Spokesman David Giroux said.
"Cash balances have grown due to rapid enrollment growth and UW's increased reliance on non-state revenues," Giroux said. "These balances take on greater importance as UW campuses become more reliant on new revenue streams, and must hedge against volatility caused by fluctuations in private giving, endowment performance, federal funding, student enrollment, and other trends."
Just hours before the fiscal bureau issued its memo, Reilly announced he would recommend capping tuition at 2% a year for the next two years, eliminating the wait list for financial aid and expanding work-study opportunities - assuming funding and flexibility provisions for the UW System remained intact.
A total of $60 million from cash reserves would be allocated over the next two years under Reilly's proposal announced Friday: $30 million for additional financial aid; $10 million for the new UW Flexible Option degree program to help working adults earn a college degree; and $20 million for economic development grants to boost Wisconsin's economy.
Sen. Glenn Grothman (R-West Bend) said it was callous for the system to propose any tuition increase on the day that its vast reserve funds were disclosed.
He called for cutting tuition, rather than freezing it.