Cal State says that hoarding $1.5B was ‘nothing nefarious’
Someone a government bureaucrat never wants to see at the door is veteran State Auditor Elaine M. Howle. Her latest target: California State University.
Howle has been auditing state agencies for over 35 years, skillfully rooting through their books and uncovering dark secrets.
Last week Howle reported that giant CSU had hoarded a $1.5 billion surplus, hiding it from legislators and students while hiking tuition and poor-mouthing the state for more money.
The CSU chancellor’s office, she wrote in her report, “has failed to fully disclose financial resources that it holds in outside accounts. ...
“As of June 30, 2018, CSU had accumulated a surplus of more than $1.5 billion, which consisted primarily of unspent tuition revenue. During the same decade this surplus was growing, the annual tuition for students … nearly doubled. And the state increased annual appropriations to CSU as a result of additional voter-approved taxes.”
Cal State Chancellor Timothy P. White denied all.
“Those who think we’re doing something on the sly just really are totally, totally inaccurate,” White told the Los Angeles Times. “There is nothing nefarious here.”
In a prepared statement, the chancellor called the report “irresponsible” and added: “Reserve funds are like a family savings account or the much acclaimed state of California’s Rainy Day Fund, which is … used to … protect against uncertainties.”
But here’s one key difference: The Legislature, governor and voters approved the state rainy day fund in a statewide election. CSU’s fund wasn’t discussed publicly because few apparently knew of its existence.
White denies that, writing: “We have gone to great lengths to publicly report information about investment balances, net assets and reserves. … The report’s incorrect claim that the CSU failed to fully inform its stakeholders … overlooks dozens of presentations.”
Maybe it was written in small type, in impenetrable lingo. Any verbal presentation was garbled and muted.
Gov. Gavin Newsom, a CSU Board of Trustees member for eight years, hasn’t commented publicly. A Newsom spokesman said the CSU board “was given notice of reserves” in 2017 “as the audit indicates.”
The new lieutenant governor, Eleni Kounalakis, has been a CSU Board of Trustees member since January. She told me: “There has been nothing in the paperwork the last six months that talked about this reserve. And there hasn’t been anything before the trustees since 2007 that discussed a reserve.”
“One question is how big a reserve should there be,” she said. “The trustees should be engaged in that discussion, especially after they raised tuition the last few years and the Legislature has been allocating more funds.”
“The second question is transparency,” Kounalakis said. “It’s pretty clear the accumulation of a reserve was not as transparent as it should have been.”
Assemblyman Kevin McCarty, D-Sacramento, chairman of the Assembly Budget Subcommittee on Education Finance, found it “really interesting” that during the recession, CSU apparently didn’t dip into its reserve. It kept growing. Meanwhile, tuition climbed and student programs were dramatically cut.
Assemblywoman Sharon Quirk-Silva, DFullerton, asked for the audit on behalf of a university union. CSU is “using different terminology,” she said, “but the reality is they raised tuition and asked us for more money many times while they had a big surplus.”
Howle, who has a staff of 125 auditors, says: “We’ve been doing this for a long time. Our job is disclosing facts and the truth.”
It seems she has disclosed it again. CSU should listen up.