Lawmakers grill CSU chief over surprise surplus
After a state audit indicated in June that California State University amassed a surplus of more than $1.5 billion over the past decade while doubling tuition to nearly $6,000 a year, state lawmakers grilled CSU Chancellor Timothy White on Monday, demanding to know why.
“This is not illegal, but it sure doesn’t look good,” said Assemblyman Miguel Santiago, DLos Angeles, of the higher education committee.
The money is included in a $4 billion investment account that White said is designated reserve funds, and not surplus cash that can be spent for ongoing needs at the university.
“We don’t use onetime funds for ongoing expenses,” White told the audit, higher education and education finance committees of the Senate and Assembly. It’s not “fiscally prudent.”
But state Auditor Elaine Howle told the lawmakers her review found no clear indication that the $1.5 billion — mostly from tuition — was tied up and could not be used for instructional purposes.
She said that from 2008 to 2018, the period studied, CSU officials never told students about those funds, even during annual, statemandated discussions with student leaders to discuss plans to raise tuition, Howle said.
Nor did university officials clearly tell state lawmakers about the money, Howle said, despite submitting numerous financial documents to the state.
“The concern we had is that there wasn’t disclosure that these funds could be used to perhaps offset tuition increases,” Howle said.
In short, she said, CSU’s problem is a lack of transparency born of a lax reserve policy.
White said that, going forward, CSU would implement the audit’s numerous recommendations intended to help CSU clarify to the public how its reserves can be spent.
“The CSU commits to implementing and adhering to each of the report’s recommendations,” he said. However, he added: “The CSU did not hide money.”
Audit committee chairman Rudy Salas Jr., DBakersfield, asked how to address the “elephant in the room: Was the money hidden?”
Howle said, “You will not find the word ‘hidden’ in the audit. We’re saying they did not fully disclose the $1.5 billion.”
But CSU Trustee Jack McGrory, the trustees’ audit committee chairman, denied that. “It is my firm belief that the CSU has been nothing short of open and transparent,” he said.
Grace Pang, a San Jose State sophomore and vice president of student affairs at the California State Student Association, seemed to sum up the frustration among the lawmakers and others in the room: “The truth should not be this hard to pursue,” she said.
White said that while he largely agreed with the findings, he “took umbrage” at a suggestion in the audit — and the resulting news stories — that CSU had squirreled away money it could use for students. That “risked unfairly tarnishing (CSU’s) reputation,” he said.
Not all the lawmakers were convinced.
“Next year, when we start the budget cycle, we’ll have to evaluate CSU’s request,” said Sen. Richard Roth, DRiverside, vice chair of the Joint Legislative Audit committee. He was referring to the possibility that CSU might have plenty of reserve funds to dip into.
“The main concern is not that CSU has a reserve, but that we did not know about it,” Pang added.
Leaders of the California State University Employees Union, which represents CSU support staff, proposed the audit last year to Assemblywoman Sharon QuirkSilva, DFullerton (Orange County), after learning of the investment account in 2017. The union was in a labor dispute with CSU at the time. QuirkSilva served on the Higher Education Committee and requested the audit.
In her testimony Monday, Catherine Hutchinson, the employee union’s vice president for finance, disputed White’s description of the money as a reserve fund.
“The facts reveal otherwise,” she told the lawmakers. “The CSU has been hoarding money and not spending the funds given to them by the Legislature to spend in each fiscal year,” she said. “One and a half billion dollars just sitting in outside accounts is alarming.”