ST. CLOUD, Minn. -- Rainy day coffers at Minnesota State Colleges and Universities have swelled significantly in the last decade, nearly tripling to almost $100 million, state records show.
Minnesota State Colleges and Universities officials say that happened as part of an effort to rebuild reserve funds at the system's 31 colleges and universities. The increases came after MnSCU officials say reserves were judged to be too low to ensure the system's financial health.
But state Rep. Gene Pelowski says the swelling reserves are cause for concern. Pelowski, who chairs the House committee that oversees state colleges and universities, questions the timing of the increases and says not enough is known about how the reserve funds are used.
The fact that MnSCU institutions are collectively holding almost $100 million in reserve "is a paradigm we can no longer sustain," said Pelowski, DFL-Winona.
Pelowski said his committee may hold hearings on MnSCU reserve levels as soon as this fall. The 14-term lawmaker, a leading champion for a two-year MnSCU tuition freeze enacted last session, says he's especially bothered that reserve funds were growing as tuition rates were soaring during the last decade.
"Why has tuition gone up by these amounts when (MnSCU) had this much in reserve?" Pelowski asked.
MnSCU officials contend reserves are a key tool for campus administrators when they need to quickly fix leaky roofs or offset unexpected declines in enrollment.
A national expert on college finances says MnSCU reserve levels are in line with comparable institutions in other states.
The increase began after the 1998 passage of a policy by the MnSCU board of trustees requiring many colleges and universities to bolster their reserves. MnSCU attributes the increase in reserve funds to rising enrollment, declining state funding, cost inflation and an effort to bolster reserves to ensure campuses had adequate resources.
According to MnSCU spokesman Doug Anderson, "much of the increase was intentional."
Steady upward trend
Reserves held by MnSCU institutions soared about 162 percent in a decade, from about $38.1 million in fiscal year 2003 to $99.8 million for 2012, the last year for which data is available.
The amount held in reserve by the MnSCU central office increased much more modestly, from about $7.7 million in 2003 to $9.2 million in 2012, or about 19.5 percent.
Enrollment at MnSCU institutions grew about 16 percent during that time frame.
From 1998 to 2003, reserve levels had stayed roughly steady.
At St. Cloud State University, reserves rose more than 223 percent, from $3.25 million in fiscal year 2003 to $10.5 million in 2012, records show. At St. Cloud Technical & Community College, reserves jumped from about $945,000 in 2003 to about $2.1 million in 2012, an increase of about 122 percent.
Since 1998, MnSCU board policy has said reserves at its colleges and universities should be between 5 percent and 7 percent of the previous year's general operating revenue, primarily made up of student tuition and state funding.
In 2003, combined reserve levels at MnSCU colleges were less than 5 percent of revenues. MnSCU universities' reserves were at less than 3 percent of that mark.
One of the system's universities, Minnesota State University-Moorhead, had no reserves in 2003. Others, such as Bemidji State University, Metropolitan State University in St. Paul and Southwest Minnesota State University in Marshall, had just 2 percent of revenues in reserve.
By 2012, reserves at nearly all MnSCU institutions were within the 5 percent to 7 percent range. MnSCU officials say that trend has helped improve the system's financial health.
Anderson points to composite financial indices, assigned to each college and university to assess their financial soundness, which have improved for MnSCU institutions in recent years. The improvement is due in part to higher reserves, Anderson said.
Anderson also said it wouldn't track with MnSCU board policy or with sound management practices to use reserves to offset tuition revenues.
"It's not feasible to use reserves as an ongoing substitute for any key component of our operating revenue," Anderson said. "Once you spend those reserves, they're gone."
Expert: Not unusual
A national expert on college and university finances says MnSCU reserve levels shouldn't raise eyebrows.
Sue Menditto is director of accounting policy for NACUBO, or the National Association of College & University Business Officers.
Reserve levels at Minnesota State Colleges and Universities are "totally in line with what I've heard from a couple hundred other colleges," Menditto said.
Menditto also says MnSCU reserve levels are in line with -- or perhaps even a bit lagging -- another common metric: how long the reserves could keep paying an institution's bills in the absence of other revenues.
"Most businesses would say, you've got to have three or four months of a cushion, at least," Menditto said.
MnSCU officials say most colleges and universities have enough in reserve to cover payroll for 1 ½ to 2 ½ pay periods. Pay periods are two weeks.
Such assurances may not soothe Pelowski, who has been an outspoken critic of what he views as administrative bloat within MnSCU and of increasing tuition within the system. At St. Cloud State, for example, tuition rose by about 88 percent from 2003 to 2012.
Pelowski says he plans to accompany members of the House Capital Investment Committee on a fall tour of MnSCU campuses. The committee typically tours campuses to view sites of proposed construction projects for which MnSCU wants state bonding money.
Pelowski says he'll use the tour as a chance to learn more about how the colleges and universities used their reserves for facility maintenance and other purposes.
"I want to know, campus by campus, how these reserves were used to fix these things," Pelowski said.
Pelowski's Senate counterpart, Sen. Terri Bonoff, DFL-Minnetonka, who chairs the Senate higher-education panel, says she sees nothing amiss with the current levels.
"I think that's a good amount," Bonoff said. "It's really important for any institution to have something in reserve, should something happen."
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