As Chair of the Faculty Senate Budget Committee I would like to thank Gary for sharing the slides that will be the basis of the talk Howard Bunsis will give tomorrow. They are informative and very comprehensive. I believe they give a good review of the economic and political situation that has led to the dire circumstances facing WSU over the past few years, and likely continuing into the future. His analysis was especially useful in showing how a significant portion of the cuts from state appropriations are offset by tuition increases, assuming, of course, that the administration and regents choose to impose the full burden of allowed tuition increases on the students. The crux of his arguments are summarized very clearly in the first bullet on slide 90:
Is there really a financial crisis at WSU? No, as WSU has solid reserves, revenues exceeding expenses, strong cash flows, and manageable debt. This conclusion is confirmed by the strong credit ratings of WSU.
Bunsis insists that WSU has room to cut administrative expenses more, possibly sparing any core academic units. Moreover, he suggests that WSU use its reserves to balance the budget rather than further cuts, and that three are sufficient unrestricted reserves to do so . The first point is certainly debatable, but I believe while the second point may be legally true, it may not be so in terms of implied contracts and promises made to faculty and staff who were responsible for generating much of those reserves.
The reserve situation is summarized in Slide 39:
- Expendable net assets are the numerical sum of restricted expendable net assets and unrestricted net assets.
- Restricted non-expendable have restrictions that prevent spending, such as contractual or donor-imposed (permanent restrictions imposed by donors)
- Restricted expendable net assets are those that are externally imposed by creditors, grantors, contributors or laws, so that the money must be spent on that purpose. However, it is an indication of financial flexibility and freedom (money has been set aside to pay off principle).
- Unrestricted net assets represent the greatest financial flexibility and freedom for WSU, though the administration will claim these funds are “spoken for.” However, they are not firmly committed; if they were, the external auditors would not put them in the unrestricted category.My primary point of contention is whether WSU should expend the unrestricted net assets to cover any shortfall in state appropriations. While legally the administration has the right to spend these funds in the manner suggested by Bunsis, most of these fund, I believe, face internally imposed restrictions based on promises made by the administration to the faculty and staff who were responsible for generating these reserves. For example, I have some reserves the control of which has been promised to me by my dean because these reserves were generated by external grants I procured. These funds will be used in the future to support my research and teaching. There is an implied contract between me and WSU that these funds will be there for me. While I doubt there is a legally binding agreement, there is, in my opinion, an ethically binding agreement. The dean of my college often tells me that my department, and even some individuals within my department, control more reserves than he does. This situation exists only because he agrees to abide by promises made earlier.
Notice, please, that most of what I say here has been modified by terms like “my opinion” and “I believe” because there are no absolutes. Like anything else, there are tradeoffs between different promises made – to me to have control over the reserves I generate, to others for continued employment, to students to try to keep tuition low. Any choice from among the alternatives, or some compromise, has consequences for the future of WSU, and there is no easy solution. People losing jobs is dire, but so is abrogating promises that could adversely impact incentives and productivity at WSU in the future, or raising tuition so that a college education moves beyond the ability of middle class students. I do, however, believe that it is misleading to say that all reserves that are legally fungible can easily be spent to cover any deficit. I see the situation as much more complex than Bunsis concludes. The students, staff, faculty and administration at WSU deserve better, and need to work together to arrive what is best for WSU in the long run, even as we acknowledge that some individuals will be hurt.
Robert RosenmanProfessor of EconomicsChair, Faculty Senate Budget Committee
03 May 2011
Another View of WSU's Financial Situation
Dr. Robert Rosenman responded to Professor Bunsis' slides before his talk on April 21st in a e-mail to his fellow faculty senators. Since we are attempting to encourage a dialog, he has given us permission to post that e-mail here. Given the opportunity to add to his comments here, he chose not to.