PASSHE’s Troublesome Trends
Last week we inferred that there were some trends in the official data regarding the PASSHE Harrisburg office and the fourteen universities, which PASSHE officials clearly didn’t want the public to know about.
The fourteen PASSHE universities Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester universities.
As we will see, public awareness of these PASSHE’s trends would raise embarrassing questions that its top officials would be hard pressed to answer. And that in turn would account for PASSHE’s need to obfuscate when it comes to its FactBooks, strategic plans, and a host of problematic transactions involving money—the “Mother’s Milk of Politics”—according to Jesse Unruh, the World’s most famous expert on the subject.
According to Merriam-Webster, the word “obfuscate” has the following synonyms: “becloud, befog, blur, cloud, fog, muddy.” And why would anyone feel the need to obfuscate, i.e., to muddy a situation?
Clearly, one obfuscates in an effort to hide the truth of a potentially embarrassing situation. Obfuscation is one of the more obvious tools and tactics of deception. Why do PASSHE officials feel a need to deceive?
"A lie would have no sense unless the truth were felt dangerous."
Alfred Adler (1870-1937)
In order to understand PASSHE’s need to deceive, it is instructive to consider some “truths” that could be seen as dangerous to PASSHE officials if those truths were to become public. Consider just this one:
PASSHE Has Been Hoarding Money since its Creation in FY 1984
When I began my 20-year tenure as a PASSHE university president in August of 1992, I learned that my predecessor had left the institution with a $2.5 million “fund balance” on a $50 million annual budget.
Being new to the PASSHE system, I asked the chief financial officer whether our fund balance—which was equal to 5% of annual revenue—was satisfactory with regard to PASSHE Board of Governors’ policy.
He responded that PASSHE had no policy on how large or small individual university fund balances should be, but shared with me that a proposed policy had been discussed but never approved. That proposed policy called for fund balances at individual universities to range between 4% and 8% of annual revenue.
The Definition of Fund Balance
By way of background, in a given year fiscal year (July 1 to June 30), every PASSHE university receives annual revenue and incurs annual expense. When revenue exceeds expense in a given year, the surplus goes into the institution’s “fund balance.” But if in a given year expense exceeds revenue, the deficit must be taken out of the fund balance in order to balance the institutional books for that year.
So long as a university has a positive fund balance, it is said to be “solvent.” But should a university fund balance become zero or negative, that university would be said to be “insolvent,” a.k.a., bankrupt.
Based on this background information, a fund balance may be seen as a sort of “savings account” or “rainy day fund” that is maintained for the purpose of protecting the institution from sudden, unbudgeted or otherwise unforeseen expenses that might crop up unexpectedly in the middle of a fiscal year.
Fund Balance, Unrestricted Net Assets, and Net Position
As the accounting rules for “public” universities evolved over the last thirty years, the label “Fund Balance” was replaced by the label “Unrestricted Net Assets.” Then later, the label “Unrestricted Net Assets” was replaced by the label “Net Assets.” But one thing is certain: Only the name has changed!
Whether one calls such an account a fund balance, unrestricted net assets or net position, the essence of the monies contained in that account is that they are unencumbered and without restriction. In other words, those dollars may be spent at the discretion of the institution’s president—subject only to the normal PASSHE oversight rules on university spending—which stipulate that all university expenditures must be approved by the local Council of Trustees after the fact, that is, weeks or months after those monies have already been spent.
Witnessing the Tools and Tactics of Deception
After attending a few monthly meetings of the presidents with the PASSHE Chancellor in Harrisburg, I soon learned that PASSHE university “fund balances” had become a very touchy subject. I was told by the Chair of my Council of Trustees that prior to my arrival, Governor Casey became furious when he found out that PASSHE, as a fourteen-university system, was sitting on a combined fund balance of $90 million, with one university (with annual revenue similar to ours) holding an incredible $19 million of the $90 million total.
Gov. Casey reportedly demanded that the Board of Governors return some of its State Appropriation for that year in view of the large fund balance that PASSHE had accumulated. The BOG apparently refused but, I was told, promised to: 1) cease the money hoarding; and 2) “spend down” any huge fund balances.
Despite any assurances PASSHE officials may have given to Gov. Casey or other subsequent Governors of the Commonwealth of Pennsylvania, official data show that PASSHE money hoarding not only continued since the time of Gov. Casey, but escalated to astronomical levels in the 23 years since his angry outburst.
Official PASSHE data show that by the end of FY 1993 (my first full year in office), PASSHE’s total fund balance had already grown from $90 million to $174.5 million. And by FY 2011, it had continued to grow to $511 million, i.e., more than half a billion dollars, or about 33% of PASSHE’s annual revenue of $1.5 billion!
Every year between 1992 and 2012, under three different PASSHE Chancellors, I was present as the list of university fund balances was distributed to the assembled presidents. To my amazement, no Chancellor ever said, implied or suggested to the group of presidents that PASSHE’s 20-year trend toward ever larger fund balances might be problematic in any way.
To be continued.