The “He-Who Rule”
Many years ago a tennis partner and lawyer friend asked me if I had
ever heard of the “He-Who Rule.”When I said I hadn’t, he recited it to me as follows: “He who benefits pays.”
The essence of the rule, he went on to explain, was that in order to get something beneficial to you in any negotiation, it would always be necessary for you to give something beneficial to the other side in return.
I hadn’t thought about that common-sense Rule until I reviewed my blog post from last week and realized that the way PASSHE officials treat PASSHE students violates the “He-Who Rule” in two significant ways:
1. PASSHE Officials—with their 100% control of PASSHE’s 174 governance board seats—make all key decisions while paying a minority (25%) share of PASSHE’s annual funding;
2.
PASSHE Students, Parents and Alumni Donors—with
their 0% control of PASSHE’s 174 governance board seats—make no key decisions while
paying a majority (75%) share of PASSHE’s annual funding.
PASSHE Has Been Hoarding Money since
its Creation in FY 1984
It is very instructive to look at the above heading in the context of the “He Who Rule.” That is, we need to ask and answer the following questions: 1) “Who benefits from PASSHE’s money-hoarding? And 2) Who pays for PASSHE’s money-hoarding?
The short answers are that PASSHE officials benefit while PASSHE students pay. More on this topic later.
The Full Extent of the Money-Hoarding Involved
Last time, we cited PASSHE’s troublesome trend of hoarding money since its inception in FY 1984 and we listed some total amounts involved without providing corroborating documents to back them up. This week we will provide links to official PASSHE data obtained through Pennsylvania’s Right to Know Law.
As seen in Chart 1, PASSHE’s Total Fund balance (a.k.a., Unrestricted Net Assets or Net Position) grew from a minimum of about $120 million in FY 1995 to a maximum of about $600 million in FY 2013.¹ During that 18-year span, PASSHE’s total fund balance increased at an average rate of 9.32% per year; If PASSHE were to continue with such a large yearly rate of increase, its Total Fund Balance would double every 7.5 years.
By way of background, PASSHE’s Total Fund Balance is a combination of the fund balances from fifteen different entities—the fourteen PASSHE universities and a fifteenth entity defined in Act 188 as the combination of the Office of the Chancellor and the Board of Governors (OOC+BOG).
The truth about PASSHE’s Total Fund Balance is largely unknown because the leaders of PASSHE have worked extremely hard since its inception in FY 1984 to keep that truth from becoming widely known.
Generally speaking, whenever the truth of a situation indicates danger for some individuals, those who feel that danger will typically adopt the tools and tactics of deception to prevent a dangerous truth from coming out. And the truth about PASSHE’s Total Fund Balance could be dangerous for PASSHE leaders.
PASSHE’s efforts to deceive regarding its Total Fund Balance manifest themselves in a number of ways:
1) As
noted in last week’s blog post, none of the three different Chancellors who led
the PASSHE Office of the Chancellor between 1992 and 2012 ever directed the
fourteen presidents to stop growing their rapidly increasing university fund
balances. In fact, all three Chancellors
remained largely silent on the subject, with the exception of Chancellor
Cavanaugh who appears to have recommended a policy limiting the size of PASSHE
university fund balances to ten percent of Annual Revenue. In fact, the PASSHE Board of Governors
adopted “BOG Policy 2011.01 - University Financial Health” - which took effect
on July 1, 2011, only to be rescinded by the Board of Governors just three and
one-half years later on January 22, 2015. So PASSHE is once again back to
operating without any fund balance limits.
2) But
various Vice-Chancellors for Administration and Finance who worked for those
three Chancellors between 1992 and 2012 not only encouraged PASSHE presidents
to hoard money in university fund balances, but suggested ways in which to hide
the size of those expanding fund balances, e.g., by moving some of those
unrestricted monies into “Plant Funds,” in a vain attempt to pretend that “Plant
Funds” were restricted funds, when in both fact and practice they remained
totally unrestricted.
3) For
years, PASSHE has worked hard to suppress any public mention of the fact that
OOC+BOG—the combination of the Office of the Chancellor and Board of Governors—has
its own Operating Budget as well as its own Fund Balance, separate and distinct
from those of the fourteen PASSHE universities.
4) Chart
2 is based on official PASSHE spreadsheets and reveals² that, despite being
limited by law to some $7.5 million in annual revenue, the Office of the
Chancellor plus the PASSHE Board of Governors have somehow managed to amass fund
balances many times larger than their annual revenues.
5) The
OOC+BOG fund balances go from $3,307,514 in 1993 to $33,412,369
in 2013. The average fund balance
during that time was $26, 383,249—which is 3.5 times larger than annual
revenue. Its annual fund balance in 2005 was $67,928,197—9 times larger than
its annual revenue.
6) Chart 3 shows fund balances for the fourteen PASSHE universities
and the OOC+BOG for two early years in PASSHE history (FY 1993 and FY 1994) and
one recent year (FY 2013). This Chart³ shows the fund balances in both dollars
and as a percent of annual revenue. The
fourteen universities in FY 2013 had fund balances that averaged 32.5% of their
annual revenue—three times higher than the 10% percent maximum allowed by the PASSHE
policy adopted by the BOG in 2011 but rescinded in 2015.
7) Chart 3 also shows that the fund balance for OOC+BOG in 2013 is
445% of its annual revenue.
¹ https://www.keepandshare.com/doc/7711028/chart-1-passhe-total-fund-balance-fy-1993-to-fy-2013-pdf-185k.
² https://www.keepandshare.com/doc/7711029/chart-2-passhe-ooc-bog-fund-balance-fy-1993-to-fy-2013-pdf-186k.
³ https://www.keepandshare.com/doc/7711030/chart-3-passhe-university-and-ooc-bog-fund-balances-fy-1993-to-fy-2013-pdf-194k.
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