PASSHE Officials versus PASSHE Students - Part 8

Follow the Leader

 
By the end of FY2013, the combination of fourteen PASSHE universities plus the entity known as OOC+BOG (the Office of the Chancellor and Board of Governors), was sitting on a total fund balance¹ of almost 40% of annual revenue (a $600 million fund balance divided by $1.6 billion in annual revenue).
 
At that same time, OOC+BOG was sitting on a fund balance equal to 445% of its annual revenue (a fund balance of $33,412,369 which is 4½ times its maximum annual revenue of some $7.5 million by Act 188).
 
To put this in perspective, an OOC+BOG fund balance equal to 445% of annual revenue is eleven times larger than the 40% average figure for the fourteen PASSHE universities.  So when it comes to hoarding money, the PASSHE universities, with an average fund balance of 40% of annual revenue, are clearly following the example set by PASSHE leadership in OOC+BOG, yet remain well behind the “leader.”
 
The fourteen PASSHE universities include Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester universities.
 

PASSHE’s Annual Request for Additional  Commonwealth Funding

 
In view of PASSHE’s $600 million fund balance in FY2013, it is instructive to look at how much State funding the PASSHE Board of Governors requested from the Commonwealth of Pennsylvania for the following year, FY2014.  From page 5 of PASSHE’s official Appropriations Request 2013-14,² we read:
 
“PASSHE’s 2013/14 appropriation request approved by the Board of Governors…seeks an additional $11.6 million in the next fiscal year, an increase of 2.8 percent.  PASSHE’s 2013/14 operating budget would increase 2.4 percent.” 
 
And from Page 8 of PASSHE’s same Appropriations Request for FY 2014, we read:
 
“$424.3 million, an increase of $11.6 million or 2.8 percent. Although no decision was made concerning tuition rate increases at that time, an assumption that tuition and fee revenue will increase to balance the budget has been incorporated in the following tables. The Board will consider addressing the remaining budgetary requirements in the spring through a tuition increase or other means.” 

Note that PASSHE’s total FY2013 fund balance ($597.6 million) is 45% larger than PASSHE’s total State Appropriation for FY2013 ($412.7 million), and is also more than fifty times larger than its requested $11.6 million annual funding increase.  One wonders what PA legislators may think when PASSHE asks for more State money each year while sitting on such huge fund balances.
 
For a clue as to what PA legislators may think, check out the Pittsburgh Business Times article³ from October 9, 2015 entitled “PASSHE requests increase in state funding.” It contains this quote:
 
“PASSHE's annual appropriation was cut by more than $90 million in 2011-12. It has not received an increase in state funding in seven years.”

One-Half of One Percent

In Act 188 of 1982⁴ (pp. 19-20, Section 20-2016-A, Continuation of Powers and Duties), we read as follows:

“Act 188 of 1982 as amended enabling Legislation for the Pennsylvania State System of Higher Education

Section 3. Funding for the Board of Governors and chancellor shall come from all operating funds available to the state colleges and state-owned university, but shall not exceed one-half of one per centum (.5%) of such funds. For purposes of this section, the phrase “operating funds” means any federal appropriation, any state appropriation, any student tuition fees and any student fees for room and board.”

 
It is clear from this section of Act 188 that the Pennsylvania Legislature set out to impose strict limits on how much annual revenue the “PASSHE central office” (i.e., the OOC+BOG) would be permitted to have.
 
As we will see from official PASSHE records obtained under the Pennsylvania Right to Know Law, PASSHE’s central office—OOC+BOG—appears to have found ways of getting around that explicit legal limitation.

Follow the Money

 
After submitting a Right to Know request to PASSHE on July 21, 2012 I received a PDF file⁵ purported to list the actual revenues and expenditures for the entity OOC+BOG for all fiscal years between 1993 and 2013.    

FY 1993

For FY1993, PASSHE reported the following figures for OOC+BOG:  Total Revenue of $4,062,578; Total Expenditures of $3,953,547; and Revenue less Expenditures of $109,031.  These figures suggest that OOC+BOG managed to spend only 97.3 of its annual revenue that year,  which means an “operating margin” of 2.7%, a figure that falls nicely between the 2% to 4% range once mandated for the fourteen PASSHE universities but never required for the Office of the Chancellor and the Board of Governors.
 
Since the revenue to OOC+BOG must not exceed one-half of one percent of PASSHE’s Total Revenue, the figure of $4,062,578 corresponds to one-half of one percent of $812,515,600. But PASSHE’s total E&G revenue in FY1993 was only $716,868,076.  And one-half of one percent of that figure is $3,584,340. The additional revenue ($478,238) is clearly due to the one-half of one percent of the room-and-board revenue from all fourteen PASSHE universities, which would have to have been $95,647,600 in FY1993.

FY 2013

For FY2013, PASSHE reported the following figures for OOC+BOG: Total Revenue of $9,197,567; Total Expenditures of $9,336,309; and Revenue less Expenditures of -138,742.  These figures reveal OOC+BOG spent 101.51% of its revenue that year, meaning that its operating margin was -1.51.  As explained previously, when annual expenses exceed annual revenue, the shortfall must come from fund balance.   
 
The FY2013 revenue figure for OOC+BOG is equal to one-half of one percent of $1,839,513,400.  But PASSHE’s total E&G revenue in 2013 was only $1,519,325,346, and one-half of one percent of that figure is $7,596,626.  The additional revenue ($9,191,567 - $7,596,626) equals $1,594,941 and would represent one-half of one percent of the student room-and-board revenue from all fourteen PASSHE universities, which would have to have been $318,998,200 in FY2013.
 
To be continued.
 
¹ https://www.keepandshare.com/doc/7711030/chart-3-passhe-university-and-ooc-bog-fund-balances-fy-1993-to-fy-2013-pdf-194k.
² https://www.keepandshare.com/doc/7734251/passhe-s-2013-14-appropriation-request-pdf-709k.
³ https://www.keepandshare.com/doc/7734261/pittsburgh-business-times-passhe-requests-increase-in-state-funding-october-9-2015-pdf-161k.
⁴ https://www.keepandshare.com/doc/6772880/act188-pdf-405k.
⁵ https://www.keepandshare.com/doc/7734281/passhe-ooc-bog-annual-revenues-and-expenditure-from-fy-1993-to-fy-2013-pdf-1-2-meg.