By TODD RICHMOND
MADISON, Wis. (AP) — Questions about the relationships between University of Wisconsin System schools and their private foundations could mean less aid for the system when the state budget is completed, the state Senate’s top Republican signaled Thursday.
Gov. Scott Walker’s 2017-19 budget calls for a $100 million boost in funding for the university system, with about $42.5 million being contingent on the system’s meeting performance standards. But Senate Majority Leader Scott Fitzgerald told reporters that allegations that former UW-Oshkosh officials illegally transferred millions of dollars to that school’s foundation to fund construction projects are a “dark cloud” and will weigh on lawmakers’ minds as they revise the budget.
Shortly after Fitzgerald had made his remarks, the Legislature’s audit committee voted unanimously to order a state review of UW institutions’ relationships with their 74 affiliated organizations. It’s unlikely that review will be completed by the time the budget is finished in late June or early July, however.
“I just think it’s going to be in the back of members’ minds when you get to the UW portion of the budget and you talk about how much revenue is going to be in the budget for the system,” Fitzgerald said. “It’s a dark cloud that’s out there that I know is going to be on members’ minds when you ask them to support different aspects of the budget when it comes to UW.”
UW System President Ray Cross told reporters outside the audit committee that he hopes Fitzgerald and other legislators take the Oshkosh situation in context. He said system officials started an extensive review of schools’ transactions with their foundations after they had learned of the Oshkosh allegations and found no widespread problems. He noted too, that, the Oshkosh officials are suspected of hiding their transactions.
“This is an anomaly,” Cross said. “An abnormal situation. We’ve taken very direct action to deal with it. I hope (lawmakers) would look at this in context.”
Cross and Regent Michael Grebe, who leads the regents’ audit committee, told the Legislature’s audit committee that the review examined 2,072 transactions in which UW schools sent money to their foundations over the past seven years. The review found that $36 million flowed from the schools to the foundations over that period; most of the transactions involved $500 or less.
Money can flow from schools to foundations for several legitimate reasons. This can occur, for instance, when schools rent space from foundations or refund foundation scholarships when students quit school, Cross said.
Grebe said the regents and system officials asked the Wisconsin Department of Justice to investigate the Oshkosh allegations, which resulted in the DOJ’s filing a civil lawsuit in January.
“We didn’t wait to be told to act. We immediately took investigative steps and corrective actions when these irregularities were uncovered,” Grebe said.
Cross told the Legislature’s budget committee about the system review during a hearing later Thursday afternoon and said he has no objection to a state audit. Committee members seemed receptive to his remarks.
“There’s never a way to stop malfeasance 100 percent,” Rep. Mark Born, a Beaver Dam Republican.
Assembly Speaker Robin Vos told reporters Thursday that a state audit is a good idea and he’s not convinced the Oshkosh situation should mean less money for the system.
“The fact that a couple people at Oshkosh seem to have made a really bad decision that was outside the law, I don’t know if that affects my decision to say we need more revenue … unless there was some kind of widespread fraud, or UW knew about it and ignored it, which none of which I know about happening,” Vos said.
According to the lawsuit, former UW-Oshkosh Chancellor Richard Wells and former Vice Chancellor of Administrative Services Thomas Sonnleitner illegally transferred $11.3 million from the university to its foundation between 2010 and 2014 to help pay for a new alumni center, a pair of biodigesters, renovations at a sports complex and a waterfront hotel project without recording the transfers in the university’s books.
The lawsuit also alleges that Wells and Sonnleitner illegally guaranteed UW-Oshkosh would back the foundation’s bank loans for the projects and cover the foundation’s debt on the work if the foundation couldn’t meet its obligations, an arrangement prohibited by state construction and UW System policies.
Turning from the Oshkosh allegations, Cross told the finance committee during Thursday’s hearing that Walker’s spending plan is the best budget the UW System has seen in a decade, noting it provides the first new money for the system in more than 10 years. Walker’s last budget cut $250 million from the system and extended a tuition freeze.
He fielded questions from the committee for more than two hours. Members asked him what he thought about provisions in the budget that call on regents to develop teaching standards and reward faculty for going beyond them. They also asked about provisions that would tie aid to campuses to various performance measures, such as the amount of time faculty spend teaching, and his thoughts about language allowing students to opt out of paying some fees.
Democrats on the panel warned that provision could hurt student government groups and make bus passes more expensive; five campuses use student fees to offer discounted bus passes for students.
Cross responded that campuses already have teaching-load policies and administrators should develop them, not legislators. He also acknowledged the fee opt-out could lead to more expensive transportation.