The flap in Madison over the appropriate level of reserves for the UW System tees up an opportunity for a broader look at the financing of what may be the state’s finest asset.
First, an observation: if the auditors had found deficits or fund shortages, the flap would be a lot more serious and even more politically combustible. So, at least we have a problem of too much money on the books, not too little.
Further, there is even more money floating around the system than the Legislative Fiscal Bureau discovered in an audit of its general accounts. It’s in the off-balance sheet accounts of organizations like the UW Foundation, the Wisconsin Alumni Research Foundation (WARF) and other foundations like the UW Madison Hospital Foundation and University Research Park.
Take WARF as an example. It has assets of $2.5 billion, not counting the present value of its flow of royalty income. Those assets are included on the balance sheet of other major universities, but not in Wisconsin.
WARF brings in royalty income from patents
of more than $50 million per year, and, at a modest 5% return on its portfolio, another $125 million per year. That’s $175 million per year. (It probably does better than 5% in most years.)
Its mission is to support UW – Madison, so it gave $48.3 million in research awards on the campus in 2010-11. The question arises as to where the rest of the dollars go. Some supports its staff, and some gets plowed back to build its principal. That’s how it got to $2.5 billion.