Connecticut’s colleges and universities have pushed hard for state assistance since COVID’s arrival in 2020 rocked their finances. But those institutions are now sitting on nearly $1.1 billion combined in reserves — half of which was stashed over the last five years — and some officials are asking if higher education pushed too hard for too much. “They’re just hoarding money like the dragon in … ‘The Hobbit,’” said Republican Rep. Tammy Nuccio of Tolland, referring to British novelist J.R.R. Tolkien’s 1937 fantasy classic. “The General Assembly’s been swindled.” The Connecticut State Colleges and Universities system — which includes four regional universities, the community college network, and online Charter Oak State College — entered this fiscal year with $611 million saved, according to Lamont’s budget office. That cushion is equal to almost 52% of its nearly $1.2 billion operating budget. The rainy day fund for the entire state budget is capped at 18% of operating expenses and was limited at 10% for much of the 2000s and 2010s. The University of Connecticut’s main campus in Storrs and its satellite branches began the fiscal year with $171 million in reserves, a more modest 10.2% of its operating budget. UConn’s Farmington-based health center held $297 million, which represented 18% of its $1.65 billion annual operating expense. The size of the reserves took some legislators by surprise. “It’s eye-opening,” said Sen. Derek Slap, D-West Hartford, who co-chairs the Higher Education and Employment Advancement Committee. Slap, who spearheaded a successful push to send an extra $40 million to local K-12 districts for special education costs, said a tiny fraction of what colleges and universities are holding would be “a lot of money for these towns.” Gov. Ned Lamont’s administration said it’s past time for all of higher education, and CSCU in particularly, to gradually spend these savings. “The accrued reserves present the system with an opportunity to resolve their obvious structural budget issues in a planful and rational manner,” said Chris Collibee, the governor’s budget spokesman. But university officials say that while they can reduce reserves somewhat, this was not a simple case of hoarding. Much of the savings, they argue, was driven by Lamont and lawmakers since the pandemic began. Governor, legislators pumped lots of temporary funds into higher ed Lamont and the General Assembly sent an average of $168 million annually since 2022 to the CSCU system from two temporary sources — federal pandemic relief and state surplus dollars, most of which was used to cover ongoing operating costs. In other words, state officials added huge risk to higher education budgets. In its case, CSCU had to be ready for about 14% of its budget to vanish at any time. But legislators are now asking if that uncertainty made them too aggressive in seeking more funds from students and the state. A second driving factor behind the huge reserves involves timing and salaries, both of which are largely beyond higher education’s control. The Board of Regents for Higher Education — which oversees CSCU — and UConn’s Board of Trustees typically finalize tuition and other student fees in the early winter for the next academic year. But they don’t learn until May or June how much they’ll receive in the state budget. So university boards must guess how much revenue they need from students long before they learn what they’ll get from the state. And in years when state employee raises come due, further complicating the equation, the last-minute surprise gets bigger. Though higher education units technically negotiate salaries separately from the rest of state government, they effectively must match what the governor awards other state workers. Otherwise, higher education unions simply would pursue arbitration and cite those raises given non-education workers as evidence government can afford to pay up. The governor and legislature normally don’t resolve raises before April, as they did last year. And lately the raises have been healthy. Since 2021, Lamont and the legislature have approved a 4.5% average raise — a 2.5% general increase and a step hike that normally adds another 2 percentage points for all but the most senior workers across state government. Still, legislators and the Lamont administration say higher education officials, particularly those at CSCU, should have been more forthcoming about their strong reserves years ago, rather than appealing for more funds from the state budget. “They have the nerve to sit at the table and say, ‘Can you give me $27 million more to mitigate some deficiency?’” said Nuccio, who is the ranking House Republican on the Appropriations Committee. Some lawmakers also fear students were asked to pay more than necessary. More than 40% of the CSCU system’s $611 million total reserve came from the community colleges, where tuition this fall was up 11% from two years earlier. Students costs at regional universities were up more than 7%. CSCU chancellor: ‘We’ve heard the message loud and clear.’ CSCU Chancellor Terrence Cheng, who apologized to legislators last month following an audit that showed he and system presidents had misused their state credit cards and misspent thousands of dollars, said the reserves will begin to shrink.  “We’ve heard the message loud and clear: that we need to be more expeditious in our use of reserve funds,” he told the Appropriations Committee’s Higher Education subcommittee last week. “You’ll see that utilized in our mitigation plans.” Lamont in early February proposed a $472 million block grant next fiscal year for the CSCU system, and $485 million for 2026-27. Both are close to the $479 million in traditional funds the system got this fiscal year. But CSCU also needs about $125 million additional each year to compensate for pandemic aid and other temporary money that’s going away. The system plans to close that gap itself, said Vice Chancellor Adam Joseph, who added it would be achieved likely through an equal combination of reserve appropriations and spending cuts. Most of UConn’s reserves are tied to capital program UConn, which has accumulated much less funding than has CSCU, nonetheless already has begun tapping its reserves. While it projects its cushion for Storrs and the satellite campuses to grow this fiscal year from about $170 million to $202 million, the rainy day fund for the health center should drop from almost $300 million to $234 million. And that health center rainy day fund has been driven, in part, from following a Lamont directive: to increase revenue from patients. The center includes Connecticut’s medical and dental schools, John Dempsey Hospital, and other clinical programs. State support for UConn Health, which covered 27% of the center’s annual budget one decade ago, was down last year to just 13.3%. Over the same period, UConn has grown health care services and increased patient revenues by more than 150%, about $572 million. It now funds about 60% of the health center’s annual budget. The university is asking the governor and legislature for additional funding in the new biennial budget: an average of $292 million more each year for the main and satellite campuses and $228 million annually for the health center. Not only are UConn’s reserves relatively modest, said Reka Wrynn, UConn’s associate vice president for budget, planning, and institutional research, but most of them already are committed. Some goes to capital projects, and others must be held to ensure low interest rates when borrowing for dormitory and other construction work. Excluding savings in capital projects and for borrowing, UConn expects to close this fiscal year with about $94 million in the rainy day fund for Storrs and the satellite campuses and $71 million for the health center. That’s enough to cover Storrs’ operating costs for 30 days and the health center for 20 days — well below the 90-day target set by the university’s Board of Trustees, Wrynne added. Rep. Greg Haddad, D-Mansfield, the other co-chair of the higher education committee and whose district includes the Storrs campus, said he’s confident all institutions will intensify efforts to tighten reserves. “We’ll take them up on that offer,” he added. ...read more read less