Friday, December 21, 2018

UW Oshkosh settles dispute with its foundation

Ownership of the Alumni Welcome and Conference Center will be transferred to the University of Wisconsin Oshkosh.

By Miles Maguire

After a full day of mediation, the dispute between the University of Wisconsin Oshkosh and its fundraising arm is coming to a close.

Full details of the settlement were not immediately available, but Tim Mulloy, chairman of the UW Oshkosh Foundation, said, "We feel pretty good."

"After completing a court-ordered mediation process, the University of Wisconsin System Board of Regents and the University of Wisconsin Oshkosh Foundation are pleased to announce that they have agreed to settle all issues relating to the disputes between the Board of Regents and the UW Oshkosh Foundation," the UW System Board of Regents said in a statement released Friday night.

The university will take ownership of the Alumni Welcome and Conference Center "for a net settlement of $4.6 million," the regents said.

"Additionally, the Board of Regents will invest approximately $1.7 million in the Witzel Avenue Biodigester, a renewable energy power plant and revenue-generating educational asset that will yield significant returns," the statement said. 

The money will be paid directly to the banks that funded the projects, which will allow the deal to go forward notwithstanding a provision in the current budget law that says funds may not be paid to the foundation without approval of the legislature.

The two sides have been battling in court for more than year. For almost two years, the regents have taken the position that what they are now planning to do is prohibited by state law and the Wisconsin Constitution.

Their stance, described in a Jan. 18, 2017, announcement, was that public money could not be paid to support a private organization. This position provided the rationale that led to civil and criminal actions against former UWO officials and that cut off funding to the foundation, causing it to file for bankruptcy.

A federal judge and a state judge have both since ruled that this reading of the law is incorrect, a view that the regents and UW leaders have apparently now come around to.

“The UW Oshkosh Foundation is pleased that we were able to reach resolution with the Board of Regents to move forward," Mulloy said in a statement issued jointly with the group's secretary/treasurer, David L. Omachinski. "This joint resolution will allow us to focus on our shared core mission – which is to support the students, faculty and entire UW Oshkosh community.” 

"The Board of Regents is pleased to have resolved this issue in a way that protects taxpayer and student interests, and renews the productive relationship between UW Oshkosh and the UW Oshkosh Foundation,” said Michael Grebe, a lawyer for Aurora Health Care who serves on the board.

Said Oshkosh Chancellor Andrew Leavitt: “We look forward to working together again to support UW Oshkosh, the region and the citizens of Wisconsin. I thank our partners in the UW Oshkosh Foundation for joining with the university in renewing a spirit of trust, service and philanthropy as we support the experiences and journeys of our students.”

Friday, December 14, 2018

Major changes coming for UW Oshkosh as school implements plan to deal with budget 'crisis'

Photo by Miles Maguire
University officials dispute warnings that educational quality will decline as academic funding is cut.

By Miles Maguire

Facing a budget “crisis,” the University of Wisconsin Oshkosh is cutting about $8 million in costs, a move that some classroom instructors say will have far-reaching effects on the educational environment and undermine recent successes in attracting and retaining students.

Provost John Koker, the school’s chief academic officer, has used the word “crisis” to describe  a budget situation in which the university has been spending about $9.5 million a year more than it has been taking in. While faculty and staff acknowledge that the budget problems are real, many of them are doubtful--and some are outright critical--of the proposed changes.

“This is a fundamental shift in the way that our university has viewed itself and the relationship between teaching and research and the relationship between faculty and students,” said Jim Feldman, the director of the school’s Environmental Studies Program and president of a newly formed union, United Faculty and Staff of Oshkosh.

“The student experience is what is at risk,” he added. “We will simply not be able to do as good a job as we did before. That will have a dramatic impact.”

The university has embarked on a three-year cost reduction and revenue enhancement program, with the biggest cuts coming in the next academic year and with additional cuts coming in the following 12 months. Oshkosh hopes that a rebound in enrollment and a change in the way it charges for certain classes will bring in $1.5 million to close the budget gap.

Starting in fall 2019 budget cuts will mean increased teaching for many faculty members, especially in the school’s largest division, the College of Letters and Science. Faculty members, who are expected to conduct research as well as teach, will have less time to engage in studies and experiments.  Financial support to attend academic conferences has already been cut.

The situation is worse for untenured instructional staff, some of whom will be losing their jobs after many years of service. “We have great compassion for the people who are experiencing these changes. They are very difficult,” said Chancellor Andrew Leavitt. “But at the same time [we] have the responsibility for making sure we continue to have a strong institution moving forward.”

Because of the smaller instructional staff, Oshkosh students can expect to see larger classes, reduced availability of courses and a loss of both personalized attention and the opportunity to work with professors in laboratories and other research settings. Independent study courses, which faculty teach without compensation to help individual students meet graduation requirements, may disappear altogether.

University officials acknowledge that major changes are underway and that morale has taken a hit. But they argue that they are working to preserve critical elements of the school’s program for first-year students and that faculty research was ripe for review because of varying productivity levels.

At UW Oshkosh, research support for faculty has been more extensive than it is at other teaching-oriented schools in the UW System. Faculty members have been able to apply for reduced teaching assignments to spend more time on research.

“The rigor of that curriculum modification plan has not been what it was intended to be originally,” Koker said. “You have people who are barely skating by and people who are very highly productive.” He envisions a time when more faculty members will routinely teach four courses a semester while others teach three based on their productivity as researchers.
Not all of the details have been sorted out, and campus employees are hoping that a change in administration in Madison could mean a restoration of some state funds. These revenues have been cut by hundreds of millions of dollars across the UW System over the last few years. Other factors in the Oshkosh budget situation are a tuition freeze and a steep drop in enrollment over the last five years.

The university is moving toward “more of a private school model,” Koker said, with strategic and operating decisions driven by how well it can manage fluctuations in enrollment.

Within five to 10 years he believes this shift will bring significant benefits, giving the campus greater flexibility in developing new programs for students and providing incentives to attract and retain staff.

But in the short run the price will be paid by instructors, including some with 20 years or more of experience at the school who will not be hired back in the fall. Koker said there are no alternatives given the size of the budget shortfall and the fact that so much of the university’s spending is on personnel.

In the private sector, reduced job security is offset by higher compensation. But at UW Oshkosh, faculty members are paid at rates that are from 16 to 19 percent behind their peers at similar schools outside of the state, according to UW System data.

Perhaps not surprisingly UW Oshkosh has already seen a double-digit rate of faculty turnover, with 32 out of 309 having left in fiscal 2018, according to the UW System. Across the system as a whole, the turnover rate was 3 percentage points lower. In a worrisome sign for future recruitment, the turnover rate was higher for newer faculty at Oshkosh rather than for more established instructors.

Officials concede that in hindsight the budget situation could have been managed better. The school has burned through $51 million in reserves while its enrollment has been trending down over the past four years.

Some question whether the university can maintain its positive momentum in student recruitment and achievement as classroom resources are curtailed. Two of the biggest bright spots for the school have been improvements in the four-year graduation rate and in the retention of first-year students.

But faculty members say these gains are at risk, particularly with the loss of the untenured instructors who typically teach lower level courses. Some campus employees warn of a downward spiral as reduced educational quality leads to lower enrollments and then to further budget cuts.

Chancellor Andrew Leavitt rejects this idea and argues that Oshkosh will continue to provide a high quality education. “This is still a great place to come,” he said.

A complicating factor given the university’s growing reliance on tuition is the joining of the main Oshkosh campus with two-year schools in Menasha and Fond du Lac. Throughout the UW System, the two-year schools have seen major drops in enrollment, although Koker said UW Fox Valley has actually added new students due to “aggressive” international recruitment.

Rep. Gordon Hintz, whose district takes in the Oshkosh campus and much of the city, has blasted the budget reductions. “Gov. Walker and legislative Republicans continue to dismantle UW System through self-inflicted cuts,” he said in a statement. “Loss of faculty at UW Oshkosh will come at the expense of student learning and future opportunity.”

But Sen. Dan Feyen, a Republican, disagrees about the source of the school’s problems. “In the last six years, the university has seen an overall drop in enrollment of 15 percent, which equates to a $10 million loss in revenue,” he said. UW Fond du Lac “saw a decrease in enrollment of 11.4 percent this year alone,” he added.

“As these schools are serving fewer students, it is simply inevitable they will also see declining revenue from tuition, and budgets will have to be adjusted accordingly,” Feyen said. He also dismissed the idea that the UW System does not get enough state support.

“The state contributes $2.1 billion” in general purpose revenue, Feyen said. “The UW system has more money in their all-funds budget currently than ever before.”

One reason enrollment has taken such a hit, officials believe, is the strong economy, which provides an attractive alternative for students graduating from local high schools. Koker said the percentage of graduating seniors in Oshkosh going on to higher education has been cut almost in half, to about 40 percent, over the last few years.

When the economy starts to decline, which many business leaders think could happen as soon as next year, Oshkosh will likely see a “huge surge” in interest from prospective students, Koker said.

But many of these students will be older adults who may seek nontraditional classes, including online instruction. “This is an opportunity for us,” Koker. “This is the time where we seriously need to look at alternative types of programs in addition to our traditional higher education experience.”

Monday, December 10, 2018

Trial for UW Oshkosh officials Wells, Sonnleitner pushed back into spring 2019

Photo by Miles Maguire
Former Chancellor Richard Wells, far right, and former Vice Chancellor Thomas Sonnleitner confer with lawyers.

The criminal case against former UWO Chancellor Richard Wells and Vice Chancellor Thomas Sonnleitner has been delayed till the spring.

Winnebago County Circuit Judge John Jorgensen granted an extension until April 2 for another status conference, citing the complications surrounding the case.

Wells and Sonnleitner have been accused of misconduct in office in connection with financial arrangements they made to further real estate developments pursued by the UW Oshkosh Foundation. The two men have asked for the case to be dismissed.

"It is a complicated case," Jorgensen said Dec. 10. Parts of the state's interpretation of the law have been rejected in separate but related cases that have been heard in federal bankruptcy court and in Dane County Circuit Court.

Jorgensen said that allowing more time would help defense attorneys continue to put their argument together while new developments in the other cases could aid prosecutors in deciding "how to proceed."

The charges against the two officials involve five real estate projects that were undertaken by the university's foundation. If they are found guilty they could be sentenced to up to 17 and a half years in jail and assessed fines of $50,000 apiece.

Friday, December 7, 2018

Latest twist in university-foundation wrestling match: a $730,000 demand for back rent on welcome center

Photo by Miles Maguire

The UW Oshkosh Foundation wants the school to pay back rent on the campus welcome center.
By Miles Maguire

Just a day after a federal judge ordered mediation for the University of Wisconsin Oshkosh Foundation and the UW System Board of Regents, the foundation has filed a new legal action, asking for $730,000 in back rent.

The lawsuit, formally described as an “adversary complaint to recover fraudulent transfers,” is based on the fact that UW Oshkosh has been using the foundation-owned Alumni Welcome and Conference Center without paying for it.

The welcome center overlooks the Fox River at the intersection of Wisconsin Street and Pearl Avenue. The building has 40,000 square feet of usable space--15,000 square feet of Class I office space and 25,000 square feet of conference and meeting space, according to court papers.

The foundation argues that at market rates the university has been getting upwards of $365,000 a year in value by using this space without paying for it.

One of the university’s largest customers for conference space has been Oshkosh Corp., which has paid the school about $150,000 since 2014, according to figures released earlier this year under a public records request by the Oshkosh Examiner.

Some of the office space in the building is occupied by the university’s Office of Advancement, which recently began raising funds for a newly formed nonprofit called the Titan Alumni Foundation. The emergence of this rival foundation has spurred allegations that university officials have improperly interfered with donor agreements to cover some of the costs of the welcome center.

In a bankruptcy case, the presiding judge has the authority to review, and undo, completed transactions stretching back two years before a debtor seeks court protection.

For this rule to apply, the transactions have to be found to be fraudulent according to a technical definition that takes into account whether a deal would have been struck in the ordinary course of business.

Here the foundation is arguing that its understanding with the university was unfair because it was stuck with the loans for the building while giving the school free use of the facility.

The foundation “allowed the university to pay no rent for use of the welcome center based on a mistaken assumption that the defendant would voluntarily pay its indebtedness which was due,” according to a court filing.

“Other businesses would not incur $10 million in debt constructing a facility and allow a third-party to use it without paying rent,” the foundation said.

During the time of the free-rent arrangement, the foundation affiliate that owned the welcome center was insolvent because the liquidation value of the building was less than its debts, court papers say.

It’s unclear what the effect of this new claim will be on the upcoming mediation process. The filing establishes a monetary value that the UWO foundation may be able to use in negotiating a settlement with the state.

Tim Mulloy, the chairman of the foundation, was not immediately available for comment. The university and the board of regents have a policy of not commenting on litigation.

Thursday, December 6, 2018

University asks for, and gets, mediation agreement with its foundation that might settle lawsuits

Photo by Miles Maguire

A foundation official said he was optimistic but cautious about the outcome of scheduled negotiations.
By Miles Maguire
The legal battle between the UW Oshkosh Foundation and the University of Wisconsin System Board of Regents may be coming to a close as both sides have agreed to mediation.

The two parties are scheduled to meet Dec. 21.

A pair of unfavorable court rulings, a looming deposition of UW Oshkosh Chancellor Andrew Leavitt and the defeat of Republican Gov. Scott Walker all could be factors pushing the regents to look for a resolution.

“They approached us to see if we would be willing to sit down,” said Tim Mulloy, the chairman of the foundation.  

He said he was “optimistic” that a settlement could be reached, but he also expressed caution about the outcome of the negotiations.

Neither the university nor the UW System would comment on the mediation plan.

One reason for optimism is that the scope of the differences between the two sides has been greatly reduced. In addition the foundation has said that it would be willing to transfer ownership of two campus buildings that it owns to the university if the state would pay off about $8 million in outstanding debt.

Both buildings are being used by the university without charge. The foundation says they are worth far more than $8 million based on their cost of construction, but the UW System has not conceded this point.

If the building transfer occurred, the foundation would be able to exit bankruptcy, and the university would have complete control over these facilities.

A stumbling block is language in the current state budget that says that UW System regents cannot transfer funds to the foundation without legislative approval.

The mediation was ordered Dec. 6 by U.S. District Judge William C. Griesbach based on a joint agreement between the foundation and the board of regents.

Griesbach also issued an order that blocks the foundation from collecting on a judgment it has won against the state. While ruling for the state, Griesbach acknowledged that the foundation is suffering “reputational harm” and suggested that his temporary order would be no more than a “short stay.”

Griesbach did not rule on the validity of either side’s arguments but only noted that the UW System had more to lose if it was ordered to pay up now but later won on appeal.

Two courts that have delved into the matter have largely rejected the UW System’s legal argument that it does not have to make good on promises from two former university officials.

But Griesbach noted that those two officials face trial on misconduct charges, which “raises serious questions as to their authority to bind the board in the manner alleged.”

If mediation fails, the foundation will return to its plan to force Leavitt to answer questions under oath about his communications with foundation donors. The foundation alleges that these communications upended several planned gifts, including one for $2 million in exchange for naming rights to the school’s Alumni Welcome and Conference Center.

Foundation supporters are hoping that the incoming administration of Gov.-elect Tony Evers will be less interested in pursuing this litigation. But a law passed in early December might subject such a change in legal strategy to review by the legislature.