California public universities tap student fees for unintended projects

Reporting from Sacramento — 

While California universities have faced round after round of crippling budget cuts and protests against increased fees have flared on campuses, administrators have tapped funds meant for classrooms and students to cover some extraordinary costs: losses on ill-timed real estate deals, loans to high-ranking officials and an ambitious construction project.

Experts say the moves, made without wide student knowledge or public oversight, show that administrators have put aggressive business plans ahead of the teaching mission. When things go wrong, they’re dipping into student fees, scholarship funds and money meant for classes to pick up the tab.

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FOR THE RECORD:
University spending: An article in Sunday’s Section A about California universities’ use of money meant for classrooms and student services said a building purchased by a foundation affiliated with Cal State Sacramento was empty. According to a school spokeswoman, about a dozen events including lectures and a faculty retreat have been held in the 188,000-square-foot building since January. The article also misstated Jesse Bernal’s title. He is the University of California student regent, not UCLA student regent. In addition, former UCLA fundraiser Richard Bergman’s name was misspelled as Berman in one reference, and Cal State Sacramento President Alexander Gonzalez’s name was misspelled as Gonzales in one reference. —

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“It’s almost like they kind of lose sight of the core purpose of what they’re there to do, and get excited by the opportunity to speculate with other people’s money,” said Steve Boilard, director of higher education for the state’s nonpartisan Legislative Analyst’s Office.

At UCLA, student fees are being used to save a plan to renovate Pauley Pavilion, home of the school’s legendary basketball team.

In 2006, administrators launched a campaign to raise $100 million from private contributors to pay for the $185-million upgrade, which includes cushier seats, a high-definition scoreboard and expanded locker rooms. But when the fundraising effort fell victim to the recession, administrators changed the finance plan to include $25 million from student fees.

“Students really weren’t involved in the process, beyond maybe some rubber-stamp committee,” said UCLA Student Regent Jesse Bernal. “I don’t think they know enough about it.”

Most of the student money, $15 million, will come from fees approved by a student referendum in 2000 to maintain two older campus buildings that house gyms and student centers. The remaining $10 million had been set aside for seismic repair of student facilities.

Using that money to renovate the arena “seems like a strange priority,” said long-time UCLA fundraiser Richard Bergman, who originally chaired the Pauley Pavilion campaign. He said he was summarily dismissed last year after complaining about several aspects of the project, including the dip into student pockets.

UCLA Athletics Director Dan Guerrero told reporters last fall that Bergman “was very committed to the project, but along the way we had some disagreements -- reasonable people have disagreements -- on how we should proceed, and it was just felt that it was better to part ways.”

Bergman said that when money got tight, administrators should have scaled back their ambitions.

Steve Olsen, UCLA’s chief operating officer, acknowledged that the referendum approving the fee included nothing about Pauley Pavilion. But “it was always clearly understood that as the revenues grew, additional projects could be appropriately funded by those fees,” he said.

Cindy Mosqueda, who was a UCLA sophomore in 2000 and a leader of the campaign for the fee, said there was no such understanding.

“We . . . thought we needed additional space and the asbestos out of the basement,” said Mosqueda, now a PhD. candidate. “If we knew it would be used in the future for Pauley Pavilion, we wouldn’t have worked so hard.”

Few students will be able to afford a good view at the renovated Pauley, where seats between the baskets are expected to cost more than Lakers tickets, Berman said. Season tickets will require a one-time fee in the tens of thousands of dollars.

At Cal State Sacramento, administrators used general fund money to cover an investment that went bad.

University Enterprises Inc., an independent foundation affiliated with the school, paid more than $35 million raised from private donors to buy a commercial office building near campus in 2007. Administrators said they planned to hold classes in half of the building’s 188,000 square feet and lease the rest to generate revenue.

Then the real estate bubble burst.

The building is empty, and university President Alexander Gonzalez said he paid $5.6 million last year to prevent the foundation from falling into foreclosure on it.

The money came from the school’s general fund -- a combination of student fees and tax dollars -- which is more commonly used to pay professors’ salaries, utility bills and the other day-to-day costs of educating students.

“It does kind of look like a gift of public money to the foundation,” said Boilard in the Legislative Analyst’s Office.

Patrick Murphy, an adjunct fellow at the Public Policy Institute of California, said the Sacramento situation is a prime example of why land deals are usually handled through separate capital accounts.

“Maybe instead of coming up with clever deals like that,” Murphy said, administrators “should invest in the core courses that many CSU students say they can’t get.”

The payment exacerbated an already severe budget shortfall that has forced the school to forgo most spring admissions this semester, university spokeswoman Gloria Moraga said. And student fees rose 32% last year while classes were being cut, leaving many unable to finish their degrees on time.

“They said there’s no money, and yet they come up with millions for that building,” said Alma Lopez, 23, a biology major from the Central Valley town of Tracy.

The bailout adds to campus frustration that began in 2007 when the foundation came under fire for giving Gonzalez, then newly hired, $233,000 in personal loans and paying $27,000 to put a new stove in his house.

Moraga said the foundation made the purchase after the university’s head chef declared the existing stove inadequate for the large parties and fundraisers Gonzalez would be hosting. “There were health and safety issues,” Moraga said.

The transactions are the subject of an ongoing audit by the state attorney general’s office.

Last month, Gonzales said the new building won’t be a drain on school finances once the real estate market picks up.

“This is just a stopgap,” Gonzalez said of the $5.6-million expenditure. “The purchase of the building is still a very, very good deal.”

After it is renovated, the nursing department will move out of its current cramped quarters and into the modern building, where it will be able to offer public clinics, Moraga said.

But the use of general-fund money to save the foundation’s privately funded investment has become a rallying point for the California State University faculty union, some of whose members have been laid off or furloughed as budgets have tightened. The union is pushing a bill in the Capitol to force university foundations to share their financial documents under the California open-records law.

“These organizations can make arrangements that end up costing the campus money,” said Cal State Sacramento math professor Scott Farrand, who sits on the school’s budget panel.

The attorney general’s office is also auditing a foundation at Sonoma State University following revelations that the organization, which provides student scholarships, lent millions of dollars to a former board member for private deals involving undeveloped land, home building ventures and a vineyard.

Clem Carinalli, a large area landowner, began receiving loans worth more than $8 million from the foundation days after resigning from the board, said university spokeswoman Susan Kashack. One of his business associates sat on the board while the loans were approved but was forced to resign in December over the apparent conflict of interests.

The foundation hoped to profit from interest on the loans, but Carinalli filed for bankruptcy protection last year. He still owed $1.25 million to the foundation, said Kashack.

There’s less money available for scholarships this year. Kashack blamed the weak economy, not troubled investments with an ex-foundation board member.

“We do not make these kinds of investments anymore,” she added.

jack.dolan@latimes.com