Follow the money

Pick one: public or private? A fundraising organization can’t occupy space at a public university, share its employees and equipment and, in at least one instance, be led by the university president, then claim that it’s a private entity whose doings are exempt from public disclosure laws.

There have been many reasons over the last several years to question the nonprofit foundations and auxiliaries that drum up money and support for California’s public colleges and universities. At Sonoma State University, a foundation loaned more than $1 million to a former board member who has since filed for bankruptcy. A Fresno State foundation gave certain donors luxury boxes in the new campus arena. A former chancellor at San Francisco City College was indicted after accusations that he used a foundation account as a private slush fund.

A bill by state Sen. Leland Yee (D-San Francisco) seeks to end such shenanigans — or at least provide transparency so the public can readily see what’s going on — by making the foundations subject to the state’s public records law. The legislation is needed. A nearly identical measure was vetoed by Gov. Arnold Schwarzenegger last year over concerns that donors who want anonymity might shrink from contributing. Yee has addressed this in his current bill, SB 330, by exempting the names of donors and volunteers unless the foundation has provided them with gifts worth more than $500.

The finances of the universities and their foundations have been too closely intertwined in most cases for the nonprofits to claim exemption from public scrutiny. If a foundation is a separate entity, how is it that Cal State Sacramento spent $5.6 million from its general fund last year to bail its foundation out of a bad real estate deal, money that otherwise could have gone to provide classes and other services for students?

Where the Yee bill goes off course is with its implication that a private nonprofit is a quasi-public organization simply because it supports a public institution. Under that reasoning, every PTA chapter or sheriff’s auxiliary could likewise be required to respond to all public records requests. That’s not the kind of pressure we want to see put on private groups that are legitimately working for the public good.

The obvious alternative is for the foundations to fully separate from the schools and act as true independent nonprofits. Wrongdoing or failure to fulfill their nonprofit charter would be subject to investigation and prosecution by state officials, just as it is for any other nonprofit group.

Under such a scenario, to cite one recent example, it would be solely the business of the Cal State Stanislaus foundation whether its fundraiser makes money by scheduling an appearance by Sarah Palin. The contract with the former candidate for vice president made news this month when Yee’s office asked how much she had been paid and was rebuffed by the foundation, which said the information was private. When a foundation is using university resources, taxpayers have a right to know whether those resources have been well employed, though the foundation president says his organization reimburses the school for most of those resources. The hullabaloo over Palin obscured the issue of whether publicly funded colleges and universities are accountable for how their money is spent. (Yee’s office, by the way, says it also queried UC Berkeley when former President Clinton appeared there in February. The school responded that Clinton had taken no speaker’s fee.)

Californians shouldn’t fool themselves about the real cause of this kerfuffle. It isn’t about Palin’s politics or even the use of university office space. It’s about a state that is driving its stellar university system into the ground. For years, presidents of the University of California and California State University systems warned that they would have to turn increasingly to private sources of money, raising student fees and tapping private foundations. They’ve done so — foundations now account for about a fifth of Cal State’s operating budget — with the result that lawmakers are holding their fundraising up for scrutiny.

Of course, the state must ensure that each public dollar is well spent. But more important, it must address the fact that the number of dollars it invests in one of its most important institutions is utterly inadequate.