Recalling an Old Budget Controversy

February, 2016

Lincoln -- My last two posts have dealt with current issues in postsecondary education finance at both the national and state levels. While writing them I remembered a couple of old budgeting and finance issues that have been dormant for many years, but which deserve a final visit for the historical record. Discussing them may also shed light on current issues and conflicts in Nebraska.

In 1995, Professor Robert Knoll of the University of Nebraska-Lincoln's English department wrote a history of the university, appropriately titled Prairie University. It's a wonderful book, full of facts and overflowing with engaging people. Best of all, Professor Knoll does not shy away from making judgments; he praises and he punishes. From what I know based on my own fairly close association with the university over many decades, and having dealt personally with many of those in university leadership positions, Robert Knoll almost always gets it right.

There is one episode, however, that needs elaboration if not outright correction. It deals with the contretemps between NU President Woody Varner, State Senator Richard Marvel, and Governor Jim Exon in the mid-1970s.

Varner did not like Marvel's legislated earmarks that tied the university's hands on how it spent appropriated funds. Varner convinced the Board of Regents to take the matter to court to give the university more expenditure flexibility. But procedurally, the university could not sue the legislature, so the Regents sued Governor Exon and those in his administration who administered the budget earmarks. Varner told Exon personally that the suit was not against him, it was just that he had to be named in the suit to get the issue before the courts. Exon, for his part, did not like the earmarks either. He was of the philosophy that appropriated funds should be made available to the university in a lump sum.

Meanwhile, the university budget proposals that Varner submitted to the governor and legislature were full of their own problems. For example, the university would underestimate enrollment and tuition revenue in any one year so as to make a case for more state tax support. After the legislature appropriated the tax support (general funds) and tuition support (cash funds) based on the university's tuition estimates, the university would come back to the legislature later, in mid-academic year, for a supplemental appropriation to spend the additional tuition revenue based on higher enrollment than projected. Varner would say with a straight face that the additional cash fund monies must be immediately appropriated by the legislature, conveniently forgetting that less than a year before he had leveraged additional state tax support for the university by low-balling the original estimates of cash funds available.

Exon pointed this out through his own budget proposals. Marvel was not pleased that his Appropriations Committee seemed to be played for fools and chastised Varner publicly at committee hearings, albeit on somewhat different grounds than Exon. (Marvel and Exon were not close, Marvel having run for governor himself in 1974 against Exon, who defeated him easily.)

Knoll records part of this in a chapter on Woody Varner. Knoll writes,

When the governor presented his budget, he and his fiscal officers used data about cash balances which University officials thought inaccurate. "I don't know the origin of his figures," Varner told...the Lincoln Journal.... "I wouldn't argue that such figures could be found, but the conclusions he reaches are simply wrong. It is a bad use of data." Exon reacted angrily. (p. 171)

Woody Varner resigned not long afterward, to become president of the NU Foundation, taking everyone by surprise. As his reason for resigning, he cited bad relations with the statehouse. In 1977, the Nebraska Supreme Court ruled in favor of the Regents, technically against Exon but essentially against the legislature. The controversy over the cash funds was addressed in a concurring opinion by Justice Harry Spencer, who summed it all up nicely in one sentence, slapping down both Marvel's earmarking and Varner's now-you-see-it-now-you-don't treatment of cash funds:

I concur with the majority opinion herein, with the understanding that the opinion holds that the Legislature cannot control the use of cash funds generated by University activities, but that it can consider them in the making of appropriations.

Robert Knoll can be forgiven for not telling the whole story, which he may not have known. Or perhaps he did not want to put Woody Varner in a bad light, being the "D.B. and Paula Varner Professor of English." Before publishing, Knoll ran his book by State Senator Jerome Warner, Marvel's successor as chairman of the appropriations committee. Warner, a man with his own agenda, likely was only too happy to leave the last word with Varner's version of events.

I rather liked Woody Varner and do not disagree with Robert Knoll's placement of him as among the best NU leaders of all time. Varner was a prodigious fund-raiser. He was the man behind the Lied Center in Lincoln. He made many friends for the university and for the whole state. He had his faults. He would try to come between people to create rifts, which he would then try to exploit. His reorganization of the university, making himself president of all the campuses under a central administration, would later backfire. Creation of a separate UNL and UNMC eventually, in 2011, cost UNL membership in the prestigious Association of American Universities, a huge blow which he could not have foreseen. But I'll wager Woody could have kept UNL in the AAU had he still been around; he would have have charmed AAU presidents to no end and come away with UNL membership in AAU intact.

The moral of this story, if it has one, is that when it comes to budget and finance, it's better to be transparent in the first place and not to engage in flim-flam. In the end, it really doesn't pay off. That was true in the 1970s (it brought down an excellent university president) and it should be even more apparent today, if anybody's paying attention.

Postscript: I know this history because I was an eyewitness to it as well as an active participant. When President Varner and Governor Exon met to discuss these and other budget matters, I was customarily present. I was intimately familiar with the Governor's budget numbers and knew the care with which they had been worked up and reviewed. When Senator Marvel went after President Varner in open hearing, I was in the hearing room and felt the tension. Marvel himself was still miffed about his loss in the previous gubernatorial race. He had tried to position himself with voters as a friend of the university through his earmarked appropriations, only to lose the election and then have the university object to his way of writing appropriations bills. It was salt in the wound. When the university prevailed in its lawsuit, unfortunately it was not only Marvel's appropriations bills that were found to be unconstitutional, but several longstanding statutory provisions dealing with procurement and personnel as well, which were not intended to invade the university's prerogatives but merely to remove inequities across state government. This is an unfortunate legacy of the ambition and overreach of Richard Marvel.