CU loses $120 million in investments, upending campus spending plans

The University of Colorado lost $120 million by not withdrawing investment gains ahead of this year’s market downturn, a snafu that has forced CU leaders to halt or delay some of the “once in a lifetime” spending plans they made across the system’s four campuses in the wake of historic investment returns in 2021.

Now faculty leaders are calling on CU’s president and Board of Regents to explain what happened, saying the campuses already are feeling the loss of money promised a year ago when the university sped up its strategic plan based on an investment windfall of more than $400 million.

“We had made commitments with some of those dollars that were unrealized” — not yet taken out of the market — “and then the market decline happened and the dollars simply weren’t available,” CU President Todd Saliman told The Denver Post in an interview Thursday. “And we can’t spend what we don’t have.”

CU stressed the investment losses don’t impact core university or campus budgets.

Some of the plans laid out by CU leadership in December 2021 are being financed with $140 million that was pulled out of the market, Saliman said, but $120 million more that had been allocated as “one-time funds” toward the strategic plan was lost in the downturn.

Saliman blamed that on bad advice from CU system treasurer Tony Vu, who has since resigned.

“Clearly, we would have been better off now if we had realized all those gains at the time — and we didn’t do that at the time based upon the advice we were receiving and that turned out to be the wrong move,” Saliman said. “That was a decision made about a year ago based upon advice we had gotten from the treasurer, and if the markets had gone up, that probably would have worked out just fine. But that’s not what happened.”

When reached Thursday, Vu told The Post only that he did not resign over the investment situation.

Faculty leaders from CU’s Boulder, Denver and Colorado Springs campuses sent a letter to Lesley Smith, the chair of the Board of Regents, and other officials on Wednesday night demanding a detailed explanation of “how much money has been lost and how it was lost.”

“We call on the Board of Regents and our president to take responsibility for over-promising hundreds of millions of dollars in what we understand to have been unrealized gains, provide a clear and transparent account of what happened to the promised funding, as well as what financial investment stewardship practices will be established to prevent such a thing happening again in future,” they wrote.

“A historic return”

Last December, CU leaders announced plans to address some of the university’s long-term needs with an infusion of money from “a historic return” on the system’s investments. According to a 2021 university memo, CU saw a 24.4% return on its investments in fiscal year 2020-21, which was 3.4% higher than the historic average.

A portion of those gains — $436 million — was allocated to spend on “one-time strategic needs,” according to the memo, with about $225 million of that earmarked for initiatives in fiscal years 2022 and 2023 and another portion to be used to build a treasury pool to buffer against market fluctuations.

Among many other things, the plan called for the investment gains to be spent on increased financial aid at the Colorado Springs campus, a new engineering building on the Denver campus, child care support for faculty and graduate students on the Boulder campus, and an expansion of the bioengineering program on the Anschutz Medical Campus.

“A year ago we saw this as a once-in-a-lifetime opportunity to put our market gains to use, and we did,” Saliman said. “But we didn’t realize all the gains and now we’re in a position where those gains have declined and we can’t spend money we don’t have.”

Before becoming CU’s president last year, Saliman oversaw the university’s budget and finance operations for more than a decade. He also previously served in the state legislature, including four years spent on the Joint Budget Committee, and worked on budgeting issues for two Colorado governors.

In their letter to the regents, faculty leaders said the loss of that planned funding is being felt on their campuses.

For example, they wrote Boulder campus is short $18 million after using the planned one-time funds to cancel a student fee that had been paying down the campus’s construction debt. The price tag for canceling the fee was $66 million, the letter said, but only $48 million was paid out by the system. The rest, the letter said, was promised to be forthcoming.

The new engineering building on the Denver campus is now on indefinite hold, the letter said. And the Colorado Springs campus “has seen what can only be called chaos as faculty development grants were revoked, then partially reinstated by campus leadership using funds earmarked for other needs,” they wrote.

“Numerous other initiatives targeting graduate student funding, faculty and student retention, staffing, DEI-related and COVID recovery initiatives, covering inflationary cost increases for an engineering annex already under construction, and other long-term needs are now placed on hold,” the faculty leaders wrote.

“Frustrated and disappointed”

CU leaders first communicated their investment problems to the university community last week through the school’s CU Connections publication, noting that some of the planned spending projects announced in late 2021 “will have to be delayed or will have a longer time horizon. Still others will be scaled back, and some will likely be stopped for the time being.”

The Dec. 8 article offered vague details about the nature of CU’s financial misstep.

“Compounding the market downturn challenge, there was a disconnect between information the CU treasurer provided the system administration that inhibited the university’s ability to respond to the market downturn and intervene in a timely way,” the article said.

At CU Boulder, Chief Operating Officer Pat O’Rouke sent campus leaders an email that same day saying officials still were trying to determine the full impact.

“I want to reassure you that this will not affect our campus’s operating budget or day-to-day operations,” he wrote. “The one-time funds were outside of our general campus operating budget.”

Neither the CU Connections article nor O’Rourke’s email specified how much of CU’s investment gains had been lost in the market. Ken McConnellogue, the CU system spokesman, said the university needed more time to provide accurate information.

CU’s Board of Regents last week voted to name Dan Wilson as interim treasurer. He previously held the treasurer job from 2015 until retiring in 2021.

Smith, the chair of the board, told The Post in an email Thursday that “sorting through the details of this challenge is complicated and we want to provide as much good information as we can in a timely way, which is what we’re doing.”

Moving forward, Saliman said the university plans to hire a third-party expert to join internal leaders to evaluate what went wrong and how to prevent such an investment mishap from happening again.

“For people who are frustrated or disappointed, I agree,” he said. “I’m frustrated and disappointed, too. I was really excited about these additional investments we were going to be making and the fact that we’re not going to be able to afford to implement all of those plans is disappointing. That doesn’t mean our strategic plan is any less of a priority. We will continue to prioritize our work and continue to try to make progress on the critical goals outlined in that plan.”

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