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Board approves overhaul of reserve policy to centralize campus fund balances into loanable system pool
Summary
Trustees approved amendments to Board Policy 5.1 to pool institutions' minimum reserves into a system reserve available for loans or one-time investments, increasing the potential pool from about $14 million to roughly $80 million while preserving institutional accounting and requiring board reporting.
The Board of Trustees on March 19 approved amendments to Board Policy 5.1 that change how institutions’ minimum general-fund reserves are managed and used across the Minnesota State system.
Vice Chancellor Bill Mackey told the Finance and Facilities Committee that the central change would be to manage the institutions’ minimum 5% general-fund reserve centrally, creating a system reserve pool that would increase available funds for limited, defined uses from the existing $14 million to about $80 million. "We're really trying to create this pool and adjust this policy so it creates more flexibility for the system, but also does not provide any harmful impacts to our individual college and university financial health," Mackey said.
Under the approved policy package, institutions would continue to hold the reserve on their balance sheets, but a portion (minimum 5%) would be placed in a central pool and would be available for loans and one-time investments for systemwide enterprise activities or to respond to urgent, short-term institutional financial challenges. Mackey said any use would be documented as loans repayable to the pool with interest, and the interest rate will be aligned annually with treasury/ITC rates to “hold campuses harmless.” The committee also approved a recommended minimum floor for the central pool of 40% — effectively preserving about $32 million as an operational minimum while allowing short-term lending above that amount when justified.
The approved package includes accompanying procedures and operating instructions that lay out loan terms, memoranda of understanding between the chancellor and presidents for individual loans, and reporting requirements that the system office must present to the board as part of the year-end close and June budget process. Mackey said implementation would occur through the fiscal-year 2025 year-end close and the FY26 budget setup, with the system office moving funds into the pool later in the summer or early fall if the board ratifies the policy.
Trustees and presidents said they supported the approach. President Jannes (Winona State) and other university presidents who participated in the work group described the process as collaborative; Trustee Johnson asked for a clearer operational definition of the policy’s term “short term,” and Mackey said short term had been understood operationally as one to three years in prior practice and that the procedure would be revised to put a more precise definition in writing.
The March 19 roll-call vote approved the amendment. The policy change will go into effect on approval and be operationalized with the FY25 year-end close.
