David Holwerk: A peek inside a Sac State foundation

After you've been in this business awhile, certain phrases in news stories make the hair on the back of your neck stand up.

I had one of those moments last Wednesday while reading about a report on pay for top executives at California State University.

The report from State Auditor Elaine Howle dealt with the whole 23-campus CSU system. What naturally caught the attention of Sacramento Bee reporters Bill Lindelof and Dorothy Korber was the part that focused on CSU Sacramento and its president, Alexander Gonzalez.

Gonzalez makes $295,000 a year. Some people in the story thought that was too much. Others thought it wasn't.

I don't know whether Gonzalez makes too much or not. It does seem unusual for his salary to go up more than 33 percent over four years, especially while the cost of attending Sac State is squeezing students.

But maybe he's worth that, plus the housing allowance ($5,000 a month), car allowance ($1,000 a month) and other compensation. Running an operation the size of CSUS is a big job.

But what got my hair standing on end was a passage about some other parts of Gonzalez's compensation package. For instance, there's $27,000 for a kitchen remodel in the house Gonzalez bought in Sacramento. And $233,000 in loans, at an attractive 1.697 percent interest rate, that Gonzalez needed to make his Sacramento real estate deal work.

There seem to be two versions of why Gonzalez needed the loans. Gonzalez told The Bee he needed them because he couldn't pay two mortgage payments. The auditor's report says that the loans enabled Gonzalez to hold onto his old house in San Marcos until he could sell it without taking a "significant financial loss." Or maybe those are just two ways of saying the same thing. Without details, it's hard to know.

In any event, the money for the loans and the kitchen remodel for Gonzalez's Sacramento house didn't come from the university. It came, the story said, from "a nonprofit university foundation that gets its revenue from campus-related businesses." Reading that made my neck hair stand at attention.

Foundations at public universities come in various forms and do various things, most of them admirable. They raise money from alums and philanthropists. They administer research grants. They give scholarships.

In many states they work outside the boundaries of public information laws, so the public has only a limited view of what they do. In my experience, when the public does get a glimpse, controversy often ensues. Sure enough, The Bee story quoted a leader of the California Faculty Association, complaining about the foundation's opaqueness.

A few minutes with an Internet search engine brought me to the part of the Sac State Web site related to the foundation, which is known as University Enterprises Inc. The Web address is www.enterprises.csus.edu/about.html.

There, I learned that University Enterprises is "a dynamic and innovative non-profit corporation. It creates and manages an array of programs and services, which support and strengthen the University's mission of teaching, scholarship and public service."

Reading on, I found that University Enterprises started out in 1951 as the outfit that ran the campus bookstore. Now it does all sorts of other stuff: It manages food services, manages real estate development, manages research contracts.

It's an impressive portfolio. But where in that empire did the money for the loan and the new kitchen come from, and who decided to use the money that way?

Given my experience with other public university foundations, I doubted that I'd be able to use California's open records laws to find out. A quick check with The Bee's lawyers confirmed that. I also found out that CSUS already had denied a Bee reporter's request for information, saying that University Enterprises was not part of the university.

Let's ponder that for a minute, absent the legal technicalities.

It's obvious that University Enterprises wouldn't exist without Sac State. Sac State is a creation of the people of California. So it seems reasonable to think that the people of California have an intrinsic interest in how this foundation spends its money – money it got solely because of its affiliation with a public university – in support of the university the public created.

If state law doesn't enable the public – not just journalists but students, faculty and interested citizens – to find that out, then the Legislature needs to change the law.

On another front, it's worth pondering what some of University Enterprises' activities have to do with its status as a tax-exempt charitable foundation.

The idea behind such foundations is that they deserve to be tax-exempt because they act in the public interest. Federal law strictly limits what those actions can be. In the instance at hand, University Enterprises loaned a university president money at a low interest rate to make his real estate deal work.

Is that an act in the public interest?

I don't know. I imagine the IRS does, though. And it would be interesting to hear what the folks there think about the question.

About the writer:

• Call The Bee's Editorial Page Editor David Holwerk at (916) 321-1851.