CapRadio is in financial trouble. How did it get here, and what does it mean for NPR?

The capital region’s flagship public radio station is in dire financial straits and mishandled funds that were meant to ease the strain, an audit from the California State University system shows.

Capital Public Radio, the region’s NPR affiliate, had significant financial problems according to university auditors — the report released Wednesday said the station’s management mishandled money, took out loans without the knowledge of its own board of directors and missed rent payments, among financial discrepancies. The station was also chided for failing to follow mandates that it serve the academic needs of Sacramento State students.

Sacramento State President Luke Wood announced the university would assume operational control of the entity. That would not include the news operations, which will remain under CapRadio’s control and separate from the school.

“One thing is abundantly clear: We have real and immediate work to do to ensure CapRadio’s financial controls and operational processes are disciplined, sound, and transparent going forward,” Wood said in a statement. “The financial implications of CapRadio’s mismanagement have significant consequences for Sacramento State, but we will make it through.

The audit followed the station’s sudden late-August announcement that it had laid off 12% of its workforce and canceled four of its music shows.

“The finances are pretty severe right now for CapRadio. We owe a lot of money to vendors. We barely have enough cash to keep us going right now. We are making payroll. It’s just been a very, very tough time. We have no reserves,” said Tom Karlo, the interim general manager, in an interview on CapRadio on Sept. 5.

The Bee previously reported that the station owes vendors $3.3 million in unpaid bills from the past two fiscal years, according to a budget presentation made on Aug. 30 to CapRadio’s executive board. One of those vendors is NPR itself, a bill that has not been paid for more than a year.

Not included in that deficit is the rent it owes Sacramento State for its current East Sacramento headquarters, also unpaid since September 2022.

Sacramento State owns the central license for CapRadio’s two main stations — KXJZ-FM (90.9) and KXPR-FM (88.9). A former employee said the university practically bailed out the broadcaster with an infusion of cash over the summer.

“Had the university not come in with an infusion of cash at the eleventh hour, there may not be a CapRadio,” former music director Nick Brunner previously told The Bee. Brunner learned on Aug. 30 that the station had laid him off after he lost access to his work email.

Will CapRadio still carry NPR?

Although the station has not paid fees to NPR, the nation’s public radio broadcaster based in Washington, since last year, it remains likely favorites like “All Things Considered,” “Fresh Air,” “Wait, Wait, Don’t Tell Me” will continue to be carried.

“While we can’t comment on our relationship with specific programmers, we are making progress on payment plans with each,” Karlo said. “These public media colleagues have demonstrated the meaning of partnership and want to see CapRadio succeed.”

“After announcing staff layoffs and resulting programming changes on Aug. 23, we have no further programming changes planned,” he said. “As a public media station, we will continue to review our content from a broadcast and digital audience engagement standpoint.”

Representatives for NPR did not immediately respond Wednesday evening to questions about programming on 90.9 FM, the news station. Other shows, such as “Marketplace” and “This American Life” are provided for a fee to the station from other media organizations, such as American Public Media and Public Radio International.

Also unaffected are classical and jazz numbers played on CapRadio’s music channel, which is operated like other traditional music-only stations.

CapRadio recently ran its on-air listener fundraising drive, urging listeners to donate by citing its financial problems and asking for the community’s help, and Wood noted in his statement the importance of the operation to the region.

“We are fighting to save our auxiliary,” Wood said, referring to the operation. “CapRadio has been part of the fabric of Sacramento and Northern California for decades.

“It is important to us to maintain the health and integrity of such a valuable and beloved media institution.”

How CapRadio started

The gutting of CapRadio’s music team in August marked a sharp deviation from the classical and jazz roots that once formed the backbone of CapRadio’s programming.

On Oct. 5, 1964, a humble student-run broadcast known as KERS-FM (88.9) signed on the air as Sacramento’s first non-commercial radio station. The broadcast primarily featured recorded lectures from Sac State professors in addition to tapes from the BBC and the Thomas Sherman Little Symphony Society of New York, according to The Bee’s previous reporting.

“We have a cultural goal to provide a certain type (of) program not readily available over commercial radio,” said Howard Martin, an assistant professor of speech at Sac State and the faculty advisor to the students who were running the station, in a 1964 Bee article.

The small 10-watt station grew in power throughout the late 1960s and early 1970s, but the region still lacked a true public radio station. Starting in 1975, Sac State’s Communications Studies Department under Barbara O’Connor embarked on a mission to bring what was then called National Public Radio to California’s capital region.

Three years later, KERS signed off and relaunched as KXPR-FM (88.9) in 1979. The new station primarily played classical and jazz music, but it also began to feature NPR programming, such as “All Things Considered” and later Morning Edition, as well as radio theater programs like Star Wars and Hitchhiker’s Guide to the Galaxy.

By the early 1990s, the now-mighty KXPR was broadcasting 24 hours a day and boasted an annual budget of more than $1 million. The station applied for and later launched a second FM station, KXJZ-FM (90.9). Originally, KXJZ emphasized jazz music alongside news and public affairs. But ever since 1996 when the broadcaster consolidated news programming onto one channel, many listeners now tune in to 90.9 FM to get their daily dose of news and current events from NPR and the BBC, among other broadcasters.

Two new stations, KKTO and KXSR, expanded the company’s reach even further into the Lake Tahoe Basin and the Groveland area. The year 1998 saw KXPR/KXJZ Inc. rebrand itself as Capital Public Radio in recognition of the company’s growth beyond its first two flagship stations.

Altogether, CapRadio operates a total of seven FM frequencies and six FM translators that repeat the signals for those news and music stations. It also operates North State Public Radio, two stations owned by Chico State.

The Bee’s Sam Stanton contributed to this story.