With Missouri staring at another tough budget, Gov. Jay Nixon is floating some out-of-the-box ideas.
One that should sink immediately — if it hasn’t already — is the suggestion that five of the state’s public universities loan the state a total of $107 million out of their reserve funds.
The rationale is that cuts to the state’s higher education budget could be avoided by having reserve-rich schools front money to the state treasury. They would receive a portion back immediately in operating funds, and the rest of the money would be repaid over a seven-year period with money from the Missouri Higher Education Loan Authority, known as MoHELA.
Nixon’s team is right to want to avoid cuts to higher education. Missouri’s public colleges and universities have never financially recovered from draconian cuts imposed on them over the past two decades.
But the idea of having the state borrow from university reserves creates the mistaken impression that at least five of Missouri’s public universities are flush with cash. Missourians might well wonder why schools with sufficient reserves to bail the state out of a budget jam are asking for tuition increases. Donors might have similar thoughts.
The reality is much more complex. The University of Missouri System — one of the five institutions on the governor’s list — doesn’t have a single reserve account. Rather, it has thousands of reserve accounts scattered among its four campuses and its hospital system. They have multiple purposes, including a self-insurance fund, parking accounts, planning for future maintenance and capital projects, and seed money for future labs and academic programs.
Some of the reserves were given by donors for restricted purposes. The system also uses reserves to borrow funds for capital projects and maintain a high credit rating.
"The idea that we have this nice, fat piggy bank waiting to be plucked is a false concept," said Warren Erdman, chairman of the UM System Board of Curators.
The idea of repaying interest-free loans from the universities out of the MoHELA fund over seven years is also dicey. Even if Nixon and current legislators would agree to such a plan, there is no guarantee that future governors and legislators would honor it.
In considering ideas for closing a budget shortfall that might reach $750 million, Nixon should work with the legislature to tap the rainy day fund to pay for emergency costs incurred this budget year from the Joplin tornado, flooding and other natural disasters.
And the governor should lend his support to the broad coalition that is pushing for a public vote to raise Missouri’s lowest-in-the-nation cigarette tax. That’s a far healthier option for improving the state’s finances than borrowing from university reserves.
Copyright The Kansas City Star. Reprinted with permission.