Colleges and universities will never have an overabundance of buildings and facilities, not in this poor state, and borrowing is as good a way to get them as there is, except one. That would be to build them with the cash you have on hand and avoid the lengthy debt and interest.
So does the state have $150 million in cash that the institutions want, or must it sell bonds? The issue before voters on Dec. 13 is not quite that simple, but it frames the questions.
Gov. Huckabee called a special election on that day to restructure some $250 million of 15-year-old college savings bonds, which would free $150 million for new buildings and equipment at the state-supported universities and the two-year colleges. While he was at it, Huckabee put a second issue on the same ballot, whether to authorize the state Highway Commission to keep borrowing money at its pleasure to repair interstate highways when the current debt is repaid in five to eight years. We have told you why we think the highway issue should be defeated. The interstates can be repaired almost as quickly and much more economically by paying as we go, and the state would not be relinquishing a fair part of popular rule.
The college bond question is not so easy. People of good will can disagree reasonably on the value of the college buildings and the wisdom of the bond financing, but they need to look behind the salesmanship. Matters are never so desperate or the exigencies so clear as the sponsors suggest.
Bonds or cash. The state is building a cash surplus that is expected to be close to $300 million by the time the biennium ends in July 2007, and more than half of that will be available next summer.
Could it be used for the college buildings and avoid the debt? Yes, but the legislature would have to appropriate it for the colleges, and lawmakers proved again this year that they would rather use these cash balances on local pork-barrel projects that help them get re-elected. The Arkansas Supreme Court might hold the legislature and Gov. Huckabee in contempt for not providing enough money for public school construction needs, in which case part of the $300 million could be dedicated to that. But it is an option for higher education. Would you trust the legislature to be so prudent?
The need. Gov. Huckabee and Dr. Linda Beene, the director of higher education, say that enrollment on the campuses has been growing rapidly the past 10 years, far outstripping the campuses’ physical expansion.
Enrollment has been growing, a very good thing, but it has been accompanied by capital improvements of unparalleled volume in Arkansas history. A look at the vouchered expenditures of public funds at the state treasury from 1995 through 2004 shows that the institutions have spent nearly $1 billion — $917,360,013 to be exact — on capital improvements. Another $250 million or more has been spent on buildings and athletic facilities with grants from the great family fortunes and foundations. The Donald W. Reynolds Foundation alone gave the institutions $132,081,364 between 1995 and 2003 for new buildings, all of which now bear the name of the media mogul.
But not all of the money was spent on the priority needs of teaching: classrooms, research facilities, performance halls and the like. The University of Arkansas spent more than $100 million expanding and renovating its football stadium and several million more upgrading other athletic facilities. So a few of the campuses may indeed have severe academic shortages. The law, incidentally, would not permit any of the bond money from being used on sports facilities.
Timing. Unlike the highway bonds, which would not be issued until late 2010 or beyond, there is some argument for voting on higher education bonds rather than in the 2006 general election or later if you are going to sell bonds at all. The special election will cost $1 million; putting it on the general election ballot would cost nothing. If you are going to issue bonds, better to do it now while long-term interest rates are low. They will go up and up.
Taxes. No new taxes would be levied and no other program would be affected, Huckabee said. The bonds would be repaid not from new taxes, but it is wrong to say the bonds would affect no other program. The state takes $24 million a year from general revenues to retire the existing bonds, the first batch of which were issued in 1991. After restructuring the current debt to pay off some $100 million owed to investors over the life of the existing bonds, the state would commit that $24 million a year for another 20 years. If the bonds are defeated, that money after the last of the current bonds are retired in 2017 would lapse back into the general fund to pay for the public schools, Medicaid, law enforcement and all the rest.
So the question for voters is this: Are college buildings and research facilities of such overriding priority that they should stand ahead of other needs, principally the schools, in the call against the state’s public credit? As the sports announcers say, it’s a judgment call.
