The state wants the ability to borrow $1.7 billion from the University of California and California State University after slashing nearly a quarter of state funding for the beleaguered systems.In the words of a comrade, they pledged your tuition . . . to fund the prisons.
Legislation moving through the Capitol with scant notice, Senate Bill 79, would establish a new investment fund for UC, CSU, California Community Colleges and the Judicial Council. If necessary, the state could use that money to retire short-term loans from Wall Street or pay bills, while giving the universities above-market interest rates until a future payoff date.
UC plans to transfer $1 billion of cash reserves into the fund, while CSU will shift $700 million, according to officials at the two systems. The deal does nothing to relieve CSU or UC of the $650 million in cuts each system will absorb under the budget enacted nearly two weeks ago.
Gov. Jerry Brown's Department of Finance and Democratic lawmakers said AB 79 is necessary to persuade Wall Street to lend California money at competitive rates. Each year, the state receives the bulk of its tax revenue in the second half of the fiscal year and must borrow until then to pay bills.
Robert Turnage, CSU assistant vice chancellor for budget, said his system maintains about $2 billion in total short-term reserves. The money normally earns 0.5 percent interest with private managers.
Turnage believes CSU could earn 1.5 percent interest under the state deal. That would be a full percentage point above what the state now provides to other public agencies in the state's $66 billion Pooled Money Investment Account.
Asked why CSU isn't using the $700 million to offset fee hikes, Turnage said, "The budget cut that was just delivered by the Legislature is a permanent cut in our base funding from the state … If we were to draw down our short-term investment pool to avoid other steps like a fee increase, then we would have another hole next year."
Tuesday, July 12, 2011
From the Sacramento Bee: