I have grown to despise the above cliche since moving to North Carolina. It seems like every public official uses it ad nauseum to describe cutting spending on education, and especially higher education. They even use it when pushing for more spending, which doesn’t seem appropriate. 

Yet I haven’t heard the same officials use the phrase in one case in which it is highly appropriate–the raiding of the Escheats fund principal to pay for massive increases in student financial aid. The fund, which consists largely of unclaimed estates, is in violation of state statutes, according to state fund manager Shawn Wischmeier, who spoke at a Joint Financial Aid Committee meeting today. He said that the traditional investment strategy has been to include a mix of highly liquid public equities, somewhat liquid real estate, and highly illiquid private equities. State statutes mandate that the private equities be no more than 20% of the mix, and that has not been a problem–until now.  The fund’s principal has fallen from a high of $687 million in 2007 to a little more than $400 million today.  Because of this shrinkage, and because the more liquid assets are naturally the first to go, the private equities are now up to 22% of the mix. Wischmeier said he therefore must start selling off private equities, probably at a loss. He said the losses won’t be too bad at first, as long as the raiding of the fund stops, but that there could be big losses in store if belts aren’t tightened immediately.

Now that I think about it, I’m not sure if the seed corn analogy is best here, either. It might be better if I titled it “Fiscal Cannibalism: Eating our Own Legs.”