According to a report prepared by a consultant for the UNC Board of Governors, the state’s campuses are in a pathetic condition, with an enormous back log of maintenance and repair work needed — some $2.4 billion immediately and $5 billion over five years, including money to cope with student enrollment growth. As the chart on the next page shows, appropriations for the system have been increasing rapidly for the last decade, but administrators have evidently not put enough of it towards repairs and maintenance to keep campuses in good condition.
In order to cover the cost of necessary repairs, enrollment growth, and an array of “special needs” on each campus, State Treasurer Harlan Boyles has proposed a plan allowing UNC to sell $1.5 billion “special obligation” bonds and the state to issue $2 billion in “limited obligation” bonds. Neither form of debt requires voter approval. North Carolina has in the past relied almost entirely upon the pay-as-you-go method, requiring the General Assembly to appropriate the money needed by the university system. That keeps spending decisions in the hands of elected officials and ultimately, the citizens. To the extent that the state has issued bonds for university projects, they have been general obligation bonds subject to approval in a public referendum. Before giving approval to the legislation that would authorize the new “financial tools” for the universities, citizens and legislators ought to ask some hard questions.
BulletCan’t the necessary capital dollars come from existing growth in funding?
One way or another, the taxpayers, donors, or students at UNC will have to pay the cost of the system. Now that the repair and maintenance problem has been so clearly revealed, there is no reason why universities cannot redirect enough money to do much or all of the work. In its 1999-2000 budget request, the universities sought $1.8 billion for operations and an additional $622 million for capital needs. This represents a staggering 41 percent increase in state support. Such an unrealistic proposal reflects a fundamental unwillingness on the part of the system to live within its means. UNC funding has grown significantly in recent years, from taxpayers as well as from private donors and tuition hikes. North Carolina is already far more generous than the average state in taxpayer subsidies for higher education. By establishing the renovation of buildings as a top spending priority, the system should reduce its backlog of repairs over time without running up massive new debts.
Bullet Do we really need the proposed expansion of capacity?
A substantial amount of the capital spending the universities seek ($1.6 billion) is slated for expansion to meet expected enrollment growth. Looking only at demographics, it appears that there will be an increase in enrollment, but the assumption that the same share of young people will continue to enroll is open to question, as a subsequent Spotlight will discuss. Even if there is an increase in the number of four-year college students, that does not automatically call for an expansion of the UNC system. Another approach would be to encourage greater use of the state’s private colleges and universities by increasing the Legislative Tuition Grant. Instead of the state building facilities for students who will be heavily subsidized (more so than in any other state), it would make sense to encourage private sector enrollment. Many N.C. private colleges are underutilized because of the huge cap in cost between public and private schools created by generous UNC subsidies.
BulletDoes bonding open a Pandora’s Box?
State university officials say that they desperately need $3 billion for repairs, and that may well be true. But it hardly instills confidence in their ability to establish priorities that they have allowed this situation to develop. If we permit university funding through bonds that do not require voter approval, we will probably see more and more use of this “financial tool” to raise the money for all sorts of future spending projects. Bonding weakens accountability for university spending when the very crisis that gives rise to the demand for it argues that we need more accountability.
North Carolina has the resources necessary to fix the neglect of its campus buildings and facilities. Our traditional pay-as-you-go system of finance can solve the current problem without creating the new ones.
George Leef, Locke Vice President and Director of its Pope Center for Higher Education Policy