Administrators warn: Cash low with budget

Advocate staff photo by RICHARD ALAN HANNON --  Research associate Anik Boudreau feeds a line of immortalized fat cells grown in culture on Thursday in the adipocyte biology lab at the Pennington Biomedical Research Center in Baton Rouge.
Advocate staff photo by RICHARD ALAN HANNON -- Research associate Anik Boudreau feeds a line of immortalized fat cells grown in culture on Thursday in the adipocyte biology lab at the Pennington Biomedical Research Center in Baton Rouge.

Some of Louisiana’s top higher education administrators fear that they won’t have enough cash to pay bills and employee salaries over the next few months because of the way the state’s budget is structured.

The concerns came up at two separate higher education meetings last week, less than seven days before the state’s new fiscal year goes into effect on Monday.

Louisiana Community and Technical College System President Joe May said that as state funds to higher education shrinks; it has become more important to have cash reserves on hand, especially during summer months when schools aren’t collecting tuition.

“Cash flow will increasingly become more of a problem now that we’re more reliant on tuition,” May said.

But Gov. Bobby Jindal’s administration maintains that schools won’t have any cash flow issues and dismissed the talk as worrying over nothing.

Commissioner of Administration Kristy Nichols, the governor’s chief budget adviser, was particularly adamant.

She said the state’s overall higher education budget has more than enough money readily available to pay for any issues that come up. “We will certainly work with them to determine what their needs are, but when I look at the numbers I don’t see a cash flow issue,” Nichols said.

But school executives voiced concerns with the way legislators and the Jindal administration put together the state’s $25.4 billion spending plan.

About $340 million, or 40 percent of the funds colleges and universities expect to get from the state, is so-called “one-time” money. The “one time” money is supposed to materialize from property sales, lawsuits settlements, and back taxes the state expects to collect.

When the money shows up, it will go into a pool called the state’s overcollections fund.

Higher education leaders say they’d prefer their institutions’ share of state funding be held in Louisiana’s general fund, which they see as more stable.

The uncertainty over state dollars prompted the Board of Regents, which oversees all higher education institutions, to settle on a strategy to ask the state for a cash advance.

State Commissioner of Higher Education Jim Purcell said it’s hard for institutions to plan and operate normally when there is uncertainty over their finances.

“There has to be money in overcollections before you can draw money from it. Traditionally institutions take out one-twelfth of their money every month,” Purcell said. “What we want is seed money so institutions can draw money as they normally would with general fund money. We’re asking for seed money to cover what they said would be coming in.”

The situation is a little different for institutions such as LSU’s AgCenter and LSU’s Pennington Biomedical Research Center which don’t collect tuition and rely more heavily on state and federal funding.

On one hand, LSU AgCenter Chancellor Bill Richardson said he’s aware of the situation, but believes his institution will be fine. “We’ve looked into it, but we don’t see it presenting a major problem,” he said

Conversely, Guy LaVergne, Pennington’s chief financial officer, said a low balance in the overcollections fund could disrupt a number of their laboratory research projects.

“We are concerned with how liquid we will be with cash flow, but this is not an issue unique to Pennington,” LaVergne said. “I know that the regents are working with LSU and the Division of Administration to work out a plan to solve this dilemma.”

Southern University System President Ronald Mason said the university has enough cash to handle payroll and will use money from the overcollections fund as it becomes available to pay for other expenses, such as deferred maintenance.

“We’ll use overcollections to fix things that need to be fixed and for our own one-time expenditures like our online enrollment processing center,” Mason said. “It’s a concern, but we’ve talked to the administration and they feel like the money will be there.”

Late in the week, Nichols, the budget advisor, questioned the Regents strategy to ask for seed money. She explained that in addition to the overcollections fund, state schools can draw money from the $454 million in the state’s general fund set aside for higher education.

“I see no rationale for a seed request,” she said. “It’s unusual that you would contemplate a cash flow issue when you have sufficient funds.”