There is a possibility looming that sometime within the next few months Louisiana’s public colleges and universities will be unable to pay their bills, including employee salaries.
The Legislative Fiscal Office, which advises the Legislature on financial matters, issued a report this week bringing up the potential for schools to run out of their share of state funding by January.
The report echoes what a lot of higher education leaders were alarmed about this spring when Gov. Bobby Jindal and the Legislature agreed on a state budget for the 2013-14 fiscal year — that much of the money earmarked for colleges and universities is speculative and may not materialize at all.
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 of money known as the state’s Overcollections Fund.
Should any of those dollars in the Overcollections Fund fail to materialize, the budget dictates that higher education funding would be cut by the same amount.
According to the Legislative Fiscal Office “only a small portion of monies appropriated to the Overcollections Fund” has materialized to date, meaning schools are paying their bills mainly out of the other pool of money available to them — the state general fund.
Commissioner of Administration Kristy Nichols, the governor’s chief budget advisor, said Wednesday that the state is on track to collect all of the money they anticipated would be coming in this spring.
She acknowledged the Legislative Fiscal Office report but said much of the issues brought up are routine parts of accounting and budgeting.
Nichols also said that some of the money from legal settlements and property sales have come in but haven’t been officially recorded by the state Treasury.
“This is not unusual,” Nichols said. “As far as the revenue we’re anticipating, we’re on track.”
But the situation was dire enough earlier in the year that state Commissioner of Higher Education, Jim Purcell wrote a letter to Nichols asking for “seed money” — essentially an advance in case money in the Overcollections Fund doesn’t come in.
“Without the seed advance, over 40 entities will be waiting for funds to be deposited into the Overcollections Fund throughout the year,” Purcell wrote in June. “Institutions require timely access to state funds and if the funds are not available, the institutions will be financially challenged with meeting ongoing monthly expenditures.”
But an issue, which sparked a near panic in the spring, was met Wednesday with little more than a collective shrug from all four of the state’s college and university systems and the Louisiana Board of Regents which oversees all public higher education in the state.
“Any time there are potential budgetary challenges, we are concerned but at this point we are not alarmed,” Regents Assistant Commissioner for Public Affairs Katara Williams said.
LSU Chief Financial Officer Wendy Simoneaux said she expected there to be cash shortages and isn’t worried.
Southern University Vice President for Finance and Business Affairs Kevin Appleton said the state has worked out a “month-by-month detailed cash flow schedule” that he is content with because it allows Southern’s network of campuses to meet their monthly obligations.
“I don’t want to assume there is a cash flow issue if there isn’t one,” Appleton said.
University of Louisiana System President Sandra Woodley, is responsible for more than 90,000 students spread out over nine campuses around the state.
Woodley said she is sure that higher education entities will be able to work out some kind of agreement with the state should money in the Overcollections Fund not materialize and higher education dollars in the general fund run out.
“At some point, there could be a problem,” Woodley said, but at this point, we’re not worried.”