Treasurer: La. debt limit ‘meaningless’
“Everybody is in it together in light of the overall state budget. Everyone has to hurt a little bit to prevent catastrophic pain to one individual group.” State Rep. Chris Broadwater, R-Hammond
State senators are facing a critical decision Monday when they are expected to vote on a bill that would allow Louisiana’s community and technical colleges to circumvent the state’s construction funding program, called capital outlay.
Capital outlay forces hundreds of projects to compete for limited state dollars.
If Senate Bill 204 eventually becomes law, it is expected to have far-reaching implications on year-after-year state budget negotiations and how construction projects are funded in the future.
Supporters of Senate Bill 204, including Gov. Bobby Jindal, say it’s necessary to meet the needs of the rapidly growing Louisiana Community and Technical College System, or LCTCS.
Critics of the bill say it would prop up two-year schools while taking money away from the network of institutions that make up the LSU, Southern University and University of Louisiana systems.
SB204 would allow LCTCS to issue bonds to fund more than $250 million for 28 construction projects around the state including $39.7 million for Baton Rouge Community College and $92 million for Delgado Community College.
Projects include building new facilities to train nurses, welders, pipefitters and other labor-intensive careers.
Colleges would find private partners to pay for portions of the expense and then borrow money against the state’s general fund for the rest. Companion legislation, House Bill 185, sponsored by state Rep. Kenny Cox, D-Natchitoches, would extend a tax credit to entities and individuals that donate money to LCTCS.
State Treasurer John Kennedy has been critical of SB204. He said the bill would likely hurt the state’s credit rating by putting Louisiana over its debt limit, the amount of money the state is legally allowed to borrow.
“This is also a slippery slope. I support our community colleges unconditionally, but if we do it for community colleges, in fairness, we’d have to do it for LSU and Southern and Louisiana Tech and then our debt limit becomes meaningless,” Kennedy said.
LCTCS President Joe May has argued that his system is growing at a rate the capital outlay system can’t keep up with. He’s called the process slow and ineffective with projects often being held up for years. He said the program is more suited to fixing leaky roofs and not for the large-scale construction projects currently in the works.
According to an LCTCS accounting document, since 2001, LCTCS has funded 43 unique construction projects with $350 million in alternative financing, versus only three projects worth $12 million through the capital outlay program.
Edwards Barham, an LCTCS board member from Oak Ridge, has said finding alternative financing outside of the capital outlay system has historically allowed two-year schools to move out of the abandoned stores and unused university buildings they once operated in.
“It would be impossible to get where we are, absent this alternative financing,” Barham has said.
State Sen. Robert Adley, R-Benton and sponsor of SB204, has argued that the community and technical colleges are alone among state higher education institutions in increasing enrollments and expanding to meet the needs of training people for jobs.
Seventy-five out of every 100 children entering the ninth grade will eventually rely on the on the state’s community and technical colleges to train them for jobs, he’s said.
But state Commissioner of Higher Education Jim Purcell has countered that LCTCS is violating the state constitution by going around the Board of Regents, the state’s higher education management panel,which prioritizes construction projects and then submits them to be considered in the state’s capital outlay system.
He added that since LCTCS construction projects would get the majority of their funding out of the state’s general fund, the system would essentially be taking money away from other institutions.
The planned LCTCS construction could cost the state $20 million per year until they are paid off — a process that could last for decades, Purcell said.
LSU System President William Jenkins called the debate surrounding SB204 “a very difficult issue” in that LCTCS is currently making the sort of progress the state should have been pursuing decades ago.
“We need to support them, but we are in a very resource-deficient environment right now,” Jenkins said. “The harm comes in when the state has to pay those bonds off. The money will come out of education. I hope there a compromise to be found somewhere in this.”
Jenkins, however, acknowledged that the capital outlay system can be “disappointing” and “frustrating” at times.
It’s a similar refrain heard throughout higher education circles and at the State Capitol. Regents Chairman W. Clinton “Bubba” Rasberry, who opposes SB204, said Louisiana’s higher education institutions have $1.7 billion worth of construction and maintenance projects currently waiting to be funded.
State Rep. Chris Broadwater, R-Hammond, said he knows of numerous projects both in and outside of his district that have been held up in the capital outlay system for years. But he said the system is in place for a reason.
“Everybody is in it together in light of the overall state budget,” he said. “Everyone has to hurt a little bit to prevent catastrophic pain to one individual group.”
State Rep. Steve Carter, R-Baton Rouge, said the state needs to look at a way to expedite the capital outlay process. “I’m not sure there’s an easy answer, but it’s something that needs to be looked at,” he said.