Commentaries
Study Urges UNC to Slow Down on Bond

Can't the necessary capital dollars come from existing growth in funding?

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June 24, 1999

The Pope Center for Higher Education Policy this week released a Spotlight showing why the UNC system should not rely on bonds to finance the UNC system's construction costs and highlighting better ways to address construction needs. The report poses questions that it says all citizens and legislators should ask before giving approval to the legislation:

Can't the necessary capital dollars come from existing growth in funding?

In its 1999-2000 budget request, UNC sought $1.8 billion for operations and an additional $622 million for capital needs. This represents a 41% increase in state support since 1988 and a substantial increase over last year's budget request. There is no reason why the state cannot redirect enough money to finance much or all of the system's construction needs, the report says. "By establishing the renovations of buildings as a top spending priority, the system should reduce its backlog of repairs over time without running up massive new debts."

Do we really need the proposed expansion of capacity?



Of the total dollars that UNC says it needs for construction, $1.6 billion is slated for expansion to meet expected enrollment growth. "But the assumption that the same share of young people will continue to enroll is open to question," says the report. And even if there is an increase in the number of students who attend four-year colleges, this does not necessarily call for an expansion. A better approach would be to encourage greater use of the state's private colleges and universities by increasing the Legislative Tuition Grant, the report says. A capacity survey just completed by the N.C. Association of Independent Colleges and Universities indicates that these institutions have classroom space for as many as 9,000 additional students.


Does bonding open a Pandora's Box?



According to a report prepared by a consultant for the UNC Board of Governors, the state's campuses need some $3 billion worth of repairs. "That may well be true," says the report, but 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 money for all sorts of future spending projects.

"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."

Currently before the legislature, there is also a bill that would provide for the construction and financing of certain projects at UNC through self-liquidating assets. This year, there are 32 such projects on 10 UNC-system campuses that would cost UNC a total of around $300 million. $3.5 million of that total would go to build a "N.C. Center for Creative Retirement" at UNC-Asheville. A startling $22 million would extend Reynolds coliseum to include tutoring facilities for athletes. Another $4 million would go to renovations on a student union at Appalachian State University that has already had renovations totaling $9.7 million. If the bond legislation is passed, a large amount of the university spending will be done solely at the discretion of the UNC system, without legislative appropriation and control.

 


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