Why are Louisiana’s universities suddenly out of money?

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By Robert Mann

Louisiana’s colleges and universities now have a serious cash-flow problem. Without a $40 million loan from State Treasurer John Kennedy’s office, they cannot keep the lights on and pay employees.

According to the Associated Press:

Gov. Bobby Jindal’s administration is asking for a $40 million loan from the state treasury to continue paying expenses for Louisiana’s public colleges, after the financing used to fund higher education has been slow to arrive.

The loan request was filed this week with Treasurer John Kennedy’s office, seeking “seed funding” to provide cash flow for the campuses and other higher education offices.

Commissioner of Administration Kristy Nichols assures us this is nothing to worry about. “This is simply a timing issue,” Nichols said in a statement.

As I noted in my column Friday on NOLA.com:

Jindal and his economic development Secretary Stephen Moret keep telling us that Louisiana’s economy is booming. Maybe it is. Employment is surely up.

A booming economy, however, should generate enough revenue to balance the books and support critical needs like health care and education. A booming economy wouldn’t force the state into an annual rummage sale of state assets.

Perhaps the booming that Jindal and Moret hear is not the economy. Most likely, it’s thunderclouds on the horizon. Louisiana is about to be hit by some very bad budgetary weather.

Looks like that bad weather came sooner than expected.

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5 Responses to Why are Louisiana’s universities suddenly out of money?

  1. Stephen Winham says:

    “Seed” funding is not unusual and is often necessary when agencies generate their own revenues, but have peaks rather than level income throughout the year. Obviously, the earlier in the fiscal year seed funding occurs, the more sense it makes.

    It is somewhat surprising the Treasurer was willing to seed higher education appropriations this late in the fiscal year. There are only 2 months left, so the obvious questions to Ms. Nichols are, “Since it is NOT okay for any state entity to run a deficit, what will happen if this $40 million NEVER comes in at all or comes in at less than the $40 million? Will the Supplementary Appropriations Bill be amended to add money to higher education, and, if so, where will that money come from?” The mainstream press seems to have lost the ability to ask such questions.

    As you say, Bob, we are headed for a budget disaster and the only unknown is when we will hit the wall. Governor Jindal hopes it won’t happen before January, 2016. The legislature, which has the actual power of appropriation, seems content to sit back and wait for it to happen so they can blame whoever is governor at the time.


  2. Stephen Winham says:

    And this morning’s press report presents an even gloomier picture. From my perspective, we are headed for the same crisis in which we found ourselves in 1988. Note that the Treasurer is borrowing from other funds to prop up the general fund now and remember that much of the balancing act the last several years was accomplished by raiding other funds and laundering them into the general fund. What happens when all the funds against which we can borrow run dry?



  3. Greg Foreman says:

    If one takes into consideration the amount of property tax exemptions and REFUNDABLE, MARKETABLE tax credits granted companies by Jindal in the name of “economic incentives”-all of which are unaccounted for by the executive branch. the actual amount of lost revenue yearly is more in line with $3-4 billion dollars, possibly more. Just one project development, the SASOL plant in West Lake, LA, will receive $200 million dollars in tax exemptions over the next ten years. The plant anticipates employing 1,200 full time employees when the plant comes on line in late 2018. This means Louisiana will be subsidizing SASOL’s payroll approximately $16,667 dollars in tax exemptions for each employed worker per year. In addition to the $200 million dollars in tax exemptions over the next ten years, SASOL will also receive a 15% refundable/marketable tax credit for every gross payroll dollar paid. With an average income of $90,000 per employee(SASOL’s projection, not mine), this would equate to an additional tax credit of $13,500 per employee or an additional tax break of $16.20 million dollars per employed worker, per year based on an employment level of 1,200 employees. In essence, the state is subsidizing SASOL’s payroll to an average tune of $30,167 per employee, per year, or 33.50% of the $90K average quoted. (Must be nice!) So, now, the total “incentive” package grows to approximately $36.20 million per year making SASOL’s “incentive package” blossom from $200 million dollars over the ten year period to $362 million dollars yearly.

    This is just ONE example of “BJ’s” economic incentives in operation. Their are literally dozens of such “economic packages” a float through the state. All are equally detrimental and decimating to the growth of revenue for the state.

    And we wonder why the state doesn’t have revenue to operate?


  4. G Rushing says:

    Maybe its time to go after all those consulting contracts Treasurer Kennedy is always sounding the alarm over. It can’t hurt. What kind of a state lets its higher education facilities be the whipping boy, year after year? Certainly not one that wants to attract large employers, who need educated workers. In all these years, why hasn’t anyone taken a hard look at the numbers of 4 year state universities in Louisiana? We are in desperate need of community colleges to train folks for vocational and Technical jobs and offer less expensive 2 Freshman and Sophomore years. We continue to support an abundance of 4 year Universities that could be combined and ignore the need for community colleges. Based on the Population of Louisiana, we have too many State funded 4 year Universities. This will never be a popular approach for Politicians, but it could just be the solution we desperately need. A Community College system that operates in each Parish, offering the same opportunities to all Louisiana Citizens in Vocational, Technical and the 1st 2 years of College. What we have now is 17 4 year Universities and a hodge podge of technical schools. One great advantage to these schools for the student is a student who is in a Bachelors program and realizes it isn’t for them can easily transfer over to one of the technical programs instead of giving up and dropping out, wasting the money they and the state has spent. The opposite also happens, those who are completing a technical or vocational program find an easy transition to the first 2 years of college, at a much more affordable price. This may be a much better way to spend TOPS money, if we still have any left by the time the Jindal Administration is finished with us.


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