Of Budgets and Balderdash

September 1991; pages 5, 17; Volume 3, No. 1

Students' failure to lobby effectively against tuition hikes stemmed directly from their inability to confront the "experts" on questions of university finance. But anyone can understand the fundamental issues surrouding how UT gets its money, and where that money goes. Administrators hide behind the complexity of the University's financial structure to justify some of their more egregious spending schemes; don't let them fool you.

In the face of its steady or shrinking enrollment, UT income has risen sharply throughout the eighties. A major source of income is the proceeds from the Permanent University Fund (PUF). Income from the PUF (known as the Available University Fund or AUF) rose from $107 million in 1980 to $266 million in 1989-90. Two thirds of this money goes directly to UT Austin. UT's research spending from 1985 to 1991 rose from $250 million to $511 million. Meanwhile, general revenues from the legislature have remained stable overall. Further, the University has borrowed hundreds of millions for its special projects, a debt that students and taxpayers will eventually pay off in a variety of ways. In essence, while UT's income has risen steadily, massive research spending has outstripped any gains students might have seen.

Higher debt service payments directly reduce money available to students at UT Austin.

Thus, while students should be feeling the benefits of increased revenues in all areas of University life, they instead return from the summer to find a hiring freeze, cuts in hours at the library and TA shortages. UT President "Dollar" Bill Cunningham hints ominously that faculty salaries will be frozen at current levels, and talks of other harsh measures. Cunningham draws every sector of the University into the budget cutting process, presumably in order to equally spread the blame. Meanwhile, Garth Davis in a Texan article declared himself "very confident the administration will protect us in many ways." What is this man thinking?

Last year at this time, ostensibly to save money during the annual budget crunch, Cunningham announced that the library would have to cut hundreds of periodicals and reduce its hours and staff time in order to save $220,000. Meanwhile, UT continued to pay tens of millions in construction costs designed to provide R&D facilities for corporations and the military. While the payments continue, UT claims that this money - collected by issuing bonds (debt, in other words) - is not available for student services, library books, etc.

When asked in an interview with Polemicist whether money spent for research capital could have been used for general education, Hans Mark said - flat out - "No." Yet the bond statements say that bonds issued on the PUF can be used for acquiring land, construction, repair and rehabilitation of buildings, acquiring capital equipment, library books and library materials, and bond refunding. The statements further clarify another oft-obscured fact - higher debt service payments directly reduce money available to students at UT Austin, since all money not spent on debt service comes to the University in the form of the Residual Fund. Mark admitted, albeit grudgingly, "If you use the entire income from the PUF to pay off bonds, then we don't have the AUF for things we do at UT Austin."

Students Pay
Coming and Going

Total debt service payable from the UT's two-thirds portion of the Available University Fund (AUF) has increased 216 percent since 1983, from $28.7 million to $62 million, according to 1991 bond summaries - and the debt service numbers will only rise from there. When the University talks about issuing PUF bonds to pay for its big projects, it rarely mentions the mechanism for paying back that debt.

The Texas Constitution limits the bond debt that the UT regents may secure with the PUF. Prior to 1985, the Constitution required a lid on debt, keeping it under 13.33 percent of the total value of the PUF. In 1984 the University nearly hit its limit on borrowing, and pushed through a constitutional amendment upping the ante. Now, UT may borrow up to 20 percent.

As of February 1991, UT estimated the PUF at $3,438,357,015. The UT regents have secured $552,155,000 worth of debt with the PUF, or 16 percent of total value, and the debt is rising. In addition to the PUF bonds, the University also issues tuition bonds, general revenue bonds, student fee bonds and other that have no constitutional limitations. Today, UT is actually $885,152,000 in the hole on debt.

Total debt service payable from the UT's two-thirds portion of the Available University Fund (AUF) has increased 216 percent since 1983, from $28.7 million to $62 million.

An example will illustrate how this debt burdens students: the Molecular Biology Building and Animal Resources Center required PUF bond issues of $14.9 million, in addition to the $9 million drawn from student fee balances, for a grand total of $23.9 million. Moreover, interest as well as principal on the board debt will over the years come out of the AUF, upping that figure dramatically. Thus, the loss to the UT-Austin general education budget well exceeds $25 million, and will affect students for years.

Meanwhile, the only bonds approved to pay for services to students in 1990 were secured not by the PUF, but by additional student fees. In other words, if students want to remove the asbestos from the Union, they must cough up an additional $16 on their student service fee to pay back the debt.

If the Army wants a research center, "the University will provide advance funding," according to a current UT budget document, and allow the Army to pay it as it goes with a "use" fee. If the Navy wants a research lab (the Applied Research Lab will cost UT $3 million in 1991), UT graciously provides advance construction funding "from PUF bond proceeds previously allocated to UT Austin for campus repair and rehabilitation projects."

According to the House Committee on Higher Education, state-wide costs for deferred maintenance amount to $440 million and will climb to $500 million this year. Sharp attributed this to "priorities in new investment in equipment and facilities versus repairs and renovations." Although the Navy will pay off its advance this time, it amounts to an interest-free loan that directly reduces funds available for maintenance and for general education.

On the other hand, Sharp joins the bipartisan consensus that the University should continue to spend money on capital improvements that support private industry. "Economic Development items are designed to stimulate business growth and are a direct subsidy to the private sector. The programs could become self-supporting through the private sector or other public grants; however, no change in current funding levels is recommended," says the Texas Performance Review (emphasis ours).

When pressed to outline the benefit to students of UT's current spending priorities, Hans Mark answered, as if to a completely different question, that "the 'value added' for the research work at Balcones is that we develop cadres of people that can be very, very competitive in this business [which business - education?]. If you don't do that you wind up shining the boots of the Japanese tourists when they come over. The only way to compete is to have the facilities you are talking about."

In short, when students are analyzing UT's budget priorities, the primary mistake they make is to assume those priorities include their education. In Mark's case, however, it is to ensure that American industrialists don't wind up bootblacks for the ominous Yellow Peril.