Bills to allow universities to finance own projects passes A&R

From LRC

FRANKFORT -- Amid a budget crunch that could require state colleges and universities to lose hundreds of millions in state dollars, the House budget committee today approved two bills that would allow them to finance projects on their own.

House Bill 111 would allow colleges and universities to issue revenue bonds for capital projects like construction of dorms and research buildings if they cover all the bond costs. The second bill, HB 177, would allow the schools to undertake capital projects funded with cash restricted funds approved by the schools' governing boards and the state without prior state legislative approval. Both bills are sponsored by Rep. Bob Damron, D-Nicholasville.

This will be the fourth time that Damron has tried to pass legislation that would allow postsecondary institutions to bond their own projects without relying on the state to cover the bond debt. He told the committee that 43 states have already passed similar legislation and it has worked well.

He also said the state's universities support the bill.

"This is a session where we're going to have a lot of difficulty providing resources to our universities," said Damron. "Providing them some flexibility to manage their resources and assets is a way of unhinging them a little bit from the bureaucratic regulation that is costing us all a lot of money."

Damron assured the committee that the school's ability to pay off the bonds--without needing additional money from the state--would be established by private rating agencies. He also reminded fellow lawmakers that the Kentucky General Assembly would still have to authorize both the bonds and bonded projects and that the school's governing board would have to certify that the school will have enough money to pay off the bonds.

Still, some committee members wanted to make sure that the state would retain close oversight of the process.

"It's going to be incumbent on us not to rubberstamp the actions of the various universities," said Rep. Arnold Simpson, D-Covington.

While HB 177 would not require colleges and universities to seek prior approval of state lawmakers for capital projects funded entirely with cash restricted funds if they have approval of the school's governing board and state Council on Postsecondary Education, they would still have to send the school's and CPE's approval to the General Assembly's Capital Projects and Bond Oversight Committee for review.

Approval of the committee, however, would not be required. Governing boards could go ahead and allocate the funds without committee approval under the bill.

That aside, Damron said HB 177 is supposed to provide more flexibility for colleges and universities that are often restricted--especially between sessions when changes in a project may be required--by the current system.

"Again, it gives them flexibility to make changes in the way they manage those projects that are not mentioned in the budget bill specifically... for which they already have cash assets," he said.

Both bills now go to the full House for its consideration.