Beaufort News

Public universities' reserve funds make them targets for state budget cuts

COLUMBIA -- South Carolina's 13 public four-year colleges and universities have about $259 million in reserves, those schools say.

That figure could make the schools inviting targets for state legislators as they look for ways to cut spending and close South Carolina's $829 million budget deficit for the year that starts July 1.

This year, institutions of higher education -- two- and four-year colleges -- received about $550 million in state money. But there are rumblings of cuts of as much as 30 percent, says Lander University president Daniel Ball.

In part, legislators may justify a huge cut by pointing at the colleges' reserve funds, saying, in effect: Spend your savings.

The schools say they already are doing that, dipping into their reserves -- typically called unrestricted net assets or an unrestricted fund balance on their financial balance sheets -- to help offset state budget cuts in recent years.

Still, millions remain in those reserve funds.

At $190 million, the University of South Carolina has the largest unrestricted net assets balance. Clemson University is next at $27.8 million.

Other four-year schools have far smaller funds, some less than $1 million.

While those funds are described as "unrestricted," the money often is designated for use on projects such as roof repairs and upgrades to data processing systems -- important, cost-saving projects, college officials say. In some cases, officials say those repairs are overdue, having been put off to offset state budget cuts.

School officials also say the size of their reserves is misleading, including sums that never may be collected, such as accounts and pledges receivable.

Still, facing the prospect of additional state budget cuts, school officials said they again likely will have to tap into their unrestricted funds to balance their books until the impact of tuition increases, furloughs or layoffs can take effect.

"In order to manage our scarce resources responsibly, we maintain fund balances that can be tapped in the short run to deal effectively with major cuts in recurring appropriations," said William T. Moore, USC's vice president for finance and planning.

'UNEMPLOYMENT'S GOING TO GO UP'

In his final executive budget, former Gov. Mark Sanford proposed cutting state funding for higher education by $100 million.

The General Assembly is not bound by Sanford's budget. But legislators, including those who oversee higher education, have said colleges and universities should expect big cuts.

Gov. Nikki Haley wants to revamp the way the state's colleges and universities are funded by giving school leaders more flexibility in how they spend their money, provided they meet certain goals on graduation rates, the ratio of in-state to out-of-state students, and their contributions to the economy.

The state will spend about $550 million this year on higher education, including money that goes to colleges, tuition grants and the Commission on Higher Education. That is down more than $300 million from 2008.

Various schools received various amounts of that money. USC gets about $100 million a year, roughly half the amount it received in 2008. The far smaller Lander, in Greenwood, gets about $6 million, about $5 million less than it received in 2008.

"We could take a 15 percent cut without having to do too much," Ball said. "We probably would have to do a furlough. I just hope it's not as bad as what I'm hearing recently -- 25 to 30 percent. If it's that bad, unemployment's going to go up in this state" as colleges lay off employees.

School officials say their unrestricted fund balances could make them appear financially stronger than they are in reality.

"It is important for the public to understand that this figure is always a snapshot in time, and that the fund balance is part of the responsible operation of our campus," said Rebecca Masters, assistant to the president for public affairs at Rock Hill's Winthrop University, which says its unrestricted fund balance is $2.5 million.

Ball said Lander had about $1.5 million in unrestricted money at the end of the last fiscal year. "I'd like to have $1.5 million again at the end of this fiscal year, but I don't think I will," he added.

The amount of unrestricted money varies greatly from school to school. Generally, the largest schools had the largest fund balances.

A summary of USC's unrestricted net assets balance shows all but $17.7 million of the school's $190 million has been designated for use in specific areas. "Any truly uncommitted balance is money we use to recruit and retain faculty, pay for unexpected repairs and maintenance, and manage other short-term drains on resources," Moore said.

Cathy Sams, Clemson's chief public affairs officer, said that school's $27.8 million unrestricted fund balance "would be enough to run the university for about two and a half weeks."

"That's not much of a cushion against another major cut in recurring state funding," she added.

The General Assembly has cut state funding to colleges and universities by $337 million from fiscal 2008 through fiscal 2011, according to the S.C. Commission on Higher Education.

Spending on higher education accounts for 9.5 percent of overall state spending, a lower percentage than at any time in the past quarter-century.

Schools have responded by furloughing faculty and staff, limiting hiring and travel, and raising tuition rates, already the highest in the South.

The state budget board responded by threatening to block any new construction at colleges that raised their tuition too much.

USC's Moore said he wants the public to understand how fund balances are used.

"This gives us time to reduce recurring obligations systematically and gradually so that disruptions in our teaching mission are minimized," he said.

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