A recent prospectus http://meritos.com/cgi-bin/disclaimer.pl?Did=1394 presents three new series of bonds, through which the university proposes to issue more than $239 million in new debt. Over the next 30 years this new debt will require almost $415 million (principal plus interest) debt service, though the federally backed Build America Bond Program will pay $53.7 million of the interest. The total debt service will increase to more than $1.8 billion. While the university has multiple sources of funds, this debt service inevitably provides pressure to raise student tuition, limiting accessibility and affordability for many of Colorado`s young people.
Issuing new bonds, as CU is doing, is certainly a prudent way to refinance existing obligations to lower rates, but only $24.5 million of the $239 million is being used for this purpose. The remainder is to be used partly to renovate older buildings, but, more importantly, to construct approximately 500,000 gross square feet of new buildings for biotechnology, basketball, volleyball, and student housing at Boulder; and pharmaceutical research at Denver. In addition to increased debt services, new facilities increase operating costs for utilities and maintenance in an era of diminishing operating funds.
University operations are funded by the following sources: Legislative appropriations, student tuition and fees, contracts and grants, rents (e.g. housing), services, and gifts. New financial obligations place greater demands upon these sources.
State contributions to the university`s budget have declined dramatically from $209 million at the beginning of the 2009 fiscal year to a current $88 million. There is some relief from stimulus funds, but it is temporary. The state currently contributes only 3.3 percent of the university`s operating budget of $2.6 billion.
Currently, research funds over 27 percent of CU`s budget and pays the general fund an overhead to cover its fair share of operations. Research funding could easily decrease in these difficult financial times. Loss of resources from any of the university`s funding sources would force further hard choices about which sectors of the university will survive and prosper and which will be cut to pay the bill. There have already been serious personnel cuts by attrition and the Silver and Gold Record was closed for financial reasons. There is talk of salary furloughs and freezes, program terminations, and further faculty and staff reductions. Even in this constrained environment, growth will occur in some program(s), but growth will be by substitution, not by new funding. Furthermore, if several of the university`s revenue sources were to weaken at once, the more highly leveraged university would be subject to significant pressure on its excellent bond rating.
The Regents and CU central administration have taken on new debt ostensibly in order to maintain quality and remain competitive. We are concerned by the fact that debt choices are also academic choices. These program choices need to be debated within the university community rather than implicitly being made through new debt.