At the University of California's request, the Governor's budget proposes to:
1. Shift $2.5 billion of existing state-supported debt onto the University of California's books for capital projects paid for through State Lease Revenue Bonds.
2. Let UC take on more debt without legislative oversight in the future.
UC's proposal would kill essential state oversight of borrowing and take unnecessary risks that would leave taxpayers and students on the hook. By rolling $2.5 billion of existing state-supported debt into UC's budget, UC's Wall Street executives claim they could use the University's superior credit rating to refinance the debt and save money this year. In fact, UC's credit rating is only a notch higher than the State of California's.
Under this proposal, UC would be allowed without Legislative approval or even notification, to use General Fund dollars for ANY capital projects, not just to pay debt on the restructured bonds.
That hotel UC is pushing for at UCLA? Paid for with your tax dollars!
An additional financial burden of $2.5 billion in outstanding debt would put a squeeze on UC's budget at a time when programs and jobs are being cut. It would also allow UC to take on even more debt without Legislative oversight. Transferring repayment of state-supported debt currently paid by the State to UC would not shield UC from future market volatility. Higher interest rates could increase debt service costs and divert already limited funds away from normal operating costs and core academic programs.
Runaway Debt Creates Pressure On Budget
Greater debt, future market volatility, and rising interest rates could create pressure on a limited pot of money. Higher education debt service costs in CA have already doubled in a decade, from $516 million in 2000 to $1.1 billion in 2010. Without adequate Legislative oversight, UC would be at risk for runaway debt.
If this is so bad for California's taxpayers why is this still on the table?
This is a good question for Governor Brown and his staff. His office is the only current entity pushing this privatization bill. Anyone with any policy sense who reads the proposal sees immediate red flags. Anyone who remembers the Enron scandal or who has suffered at the hands of Wall Street over Main Street can see that this is a bad idea for all of California's taxpayers.
Call the Governor and tell him no to UC's debt privatization 916-445-2841 Tweet him at @JerryBrownGov #CABudget