LJWorld.com / Deal reached to fund repairs

Archive for Monday, April 30, 2007

Plan gives universities $410M over five years

April 30, 2007

Topeka — House and Senate leaders agreed Sunday to a $410 million, five-year plan to repair buildings and utilities at state higher education institutions, including Kansas University.

The compromise proposal will next go to the full House and Senate this week as lawmakers hope to finish the 2007 legislative session.

"I think it's going to pass both chambers," said state Sen. Dwayne Umbarger, R-Thayer, and the Senate's chief negotiator on the bill.

"Considering the environment under the dome this year, I think it's the best we could do," Umbarger said. "It does not resolve all of the challenges that the Kansas Board of Regents are facing, but I think it's a step in the right direction."

Action by the House-Senate conference committee represented an important step in lawmakers addressing what the regents have said is a $663 million backlog of repair projects, ranging from crumbling classrooms to rupturing utility lines to dangerous electrical systems.

Regents Chairman Nelson Galle said the new proposal "would provide an important downpayment," but he added "this package obviously falls short" of a comprehensive solution.

"Until this five-year plan can be revisited, the maintenance backlog will continue to grow, and the problem will become even more expensive and more dangerous," Galle said.

He noted the proposal provides $90 million in new and guaranteed state funds over the next five years - only 14 percent of the deferred maintenance needs. The rest of the funding is in the form of tax credits to lure private donations and $100 million in state-issued bonds, which the state would pay off.

State Rep. Barbara Ballard, D-Lawrence, said she understood the regents' concern.

But because of budget problems, including a recent settlement between the state and federal government over disputed Medicaid costs that will cost the state nearly $100 million over the next year, Ballard said this was probably the most the state could afford for the colleges.

"It will certainly get us started on those projects, and even if you received more money, you couldn't use it all at once anyway," Ballard said.

Both Umbarger and Senate Democratic Leader Anthony Hensley of Topeka said in future years, revenue from newly approved casinos probably will be allocated to maintenance costs.

"We'll be able to use that gaming revenue to greatly enhance the deferred maintenance needs of the universities," Hensley said.

A law passed this year allows the construction of four resort-type casinos and the addition of slot machines at pari-mutuel tracks. It is expected to face a legal challenge.

When the House-Senate conference committee began meeting Saturday, the House had approved a $313 million, five-year plan, while the Senate had endorsed a $630 million plan over five years.

University repair plan

A summary of the plan to fix deteriorating buildings on higher education campuses, drafted Sunday by House and Senate negotiators.

The plan

¢ Sets aside $90 million in state revenues over five years to address a backlog of repairs on state university campuses.

¢ Authorizes $62.5 million in tax credits over four years, starting July 1, 2008, to lure $120 million in private donations to universities, community colleges, vocational schools and Washburn University of Topeka.

¢ Permits $20 million in state-issued bonds each year for five years, for a total of $100 million, to pay for projects at Washburn, community colleges and vocational schools. The state would make $38 million in bond payments in those years.

Annual cost

Fiscal year 2008: $50.9 million

FY 2009: $66.2 million

FY 2010: $86.5 million

FY 2011: $104.3 million

FY 2012: $102.5 million

Total: $410.4 million

Total 5-year costs

University repairs: $183.8 million

Repairs, other campuses: $126.0 million

Additional state costs: $100.6 million

Discussion

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30 April 2007
at 7:48 a.m.

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oldgoof (Anonymous) says…

As Galle notes, the real relief was the $90 million in money, which will provide the universities some relief for some higher priority issues. And they will be appreciative for this. But spent on buildings with total value of approximately 5 billion dollars, it won't stretch very far.
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But the 'tax credits' and 'loans' are faux relief, and will likely not be used.

But this issue will probably be back before the legislature…in about the same magnitude…in about four years, if not before.

On average, all building owners, homeowner and commercial, need to annually spend at least a percent or two for repair, new roofs, new pipes. Universities are no different. State agencies are no different. Schools are no different.
30 April 2007
at 8:29 a.m.

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commuter (Anonymous) says…

Oldgoof:

You state the loans and tax credit are faux relief. I must disagree wit you on one part. The are plenty of companies that want to buy tax credits. Tax credits are great way to help pay their taxes.

Depending on the tax credits, you can pay 1 dollar of state income tax for less than a dollar.

i used to work for a company that worked with companies that wanted to buy state tax credits. we were alsways busy.
30 April 2007
at 9:29 a.m.

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oldgoof (Anonymous) says…

Commuter: I would love to learn more about this. Can you contact me? I can tell you about why I don't think these things work as well as some think.
30 April 2007
at 10:13 a.m.

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oldgoof (Anonymous) says…

commuter: I agree that tax credits are extremely popular, and companies and individuals taking them love them. The reason I call them “faux” is that they are inefficient and may not achieve their intended purpose.
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Assume the tax credit program is X dollar size. Arguably the legislature is trying to change charitable giving behavior to increase donations to whatever program (here for university maintenance) by X dollars. What I contend is that such a program raises only “X minus Y” dollars Y is the level of current or anticipated level of giving from these same donors. In some cases, Y can be nearly as much as X, and the state has then spent Y dollars with absolutely no beneficial new benefit to the charity. Especially for universities, which benefit considerably from current charitable contributions, the risk of this diminution of effect is considerable. (a large Y) That is what the talk about a tax credit program of X size is faux. There are also other problems, but too lengthy to discuss here.

But yes, they are popular for those taking them. No doubt.

I can discuss more and give you more background off-line.
30 April 2007
at 11:09 a.m.

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clyde_never_barks (Anonymous) says…

It is interesting that Galle continues to be quoted in these stories. Especially since he probably isn't even aware of the machinations that have gone on to achieve the end result. Tax credits will not work here - especially at this magnitude and places the institutions in competition with each other to try to find the donors who will help foot the bill. Also, community colleges get a piece of the action…what a joke since they are not even state owned/operated.
30 April 2007
at 11:36 a.m.

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oldgoof (Anonymous) says…

clyde accurately identifies another issue with this plan…… the inclusion of community colleges and Washburn in the program, when the real problem is with state university buildings…. The magnitude is another issue. And there are several more issues.
30 April 2007
at 3:45 p.m.

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hawkperchedatriverfront (Anonymous) says…

one article talked about 300 milliion now it is 400 million..divided by how many universities…big deal…makes good news for a few days..
30 April 2007
at 4:03 p.m.

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Marshalus (Michael Stanclift) says…

A few weeks ago they were wanting to make Douglas County/Lawrence responsible for the repairs to state buildings, now they're turning around and making the entire state of Kansas responsible for the repairs of a non-state schoool, Washburn. No offense to Washburn, it's a great school, but my understanding was it was a private school… find your own funding.
30 April 2007
at 4:07 p.m.

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Marshalus (Michael Stanclift) says…

I apologize, I did some quick research on the Washburn site and saw that it is a Shawnee-county municipal owned school and does receive state funding.
30 April 2007
at 4:28 p.m.

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oldgoof (Anonymous) says…

Marshalus: Don't apologize, Marshalus. You are correct. Washburn is not governed by the state board of regents. The state has no role in the decision to construct buildings, unlike state universities. It is a municipal university governed by a municipal board. That is the point.
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Yes Washburn has been successful in garnering state funding for operations, but largely because the Topeka legislative delegation is significant in number and have this as a priority so that Topeka/Shawnee tax support is minimized for the University. They do not want it to be governed by the state, but they want state funding.
1 May 2007
at 9:51 a.m.

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ashank (Anonymous) says…

Just two items: To Clyde Never Barks-Nelson Galle knows exactly what kind of work and negogiations went into this bill and process. The Journal World doesn't always report all it knows and Dolph has shown a pretty good bias against the Board of Regents and in particular, KU. Also, Washburn is not directly governed by the Regents as are the 6 Regent institutions, but they are coordinated just like the community colleges in the state are by the Board of Regents.