Right now, the University of California is stuck between a hard rock and an even harder place.
Here’s the rundown: California might run out of cash by early March, according to a projection by the state controller’s office released last week.
To avoid this, the state plans to ask the UC to borrow money on its behalf, among other measures. To be clear, the funds would come in the form of a loan from an outside source. Since the UC has a better credit rating than the state, it can borrow at a lower interest rate.
The UC would pay off the loan once reimbursed by the state, which should happen by April 20.
But California already owes the UC $1.7 billion and needs to find a staggering $3.3 billion to stay on its feet.
So, the catch-22 is this: Either the UC loans California the money and risks not getting it back in time, or it doesn’t, and risks the state going into the red.
It’s unclear what exactly the ramifications would be for the UC if the state didn’t come through in either case. Officials have warned that the UC would lose money if payment is delayed.
Although UC officials already have a mound of problems in addition to acquiring a loan, the UC Board of Regents is likely to approve the proposal.
As it is, the UC doesn’t really have a choice but to lend the money. Either way, the UC could find itself in a very precarious situation in a couple months, and if the University is in a position to help, it should.
But this board’s support comes with a few caveats: California needs to stop putting the UC on the line. The University has already shouldered more than its share of the state’s budget cuts.
For example, Gov. Jerry Brown signed a bill Friday that lets the state borrow $865 million from transportation funds in order to cover day-to-day expenses.
There are hundreds of these kinds of specialized funds from which the state can borrow short-term loans instead of turning to the UC.
This reserve already stands at about $20 billion, according to Brown’s Department of Finance. Friday’s bill brings that up to roughly $21 billion.
Along with asking the UC to borrow money, the state will delay Medi-Cal payments to hospitals to avoid a cash crunch.
Before the state borrows money from the UC, the legislature must hash out a concrete plan to ensure that it pays back the loan in April. That also means revenue has to increase, something that has so far proved elusive for the state.
This board also urges the UC and state officials to continue their recent talks about more stable long-term funding for higher education, especially considering President Barack Obama’s recent threat to slash federal financial aid to universities that raise their tuition too much.
And above all, UC officials should still pressure the state to make sure that gestures of good faith will be returned.
Unsigned editorials represent the majority opinion of the editorial board