Phi Beta Cons

The 100-Year Slush Fund

The University of North Carolina system will allow its two flagship universities to issue 100-year or “century” bonds of up to $500 million each.

Now, keep in mind that the voters of North Carolina just approved a $2 billion bond, with $1 billion going for university projects. That $1 billion will provide construction funds for a plant science and an engineering building at North Carolina State and a medical school building at UNC-Chapel Hill. None of that revenue is scheduled for maintenance, even though UNC-Chapel Hill and NC State have racked up $1.2 billion in repair and renovation needs.

Will this 100-year money be used for maintenance? Maybe. Maybe not. The UNC Board of Governors doesn’t seem to have put any restraints on the ability of the campuses to issue 100-year bonds, although the legislature still has to approve this idea.

Will it be paid for out of higher tuition? Maybe. Maybe not. One UNC governor said he hopes not, but the board did not put any such restraint on the funds.

The traditional justification for bonds is to pay for an expensive project over time. But a building constructed today is not likely to be serving the university well in 100 years. Even so, taxpayers will be paying for it. At least, I draw that conclusion from Chapel Hill’s plan to replace its 45-year-old medical education building, which, according to UNC, “no longer meets the needs of today’s medical teaching/learning methods.” (Or, it’s like paying for a car over four years if it doesn’t last more than three.)

So I think the new $1 billion will be a slush fund: Do what you want when you want to and taxpayers will pay.

Jane S. ShawJane S. Shaw retired as president of the John W. Pope Center for Higher Education Policy in 2015. Before joining the Pope Center in 2006, Shaw spent 22 years in ...


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