URI loses $2.5M in state aid

04/17/09 - If one were to look at the newest supplemental state budget, it would look like the university is getting $11 million more in state aid than the original budget for the 2009 fiscal year. This would conflict with the current assumption that the state is giving less and less money to URI each year.

In the state budget section covering appropriations and state aid for URI and other state schools, there is a section concerning debts that the state has to pay for those institutions. But in the last listing for URI, where it states the total change in appropriations, it shows URI's initial 2009 aid was for about $551.6 million. Yet the changes for the 2009 supplemental budget show URI getting $563 million.

So where did this approximately $11 million come from?

In actuality, the university is losing approximately $2.5 million in this year's supplemental budget, continuing the trend of decreasing state funding for the university. The $11 million shown in the budget is part of the state's general obligation bond system.

Vice President of Student Affairs Thomas Dougan said the university had anticipated a drop in state aid in the fall, and took measures to save about $1 million preemptively. He said the university did not expect the extra $1.5 million cut in state aid, but it is managing.

"We should be able to meet the additional cuts through vacancies that have not yet been filled," Dougan said.

URI's Vice President of Administration Robert Weygand said in a general obligation bond, URI sends a request to the state General Assembly for what is essentially a loan to construct a new building. If the assembly approves the bond, it is put up as legislation and is passed to the governor for approval. Then it is put up to a ballot for the voters of Rhode Island to decide.

If the bond is approved by the voters, the bond is then "floated" by the state to an investment company. They will then put it on the bond market for people to invest in the project. Previous general obligation bonds have funded the new pharmacy building and the new Center for Biotechnology and Life Sciences. The problem arises when the actual appropriations are combined with those general obligation bonds in the budget.

"From an accounting standpoint, [the state is] basically saying we're giving you this money, but then we're taking it away because we have to pay the debt," said Weygand. "So it goes in and then out, it doesn't really come to us."

Weygand said these general obligation bonds are given to the university for capital projects as loans that the state is obligated to pay for.

"Occasionally what the state will do is they will show people that they are giving us [URI] that $11 million," Dougan said. "I think it could be seen as misleading, but frankly what they're really doing is meeting their obligation to pay off the general obligation bonds approved for the university."

Weygand expanded on this idea in a separate interview.

"The state of Rhode Island is saying 'I want to build this building, I need a mortgage essentially,'" Weygand said. "[An investment company] becomes the agent, goes out and sells the bonds. The idea is that Rhode Island will stand behind these bonds if something happens to the University of Rhode Island, like it they closed up shop or something like that.