$300 Million Bond Refinancing Won’t “Save” Higher Ed from Long-Term Challenges

If higher-ed institutions don’t address fundamental challenges, their long-term debt may not be worth much more than these Confederate bearer bonds.

by James A. Bacon

Governor Ralph Northam has unveiled a higher-education refinancing plan that will allow Virginia’s public colleges and universities to reschedule more than $300 million in debt over the next two years.

The Commonwealth of Virginia would refinance bonds issued by the Treasury Board of Virginia and the Virginia College Building Authority. Under the Governor’s plan, which requires General Assembly cooperation, institutions would make no principal payments on their VCBA bonds through fiscal year 2023; the restructuring would extend institutions’ payment plans for two years beyond their current schedule for both types of bonds.

“The COVID-19 pandemic continues to have tremendous impacts on higher education, including the fiscal health of our colleges and universities,” said Governor Northam in a press release. “Families all over the country are taking advantage of record low interest rates to refinance their home mortgages, and we want our public institutions to benefit as well. Refinancing will free up millions of dollars in savings allowing our colleges and universities to make critical investments, meet the needs of Virginia students, and continue offering a world-class education.”

The headline of the Governor’s press release indicated that Virginia institutions would “save” more than $300 million over the next two years. That nomenclature was repeated in leads and/or headlines appearing in the Richmond Times-Dispatch, Roanoke Times, and Washington Post. The initiative will do no such thing. The vast majority of “savings” would come from deferring payments on $300 million, which still will would have to be repaid.

That’s not to say the refinancing isn’t a good idea. Virginia’s public colleges and universities are experiencing a cash flow crunch as uncertainty engendered by the COVID-19 epidemic has cut enrollments. By restructuring their loans, these institutions conserve cash that otherwise gone to meeting their debt payments.

But let’s be clear about what’s happening. Far from “allowing our colleges and universities to make critical investments,” as the Governor suggests, the debt is still on the institutions’ books. To the contrary, extending the debt repayments two more years will constrain the ability of the institutions to borrow more in the future.

Here are the “savings” (press release’s word) broken down by institution:

  • Christopher Newport University: $14.4 million
  • George Mason University: $58.3 million
  • James Madison University: $43.7 million
  • Longwood University: $8.2 million
  • Norfolk State University: $8.2 million
  • Old Dominion University: $29.8 million
  • Radford University: $5.1 million
  • Richard Bland College of William & Mary: $320,000
  • University of Mary Washington: $9.3 million
  • University of Virginia: $344,000
  • Virginia Commonwealth University: $23.1 million
  • Virginia Community College System: $9.7 million
  • Virginia Military Institute: $2.8 million
  • Virginia Polytechnic Institute and State University: $40.1 million
  • Virginia State University: $12.8 million
  • William & Mary: $33.7 million

Bacon’s bottom line: This is a useful stopgap measure to help colleges and universities buy time. The bigger question is what they intend to do with it. Will they maintain the same business model and cost structure in the hopes that COVID-related spending will decline and enrollments will revive when the epidemic eases? Or will they prepare for possibility that things will not go back to normal?

No one knows what will happen, but two forces are converging that do not bode well for the higher-ed status quo. First, millions of college students have been exposed to online classes. While online learning may not be appropriate for elementary school pupils, it can be a cost-efficient substitute for “in person” classes held in lecture halls. Some unknowable percentage of parents footing the bill will conclude that providing their children the four-year “residential experience” is not worth the inflated cost of higher-ed today. Meanwhile, online universities get better and better at what they do, and they are providing a legitimate alternative.

Second, many higher-ed institutions have abandoned any pretense at teaching students how to think in favor of telling them what to think. There is a growing conviction among Republicans and conservatives that many institutions have become indoctrination camps. Why would they make great financial sacrifices so their children can be taught to embrace leftist values and world views?

These challenges are fundamental and long-term. They go to the heart of what ails public higher-ed is today. Deferring $300 million in bond payments won’t change that.

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23 responses to “$300 Million Bond Refinancing Won’t “Save” Higher Ed from Long-Term Challenges

  1. Probably not the only area where the state and local governments and borrowing authorities can take advantage of this move. Always a silver lining somewhere. But your point is well taken, the 800 pound gorilla is being ignored. The Unintended Consequences will continue to roll in.

  2. The Virginia State Debt Clock is ticking along. Very depressing. It says each Virginia resident owes $7,897 buckaroos.
    https://usdebtclock.org/state-debt-clocks/state-of-virginia-debt-clock.html

  3. Everybody will get bailed out by President Biden through a combination of modern monetary theory and abject socialism. DC and Puerto Rico will become states. The US Supreme Court will be expanded to 15 justices. And one day a group of states, perhaps Idaho – Montana – Wyoming – the Dakotas, will simply declare that they are no longer part of the United States. There’s no chance that anybody in my family – even those in the military – would take up arms against the modern day secessionists. Go to Idaho and shoot at Americans because they’ve had enough? That’s a joke, right? Maybe Biden will be able to raise a snowflake army by rousting the millennials out of their parents’ basements.

    Think about what a mess our country has become. We’re facing a crisis because a single 87 year old woman with a long history of suffering from cancer died. Regardless of what anybody thinks of Justice Ginsberg – what kind of country goes into a tailspin when an octogenarian with terminal cancer passes away?

    And now we have a choice of Trump vs Biden. Dear lord. I hear Boise is nice this time of year.

    • We are facing a crisis because one party has decided it will follow whatever standard fits its immediate needs and because both parties have taken actions that overly politicize Supreme Court appointments. I strongly feel that any judge with a lifetime appointment should have to get a super-majority vote.

      • “We are facing a crisis because one party has decided it will follow whatever standard fits its immediate needs and because both parties have taken actions that overly politicize Supreme Court appointments. I strongly feel that any judge with a lifetime appointment should have to get a super-majority vote.”

        That is incorrect, both parties use the immediate standard and apply it generously when it power.

        As Democrats were against a SC appointment prior to the elections before they were against it, before they were before it. So too have the Republicans.

        The heavy reliance on EO’s since FPOTUS Coolidge is a price example of this aspect.

        • Nope, the Democrats are against the appointment now because that was the standard announced by McConnell with Garland. They just want him to follow the standard he announced then.

          • “Nope, the Democrats are against the appointment now because that was the standard announced by McConnell with Garland. They just want him to follow the standard he announced then.”

            Mr. Hall Sizemore, surely you’re being factious.

            Democrats to include FVP Biden were against appointment prior to the election in 1992. In 2016 when Justice Scalia passed away that position changed, to where they were for appointment prior to the election. Now they have again reserved that position.

            As I stated, both parties waver on what they believe depending on who is in power at that moment or who could be in power shortly.

            There is no standard, it’s Washington.

          • Dick Hall-Sizemore

            Sigh. I had forgotten about Biden’s earlier remarks. So, I must concede. Both parties have been inconsistent. But McConnell has been the most blatant. Declaring a need for the people to decide in 2016, he blithely dismisses that position three years later.

            McConnell could have gone back to the beginning to justify the circumstances this year. in 1801, after he had lost the election to Jefferson, John Adams nominated John Marshall to be Chief Justice of the Supreme Court. The prior Chief Justice had resigned in December 1800. The lame-duck Federalist Senate confirmed him. Marshall went on to become the greatest Chief Justice the country has had.

          • For the most part, these men and women are legal nutsacks and don’t get as squirrelly as the most level-headed Senators.

            No one can say there have not been contentious decisions and some tough dissents written, but as far apart as we may consider them, say Scalia and RGB, when it comes to the law and careful deliberations you cannot slip a sheet of paper between them.

            We’ve been mostly lucky with thoughtful consideration of appointees. Have been…

      • Unfortunately, I don’t think it’s possible to have a SCOTUS nominee get a super-majority now. I’m not sure, after Kavanaugh, if anyone will ever be appointed without going through a living Hell, deserved or not.

        • That’s because the members are more interested in retaining power (campaigning to do so) than they are Governing. They don’t want to evaluate Justice’s on their own merits, it’s nothing more than a giant Ad Hom fest.

          Take it leave it, but Tulsi Gabbard illustrated on the Joe Rogan experience exactly that:

        • Jesse, I hope you are wrong. I think Merrick Garland would have gotten a super majority. That is why McConnell did not even give him a hearing.

          • Jesse Richardson

            I hope I’m wrong too, but I fear that I’m not. Not sure if Garland would have gotten a majority. It was a smart choice- he’s older and fairly moderate.

      • Regardless of why we’re facing a crisis – no country should face a crisis because an 87 year old long time cancer sufferer dies. In my opinion, our country has been fundamentally broken since the 2000 election and has been getting worse at an increasing rate every year.

        At some point the lid comes off a country in as much turmoil as we’re in today.

  4. Boise is actually very nice. The problem is that it’s become crowded with American refugees from states like New Jersey, New York, Connecticut, and more recently, Virginia.

    • Sounds like it’s time for Idaho to declare independence before the libtwit diaspora leaves the places they have ruined and forms a majority in the Gem State.

  5. >>Many higher-ed institutions have abandoned any pretense at teaching students how to think in favor of telling them what to think. There is a growing conviction among Republicans and conservatives that many institutions have become indoctrination camps. Why would they make great financial sacrifices so their children can be taught to embrace leftist values and world views?>>

    This is not entirely new. It was starting when I was in college. I was once given a low grade on my critique of William Appleman Williams, a utopian and communist professor at U. Minn. My teaching assistant/professor said it read too much like a legal brief against Williams (it was) and that I obviously didn’t understand what Williams was saying. I fought him and wound up with a B+.

    It wasn’t until I got to law school that there was any real pretense at teaching how to think.

    • Getting a B+ sounds like you (1) learned how to think and (2) were recognized for it. (I had a professor who loved Williams.)

      • I take it you did not necessarily share your professor’s enthusiam for Williams. He really was a joke.

        My professor had given me a D until I went to fight with him about the paper. According to him, I had not “learned” how to think “correctly”. Ultimately though, he didn’t want to fight when i said I would go to the Department Chair. Other classmates like Mitch Daniels thought my paper was well written (at least for me anyway ;-). Daniels was already a master thinker and writer at the time and was way ahead of the rest of us. He still writes all his own stuff.

  6. I am curious how the administration can alter the conditions of bonds already issued. Perhaps they are talking about bonds scheduled to be issued. I need to see the legislation.

  7. I woulda thought they just pay off the old ones and float new ones?

    In tems of higher ed “leftist” indoctrination –

    Hey – it’s a “market” out there… youse pays your money and makes your choices. Besides, judging from more than a few of the commenters here, “indoctrination” was a massive failure…

    re: SCOTUS –

    Did the Dems make total asses out of themselves over Kavanaugh?

    you bet your butt they did…

    If SCOTUS knocks down the ACA and Roe v Wade – will it affect elections after? Are there still 3rd rail issues?

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