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Using the general fund for long-term debt

In the last several days, I’ve written about voter avoidance and revenue-backed debt. Washtenaw County voters are going to have to make a decision about whether this strategy is acceptable. What WCC is doing amounts to paying a mortgage with a credit card.

The strategy is faulty on a lot of levels, but here’s another item to consider. WCC is already funding the Health and Fitness Center with revenue backed debt from the General Fund. That debt is active until 2027. The Board of Trustees just voted to use revenue-backed debt to pay for its portion of the Advanced Transportation Center. And because this building is only loosely considered “academic”, the State will only pick up about 25% of its cost. (The rest now goes on our credit card.) So that’s two different credit lines coming out of the General Fund.

The College needs to do a massive rehab of the Student Center Building – $20M worth. The building qualifies for state funds, but a lot of the work does not. A significant portion of the work is “deferred maintenance,” which the State doesn’t pay for twice. (Yes, twice.) The State of Michigan rightly adopts the position that it provided an appropriation sufficient enough in size to use for maintenance. WCC opted to use that money for other priorities. And naturally, the State won’t reward delay. If it did, every state-funded institution would simply wait to do maintenance until Lansing stepped in with its checkbook.

The General Fund isn’t a Line of Credit from the taxpayers

This project (and a couple of others) is what the Board plans to use the “facilities fee” to pay for. Again, a third line-of-credit from the General Fund. While WCC’s General Fund is bigger than most, it’s not that big. The administration needs new fees to pay for more credit card debt. Lather, rinse, repeat.

This is all happening at a time when WCC’s annual revenues are larger than they have ever been. WCC takes in more property tax revenues than all but two community colleges in Michigan. This should not be happening! The administration cries that it needs more revenue, while doing absolutely nothing to curtail its expenses. At the December Board meeting alone, the Board approved the hiring of three (3) more directors.

This all begs the question, “If the general fund is meant to pay the operational expenses of the College, what’s happening to the operation of the College?” You cannot routinely drain away money from operations to no apparent effect. Further, this kind of spending requires the College to place a higher priority on debt payment than on instruction. The College’s new main priority is to pay its debts. The students will have to come second. And they’re going to have to pony up if they want to stay in the game.

To stay ahead of the College’s credit-card construction debt, the administration will cut instructional programs; raise tuition and fees costs; lay off non-contract employees and eliminate cost-of-living increases. Laying off employees sounds like a good idea, given the nine-year administrative hiring spree the College has gone on. Unfortunately, the high-dollar administrators and the outrageous consulting contracts will be staying. Highly effective employees will be sacrificed to fund the administrative dysfunction at WCC.

Many a slip twixt cup and lip

Finally, this also brings up another hazard: the General Fund is unrestricted. If other operational expenses arise that require the College to divert the “facilities fee,” what then? There goes the unencumbered money that was meant to pay off the unapproved debt. The College’s debts will still need to be paid, and we’ll all be poorer for it.

The Trustees need to do their collective jobs and start placing spending restrictions on this administration. If they don’t, they will put WCC’s financial future and the people of Washtenaw County at risk.

Photo Credit: frankieleon , via