The Arizona Board of Regents has threatened to sue the Legislature if language in a proposed budget bill regarding sweeps of universities’ auxiliary funds is not removed.
“They can’t rewrite the law. These are not funds available to them and if we need to litigate to demonstrate that, we will,” said Fred DuVal, incoming vice president of the Board of Regents. “We will not be shy about it.”
But according to the chairman of the House Education Committee, the regents won’t have to sue.
“I just got done meeting with the lobbyists from the three universities and explained I want to prepare a memo to go out next week (to legislative leadership) that shows why we can’t do fund sweeps,” said Rep. Rich Crandall, R-Mesa.
Crandall said the lobbyists explained how the fund balances of auxiliaries, which are self-supporting units at the universities, are unavailable to the state.
“In some cases it doesn’t exist (as cash), it’s pledged to something else or it’s illegal,” Crandall said.
Auxiliary funds are essentially savings accounts for self-supporting university units such as the bookstores, residence halls, athletic departments and meal plan programs.
In the case of bookstores, the fund balance includes inventory, and thus isn’t cash. In other cases, fund balances are in programs funded through federal grants, which university leaders said is not subject to state legislative oversight or absorption.
The House Appropriations Committee met Tuesday to vote on a Republican package of 10 bills that would form the budget for the next fiscal year “if we have no other options available to us except cuts and sweeps,” Crandall said.
“We have to get it out of Appropriations before some (legislators) will even start talking about what our options are.”
That package included $394 million from “raiding fund balances in various state accounts.”
For the university system, that sweep would amount to about $90 million, more than half of which would come from the University of Arizona, said Greg Fahey, UA associate vice president for government relations.
Fahey said UA’s fund balance is about $47 million.
Auxiliary units develop budget reserves for a variety of reasons, including emergencies, to cover operating costs in an economic downturn and, in the case of residence halls, maintenance and new construction.
“It would be a catastrophe to lose this money that we’ve built up over careful management of these (auxiliary) activities,” Fahey said. “For instance, the bookstore wouldn’t have money to buy books. Dormitories wouldn’t have money for debt service and construction.”
Jaime Molera, a lobbyist for the regents who testified Tuesday before the House committee, said fund balances are also important to the universities because they affect the bond rating the institutions can get for new construction.
The more money a university has set aside, the higher its rating and the lower the interest rate on bonds, he said.
Crandall said university leaders need to take a deep breath and relax.
“Nobody has put out a working budget that solves the entire $3.2 billion shortfall,” he said. “Tuesday’s was the closest thing, and it has warts galore. But now it’s out of (Appropriations), so we can talk about what we need to do.”
The Arizona Republic contributed to this report.