CHICAGO -- Indiana finance officials have warned public universities to expect delays in receiving gubernatorial approval for issuing about $225 million of bonds for capital projects the legislature authorized for the current biennium.
Mark Moore, deputy state budget director, said the state is trying to limit long-term debt service costs because of the uncertain economy and the projected need to draw down state cash reserves by $221.3 million in the current biennium, which began July 1
"What we're trying to get across is that it's not business as usual anymore," Mr. Moore said. "We've got to look down the road a bit and be careful of our cash flow."
Some university officials said they would like to issue bonds as soon as possible, but the delays make that unlikely. Past university bond issues received prompt approval by the governor after being reviewed by budget agency and higher education officials.
In Indiana, public universities issue bonds backed by student fees, and the state then reimburses them for debt service costs. But before universities can issue bonds, they must receive approval from the governor.
Mr. Moore said that if all $225 million of bonds were issued within the same year, the state's annual reimbursement for debt service on those bonds would be $22 million.
Indiana ended fiscal year 1991 on June 30 with a $587.4 million combined funds cash balance, which the budget office estimates will be drawn down to $366.1 million by the end of the current biennium to keep the state's $12.4 billion general fund budget in balance.
Mr. Moore said no timetables have been set for approval of the bond issues.
But some university officials said they will try to pressure the governor's office to approve their projects as quickly as possible.
Steve Miller, treasurer of Indiana University, said the legislature has authorized $140 million of bond-financed projects at the university's nine campuses. He said current market conditions are favorable for bond issuance.
"Interest rates are low now, so it would be a good time to issue bonds," Mr. Miller said. "We would like to do it as soon as possible. We can't predict what interest rates will be a year or two years from now."
Frederick Ford, treasurer of Purdue University, said university officials and legislators sympathetic to their situation will lobby the governor to approve $56 million of bond-financed capital projects the legislature has authorized for the university.
"We're hopeful our various legislators will be able to convince the governor's office that these projects should not be delayed," Mr. Ford said.
He added that in addition to the current favorable market conditions for issuing bonds, the recession has made contractors more willing to lower their bids for construction work.
"We think that we could save 10% to 15% on our original estimates if we could put the projects out for bid soon," Mr. Ford said.