Franklin County

Dividing college stimulus funds tricky

Struggling to balance their books, Kentucky's colleges and universities eagerly await their share of a massive pot of federal stimulus money.

But like almost everything associated with that $780 billion spending bill Congress approved this spring, it won't be a simple process.

The chief issue is whether universities should use some of Kentucky's portion of the one-time stimulus money to fund their basic on-going needs: employee health care, rising utility bills and program funding

After all, the stimulus money won't last forever.

"If you use those dollars to preserve (existing) funding levels, when that money goes away you have a hole," said Mary Lassiter, Kentucky's state budget director. "It becomes more difficult."

Therein lies the tricky budgeting puzzle that awaits educators and state officials once they get a clearer picture of the state's financial health and unravel the strings attached to stimulus funds by the federal government.

Kentucky is slated to receive about $3 billion in such funds over the next 26 months, according to Gov. Steve Beshear's office.

About $535 million of so called State Fiscal Stabilization money can go to education, which Beshear will divide between K-12 and universities and colleges.

How that money will be divvied out and for what purposes hasn't been decided.

"Until you know the magnitude of the state shortfall for next year, it's premature to make judgements about what is the best use of the dollars," Lassiter said.

The next month will be crucial.

Beshear has said he wants to see state tax receipts for April before asking a panel of economists to make state government revenue estimates for fiscal year 2010, which begins July 1. Once the Consensus Forecasting Group draws up the state's financial road map, Beshear has said he'll decide whether he needs to call a special General Assembly session to deal with any shortfall.

Higher education leaders say they hope the universities aren't held out as bargaining chips or caught up in political gamesmanship during debates about the need for new revenue.

"Are we strategically going to use higher ed as a flash point to make the case for more revenue? I haven't had any of those conversations," Lassiter said.

Staying above sea level

The U.S. Department of Education has recently begun issuing more specifications about how federal officials would like to see states spend the education stimulus money.

Some rules seem to be aimed at discouraging states from substantially slashing education budgets then "backfilling" them with stimulus money, said John Hayek, the Council on Postsecondary Education's interim vice president of finance.

The guidance from Washington seems to steer universities toward using stimulus money as shots of financial adrenaline to make equipment upgrades or building renovations rather than being simple budget Band-Aids.

For instance, Kentucky State University needs a $2 million boiler to help heat its buildings — funding the state hasn't made available. The University of Kentucky will need to outfit its new 280,000 pharmacy building that is scheduled to open next year.

One of the biggest stipulations the U.S. government placed on stimulus funds for higher education is that states must stay above their 2006 funding levels for public college operations.

Kentucky is providing more than $27 million more in fiscal year 2009 than the $978 million it did three years ago despite two round of budget cuts in the last year.

Working together

In the meantime, university leaders are joining forces to help Kentucky win more money from another part of the federal stimulus bill.

Hundreds of millions of dollars will be available in the form of massive research grants through entities such as the National Institutes of Health, U.S. Department of Energy and U.S. Department of Homeland Security.

The individual universities already have some grant proposals they've been working on in the hopper, but the Council on Postsecondary Education has convened the college presidents and top academic officers to put together three-page proposals in six specific areas where the institutions can work together.

"What we're looking for is some bigger ideas that might encourage collaborative projects around certain areas of research," said Robert L. King, president of the Council on Postsecondary Education.

About 25-30 faculty members from public and private Kentucky colleges are participating.

King said the groups are aiming to finish their project outlines by the end of this month before those federal agencies put out their requests for proposals in May .

"This was just our thinking about how to best position the state of Kentucky and our universities to go after that money," he said. "We were looking for areas that have some specific impact in the state of Kentucky."