TIME: Colleges Getting Hit by the Credit Crunch

[marmar]

Colleges Getting Hit by the Credit Crunch
By Laura Fitzpatrick
Wednesday, Oct. 08, 2008


American universities have long been the envy of the world, with seemingly bottomless purses to bankroll cutting-edge research, top-notch faculty and construction projects galore. And fiscally speaking, these schools have it better than most businesses in the U.S.: multiple sources of revenue, including parents willing to pay tuition through the nose amid all kinds of money trouble, have often kept these institutions insulated from economic downturns. But in a financial crisis of this magnitude, even the ivory towers are getting hit — and in more ways than one. Not only have Bank of America, Citigroup and some two dozen other lenders cut back on or stopped issuing student loans, but the market meltdown has left many colleges scrambling to come up enough cash to cover payroll and other near-term necessities.

Last week, nearly 1,000 colleges were told they couldn't access most of the $9.3 billion sitting in a short-term fund that had been offering slightly higher returns than U.S. treasuries. To prevent a run on the fund —12% of which was invested in mortgage-backed securities — the fund's trustee resigned and froze withdrawals so it could liquidate the assets and distribute the proceeds in an orderly manner. The same thing happened to another 200 schools with $1 billion in an intermediate-term fund. Given that the schools will get about half of their money by the end of this year and the rest by 2011, there's a severe cash crunch for many small schools, some of which had up to half their liquid assets in the short-term fund.

Because these funds were terminated a few days before Congress passed the mega-bailout bill, Minnesota's independent-college association sent a letter to its Congressional delegates warning that without government help, some schools would be unable to fulfill their payroll responsibilities this week. "Any further delay by Congress or the administration," they wrote, "will have immediate devastating effects on these institutions and the families they serve." The American Council on Education sent a similar plea to every member of the House of Representatives.

But even though the bailout has been approved, the financial future remains murky, and some schools are already reporting cutbacks: Boston University has called for a hiring freeze, while Grinnell College in Grinnell, Iowa, plans to delay any further plans for new buildings or other capital projects. .......(more)

The complete piece is at: http://www.time.com/time/nation/article/0,8599,1847478,00.html

[KamaAina]

1. Two of the University of Hawai'i's three four-year campuses have been hammered

not the flagship Manoa campus, home of that football team that used to be good, but UH-Hilo and the new UH-West O'ahu campus. (UHWO is presently operating as an upper-division school only, out of trailers on a nearby community college campus.)

http://www.starbulletin.com/news/hawaiinews/20080926_UH_Campus_deal_in_doubt.html

But Hunt Building Corp., the company that promised to buy 298 acres of state land around the campus for $100.1 million, is facing financial problems on the mainland, raising questions about its ability to complete the purchase here.

UH-West Oahu plans to use the $100.1 million from the sale of the land to pay for roads, sewer, water and electrical infrastructure and the construction of the first five buildings of the new campus near the Kapolei Golf Course....

"I have no clue as to what is going on within Hunt," Awakuni said. However, he noted that many mainland developers are struggling with housing sales and the tightening credit markets....

Four years ago, when UH began looking at a public-private partnership to build the campus at little or no cost to taxpayers, the housing and credit markets were far different from today.

Ruh-roh, Rorge...

Meanwhile, down on the Big Island:

http://www.starbulletin.com/news/20080926_Credit_crisis_crunches_UH-Hilo_housing_project.html

Until a few weeks ago, it looked like there finally was progress in a public-private partnership to build badly needed student housing for the University of Hawaii at Hilo in exchange for rights to develop a hotel/retail and conference center complex on state land.

The developer, Bridgecreek Development International, and UH-Hilo even scheduled a groundbreaking ceremony in June for the U.S.-China Center project next to the campus.

Then the credit crisis hit and the company couldn't get a loan to build the student housing, said John Carlson, Bridgecreek's president....

The clock is ticking on Bridgecreek. The company must complete the first phase of the student housing by November 2010 or it will lose its lease on the 36 acres of state land.


And so go our repuke governor's latest vaunted "public-private partnerships", right into the crapper. :eyes:

Side note: UH-Hilo was to have been the first of, as it turned out, quite a few academic destinations for a young basketball star from Alaska named Sarah Palin. Somehow or other, Sarah failed to realize that Hilo, located on the windward side of the Big Island, receives well over 100 inches of rain a year -- until she got there, of course. That's when she and her friend high-tailed it up here to Hawai'i Pacific University, once lampooned on "Beverly Hills 90210"'s hawai'i episode as "Aloha University".

[Igel]

2. I seem to recall just recently how Congress was going to have hearings.

Concerning how colleges and universities--not just the ones with the biggest endowments, although they got the spotlight because of the sheer size of their endowments, the sizes being a result of how the stock market increased and of taking some risky measures that at the time were paying off--weren't spending enough, how they were being too cautious and not drawing down their endowments enough.

The colleges' responses were usually simple: Expenditures aren't averaged over the years, they occur stochastically; the income from the endowment and its value aren't actually guaranteed, since they're investments, which can be managed well or not so well.

I wonder how much their endowments have dropped in value in the last few months, and if it's enough to satisfy those in Congress who wanted hearings.