Tuesday, April 24, 2012

More Brilliance From California and Some From Wyoming, too

California ... Academics, Athletics and MOM

Cal's Football-Stadium Gamble is a telling story, even as it's a distressing one to read. Here's what it says:

"As state legislators shrink its appropriations, it's hard enough for the University of California-Berkeley to maintain the nation's highest academic ranking among public colleges.

But there now looms a financial threat from another, somewhat unlikely quarter: the university's football program.

Until now, the years-old effort to renovate the school's football stadium, which sits on an earthquake fault line, never raised many alarms. Although its $321 million price tag would make it one of the most expensive renovations in college sports history, the university said the project would be funded privately, largely through long-term seat sales and naming rights.

But three years into the fund-raising effort, a projected $270 million from the sale of seats has failed to materialize. At the end of December, the school had collected only $31 million in the first three years of the sale. Now it has become clear that the university will have to borrow the vast majority of the money.

In recent interviews, university officials acknowledge that if revenue projections fall short and won't cover the bond payments, the shortfall "would have to come from campus."

The idea that money for the football stadium could come from campus funds, which include student fees, is an admission likely to stir outrage at a school that's already facing possible double-digit tuition increases. . . .

Unlike some athletic powerhouses, Cal's athletic department isn't self sufficient. From 2003 to 2011 it stayed solvent only by receiving a total of $88.4 million in campus funds . . . .

The stadium situation comes at a time of financial anxiety on campus. After the state legislature last year slashed $650 million from the University of California system's previously $3-billion budget, tuition at UC schools rose 17% for in-state students and 5% for nonresident ones, prompting student protests and sit-ins on the Berkeley campus. With California already leading the nation in tuition increases, the UC system has said that annual tuition spikes could range from 8% to 16% over the next four years.

Also controversial is a plan to open the gates to more nonresident students—who pay higher tuition. At Berkeley, the proportion of undergraduate students who pay nonresident tuition is 16%. The school said its goal is to increase that figure to 20%.

The nearly half-billion-dollar Cal athletic project encompasses a $321 million renovation of Memorial Stadium that opens Sept. 1 and $153 million for a new multisport training facility....

The total bonded debt for the project, including the training center, will be $447 million. That's apparently an unprecedented amount of borrowing for a college-sports project, far above the $220 million that Minnesota borrowed to build a new stadium in 2009, the $200 million that Washington has borrowed for its stadium renovation and the $148 million that Michigan took out to add luxury seats that opened in 2010. . . ."

Wyoming .... Coal, Basketball and MOM

And there's a similar but perhaps even more disturbing example of government spending from the University of Wyoming's basketball facility's renovation.

States Mine Federal Funds Long After Need Is Gone tells the story of the state of Wyoming spending federally allocated money, and which money doesn't even exist, on projects for which it was not intended to be spent:

"LARAMIE, Wyo.—When the University of Wyoming needed an extra $10 million for renovations to its basketball arena last month, state legislators turned to an unlikely source: a federal fund for cleaning up abandoned coal mines.

The fund was set up to pay for things like sealing up old mine shafts and dealing with collapsed tunnels and abandoned surface mines. But, as allowed under law, the university plans to use the money to fix up its Arena-Auditorium, where its Cowboys play, providing an exterior face lift and rotating the court 90 degrees.

The U.S. Interior Department is likely to fork over the money for the arena despite years of bipartisan efforts in Washington to close the spigot of federal dollars to states that no longer need so much money for abandoned mines.

In the fight to curb government spending, the Obama administration, the Simpson-Bowles deficit-reduction commission and a host of Republican and Democratic lawmakers have advocated cutting the $180 million in mine cleanup money that goes to four states and three Native American tribes that have largely fixed their abandoned coal mines.

The money keeps flowing, however, because efforts to stop it have been blocked by a bipartisan group of lawmakers from the states that get the money. They say the money is theirs because the federal government collected it from coal-mining operations in their states.

The stalemate illustrates how difficult it can be for Washington to stop spending money even when members of both parties agree that cuts are needed to reduce the federal deficit, projected at roughly $1.2 trillion this year. Other bipartisan proposals, such as a push by the White House and House Budget Committee Chairman Paul Ryan (R., Wis.) to end certain farm subsidies, projected to save at least $20 billion over 10 years, have hit a legislative wall amid stiff resistance from farm-state lawmakers.

Advocates of scaling back the abandoned-mine spending argue that if the federal government can't trim a program that small—it makes up just 0.0047% of federal spending—odds are slim it will be able to effectively tackle bigger challenges like Medicare and Social Security. . . .

Republican Gov. Matt Mead said in an interview he had concerns about the basketball-arena project, but agreed to support the funding because the school needed it. "The Arena-Auditorium is probably outside of the core area, but I don't think it is inappropriate or that we are violating anything like the spirit" of the law, he said. . . .

Wyoming officials figured they would get large payouts every year because their state was producing so much coal. But the money had to be "appropriated" by Congress, meaning lawmakers had to vote each year on who would receive it. That often didn't happen, so a lot of the money sat unused, including hundreds of millions of dollars that Wyoming officials believed belonged in their state.

In 2006, as parts of the law were set to expire, Sen. Mike Enzi (R., Wyo.) won passage of a measure that allowed the money to flow as "mandatory" spending, meaning it didn't have to be voted on by Congress each year. In addition, it allowed Wyoming, three other states and three Native American tribes to use their money, including funds not distributed in prior years, with virtually no strings attached. Those four states and three tribes were certified as having taken care of their most severe abandoned coal mine problems. Other states had to use the money more narrowly for mine problems.

The next year, the Wyoming legislature voted to spend $50 million in coal-mine funds to build a new science, technology, engineering and math building at the university. Groundbreaking for the building, to be named after Mr. Enzi, is slated to begin this year. . . .

"Wyoming ought to get to do with the money what they want to do," Mr. Enzi said.

Democrats from states that benefit from the current law also have vowed to stop the White House effort.

"We will keep fighting to make sure money from Montana coal companies goes to cleanup efforts in Montana, where it rightfully belongs," Senate Finance Committee Chairman Max Baucus (D., Mont.) said in 2010. . . .

The 2006 law was a victory for Mr. Enzi, who estimated it would bring in $1.6 billion for Wyoming over 15 years.

Last month, Wyoming legislators from both parties agreed to spend $30 million of the roughly $150 million they will receive this year on road projects and $40 million on the University of Wyoming. Another $30 million is being set aside to deal with problems that could crop up with abandoned mines previously thought to be stable.

Meantime, other states that aren't producing as much coal today lack funds to address problems with their old mines. . . ."

Summing Up

At the state level, we continue to spend money we don't have for things we don't need. Then at the federal level we vote to spend additional funds we don't have to provide federal aid to education and such to help students attend public universities. Meanwhile, tuition goes up as states are out of funds.

In any case, we sure do have nice sports venues in California and Wyoming, as well as many other states, albeit expensive ones. So did the Romans.

What both state and federal officials aren't concerned about is the simple fact that we don't have the money to spend on luxuries like these. The federal government has no money, and neither do the states involved. Yet we spend it anyway.

At least drunken sailors spent their own money. Our apparently sober politicians don't even do that.

Where do we get the OPM to spend? Well, we often get it either (1) from foreign countries like China and Japan in the explicit form of loans or (2) from future taxpayers in the implicit form of future taxes.

Government officials will spend whatever money is available to them, even if it doesn't exist.

We the People need to understand this when approving tax increases. There will never be "enough" money to satisfy the insatiable spending appetite of our politicians. They're hooked on debt.

Hopefully, We the People aren't so hooked. That's our only way out of this mess.

Thanks. Bob.

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