Former UT Regents' Chair Defends TRBs
Wed June 27, 2007 5:01 am

In Monday's posting about Perry's line-item vetoes (See, "Assessing the Vetoes: The Line Items"), most of which involved higher ed, I made this comment:

Perry threatened to veto Article III this session and he says in his statement that he is more persuaded than ever that higher education funding is flawed. I would feel a lot better about Perry's scrutiny if he had ever demonstrated that he was a true friend of higher ed, and I am concerned that he is more focused on the little picture than the big picture. Still, I can't defend some of the things the Legislature has done, like the tuition revenue bond frenzy (grade A pork, and mendacious to boot--TRBs are not strictly revenue bonds; they obligate GR); the creation of new institutions by influential legislators; and the excessive use of special items.

My from-the-hip comments about TRBs drew a response from Charles Miller, former chairman of the University of Texas Board of Regents, and chairman of the Spellings Commission on the Future of Higher Education. Mr. Miller writes:

TRB's are not pork. They are normal capital expenditures for higher education, Texas style. In other places, states might authorize and issue general revenue bonds for higher ed. In Texas we have chosen not to do so, for whatever reason. But borrowing money for capital expansion, improvement or enhancement is a natural and normal finance function. We do it all the time for other public capital purposes.

In fact, capital investment in higher education is probably as defensible as an investment as any kind of public expenditure. It produces real assets, with long term productive lives. Current market or replacement value is probably far higher than cost.

Physical capacity is necessary to produce educated people who produce future economic growth for the state and future tax revenues for the state. If used for research purposes, these capital investments often pay for themselves with the realization of grant revenues from non-tax sources and non-Texas sources, at times fully paying for themselves rather quickly. And they attract the best and brightest intellectual capital to Texas. And they are also used to treat sick people and cure disease and discover new universes and...so forth.

TRB's at the UT System always got great scrutiny while I was on the UT Board of Regents and there was great internal competition for project approval, and rankings were based on quantitative measures...such as space deficiencies...as well as strategic value. (I believe that process continues.) TRBs also received review and approval by the Higher Education Coordinating Board and then got into the queue at the Legislature for a policy and political scrubbing. Not exactly a shabby process compared to many other public expenditures we make.

Do politics ever get involved in the ultimate choices? Sure. Could we eliminate that? No, not entirely. Would we want to totally eliminate a "geographic" dispersion of capital? No. Does that make some choices redundant? Maybe so and maybe necessary, because while not optimal, it still produces positive returns. Have the choices generally been sound choices? Usually, in my opinion.

Have the total amounts of TRBs issued been excessive? Absolutely not. We have probably seriously underinvested in higher education capital in Texas because of our natural fear of taking on debt, in spite of a high credit rating, low interest rates available and a huge predicted demand for higher education seats.

The lack of a comprehensive and long term strategic plan for Texas higher education does result in ad hoc methods, some shooting from the hip decisions, less precise terminology and more political heat than policy light. However, the lack of state political and business leadership in this area is the problem. The institutions are merely using the best available route possible to develop the capital resources they sorely need when they use TRB's. I find it hard to accept criticism of the system from those who are in a position to lead and to change it.

Charles Miller

P.S. "Mendacious" is not fair to Tuition Revenue Bonds. Technically, there is a pledging of institutional revenues although there is also an implied expectation in the market place that the State of Texas will continue to honor payments through general revenue appropriations. Could Texas be more direct and go to the use of general revenue bonds? Sure. And it would probably require more serious statewide planning...and even bond elections.

My response:

Sometimes I get distracted by the sausage making and overlook the quality of the sausage. The battle over tuition revenue bonds in 2006 was ugly sausage making in both houses--raw politics carried on in public. Mr. Miller offers a reminder that we can't let the process devalue the substance. Even more trenchant are his concluding thoughts: "[T]he lack of state political and business leadership in this area is the problem .... I find it hard to accept criticism of the system from those who are in a position to lead and to change it."

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