When Illinois Gov. Pat Quinn signed Senate Bill 642 into law on June 8, 2010, I was a little skeptical about the direct consequences that would result from this bill. Should a state allow its universities to open up a tab of IOUs when the state’s financial well has been long dry? After this bill became law, I decided to spend some time becoming acquainted with this 85-page law. The information found on pages 12-22 in regards to the new borrowing allowance at Southern Illinois U. has persuaded me to defend this new law.
Like many students, I heard rumors that SIUE would not be able to open its doors for the fall semester if they did not receive some financial support owed to them by the state. This law will put those rumor and worries to rest. This new law is meant to meet universities’ payroll and encourages continued academic research at the university level. This law will also ensure responsible budget, a checks and balances system, and it will provide local economic growth.
Contrary to common belief, this law forces the state to be more financially responsible. I originally saw this act as a way for universities to get in deep financial debt with financial institutions. However, legislators ensured that such an issue would be near impossible. On pages 19 and 20 of SB 642, the legislators ensured that any line of credit must be paid in full one year after the creation of the loan or within 10 days after the state reimburses that credit. Also, on page 18, the legislators ensured that any borrowed money must be used solely for expenses in fiscal year 2010. Originally, many critics of this law were worried that it would enable state universities full discretionary power over spending and borrowing for years to come. This is not the case. This law is only in effect for this fiscal year to primarily help meet payroll.
This borrowing will optimize conditions for local businesses, while it also reinvests money into the local economies. Bonds and loans will be under the direct authority of the Bond Authorization Act, which will have the face value set at a 3.5 to 9 percent interest rate. Selling these bonds and accessing loans from financial institutions will allow for local economies to flourish. Financial institutions in Edwardsville and other metro-east areas will thrive off increased reinvestment in the local, metropolitan area.
The only possible downside to this new law lies within page 20, where it reads, “Any borrowing… shall not constitute a debt, legal or morale, of the state and shall not be enforceable against the state.” Universities will have the sole responsibility to repay these loans, but I do not see that becoming an issue at SIUE. Maybe this is why some Republican legislators, such gubernatorial candidate Senator Bill Brady refused to negotiate with this new law as it passed through Springfield. However, our school leaders and Board of Directors have proven themselves to be very capable when it comes to managing finances.
SIUE was ranked number one in the state last year for being the most efficient university with state allotted finances. Hopefully they continue this reputation working with SIUC as both campuses utilize the $75 million they intend to borrow in the near future. As a student at SIUE, I would personally like to thank legislators Senator William Haine and Representative John Bradley, who sponsored and worked hard to pass this law, which will directly support our university.