University of Oregon President Begs Legislators for $800 Million and Says "We are Not Asking for More Money"

The liar-whiner of the week award goes to University of Oregon President Richard Lariviere who wants the state to float $800 Million in bonds because "We have to do something."

Please consider University of Oregon President Richard Lariviere asks legislators for $800 million in bond money.

An impassioned University of Oregon President Richard Lariviere made his pitch before legislators today for funding his university with $800 million in state-issued bonds.

If the university does not find a new way to raise money, tuition will keep climbing an average 7.5 percent per year, as it has for the past 38 years, he said. That means annual tuition will hit $17,000 by 2020, he said, a price tag that will squeeze out middle class students.

Mish Comment: The reality is tuition is already outrageous and the key reason is absurd salaries to administrators and staff.

"It is not fair," he told a legislative work panel reviewing a variety of proposals to overhaul the state's higher education system. "We have to do something."

Mish Comment: The university of Oregon, like all universities churns out thousands of students a year, at an absurd cost to the students, many of whom graduate 10's of thousands of dollars in debt, with no realistic job opportunities and no way to pay off that debt.

Yes, this is grossly unfair. The reason it happens is the staff is grossly overpaid with absurd pension benefits on top of it all. The cure is not to float bonds, but to slash pension benefits and salaries of the teachers, adminsitrators, and staff.

Lariviere's controversial funding plan, which he says has never been tried anywhere in the country, will be introduced as a bill in the 2011 Legislature, said Sen. Mark Hass, D-Beaverton, co-chairman of the work group, which met at Portland Community College.

"This is one of the most significant proposals in higher education we have had in decades," Hass said.

Mish Comment: Controversial is not the right word, "idiotic" is the right word. The state absolutely cannot afford to go $800 million into debt on a chance the idea will work out.

Lariviere said he also wants the university, now governed by the State Board of Higher Education, to have its own 15-member governing board appointed by the governor.

In exchange for more independence, the university would agree to meet performance goals set by the Legislature on freshman retention, college completion and other measures.

Mish Comment: Excuse me for asking the obvious question, but why should the state have to exchange anything for performance goals? Why shouldn't the state cold turkey flat out mandate goals on retention and completion?

The plan would be a bargain for the state, the president argued, because its annual obligation to the university would remain $63 million a year and not increase for 30 years.

"We are not asking for more money, " Lariviere said.

Mish Comment: The missing word in the sentence is "yet". The assumed rate of return on investments and donations guarantees the university would be back asking for more money.

The university in turn would match the $800 million with private donations and put the entire $1.6 billion into its endowment, which would be invested by the university's foundation.

The university would then draw 4 percent to 4.5 percent of the fund each year for its operations. The foundation projects it could on average reap a 9 percent return on the endowment, which would grow to $6.9 billion in 30 years.

Mish Comment: I have a better idea. Given the university feels it can raise $800 million and earn 9% on it, the university should do just that, and taxpayers should do nothing.

The reality is Lariviere is promising $800 million in donations when he has no idea how much will come in. Moreover, rate of return assumptions of 9% a year with 10-Year treasuries yielding 2.5% is downright absurd.

I would not be surprised to negative rates of return over the next 10 years. The long-term average is about 6%.

However, the economy is smack in the midst of Schumpeterian Depression with no end in sight. Please see Creative Destruction for more about the theory behind Schumpeterian Depressions.

Bob Davies, president of Eastern Oregon University, said Lariviere's plan is creative and has merit, but questions remain about how it would affect the rest of the university system.

He agreed with Lariviere on one point. "We have got to do something different."

Mish Comment: Bob Davies wants his hand in the taxpayer's pocket as well. However, if Lariviere and Davies really want to do something different, why don't they slash pension benefits and salaries of overpaid faculty and staff?

No such proposals are on the table for the simple reason Lariviere is looking out for the best interests of administrators and teachers, not the best interest of the kids.

Choice Comments From The Oregonian

Oregon000 writes: According to the Oregonian, their new AD is earning a pretty penny. We would be surprised to learn how much money all the university fat cats are earning. "Mullens, introduced July 15 to replace former football coach-turned-athletic director Mike Bellotti, will earn a base salary of $450,000 and deferred compensation of $50,000. Athletic and academic incentives could add up to $150,000 annually." Let's look at the rate at which the salaries for administrators, coaches, professors has increased vs. inflation. The poor students are funding a lavish lifestyle for many of them.

Jacjsonstew asks: What cuts has OU made so far?

Gnuut writes: "The foundation projects it could on average reap a 9 percent return on the endowment, which would grow to $6.9 billion in 30 years. " The same estimates that put PERS in the ditch. Won't these clowns ever learn that their lies don't sell any more?

JojoValley writes: We, the tax payers, will not gladly pay you $1.9 billion tomorrow for $800 million today. Since when is floating a loan the way to pay annual expenses? It is however a great way to delay cutting back on the growth of salary expense per full time equivalent at U of O. Private sector jobs are disappearing and deflating as the supply of workers rises. But government jobs in any sector, education, police, prisons, etc. just keep getting more expensive. Will the last taxpayer left please turn out the lights?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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