The administration is planning a very conservative budget for next year as well as working toward meeting its bond covenant requirements, which became an important topic in January.
“We’ve reacted as quickly as we could and as responsibly as we could,” Susan Lindahl, chief communications and strategic planning officer, said.
In January, university officials announced in addition to balancing a $42 million budget, the university also is required to have a surplus of $250,000 to be in compliance with its bond covenant.
This requirement came as somewhat of a surprise to the university, which already had cut about $2.7 million from its budget by December and returned in January to face a $1.1 million shortfall.
<br/>Listen to professor Alan Grant talk about the causes and effects of the economic recession.<strong>Listen to professor Alan Grant talk about the causes and effects of the economic recession.</strong>
Listen to professor Alan Grant talk about the causes and effects of the economic recession.
Lindahl said the bond covenant basically is a $10 million loan with two requirements the university agreed to when the bond was issued in 2007 to build the Living and Learning Center and cover other costs.
“The bond covenant is part of an agreement that we signed,” she said. “At the end of that first year there were two covenants. There was a rate covenant in the agreement and then there’s the liquidity covenant.”
She said the liquidity covenant requires the university to maintain cash flow and pay its bills whereas the rate covenant requires surplus funds.
The university isn’t having any trouble paying its bills she said, but with a budget deficit, the university had to come up with a plan to prove it could meet the rate covenant.
“We’ve had revenue bonds in the past, but they didn’t have those specific covenants in them, and so now we’re fully aware of what we need to do to meet that goal,” Lindahl said.
University President Pat Long said even if the rate covenant wasn’t an issue, the university would need to try to make its income exceed expenses.
“The big issue is getting spending under control and revenue up,” Long said. “We have to get our budget so that our expenses are in line with our revenue and so that we’re preparing for next year and the future.”
Lyn Lakin, vice president for university advancement, said efforts to boost the annual fund are ongoing, which will put money toward unrestricted funds for next year.
Even though the economy is floundering, Lakin said alumni are responding strongly.<br/>"We're doing great, we had the best February we've had in three years," she said."We're doing great, we had the best February we've had in three years," she said.
“We’re doing great, we had the best February we’ve had in three years,” she said.
Long said the bond covenant ensures the university will do exactly what it needs to do.
“The bottom line is we overspent last year, and we didn’t catch it in time,” Long said.
“We’re going to stop that this year.”
Lindahl said overspending can be attributed to an aggressive budget. She said the 2009-2010 budget could be between $38-$39 million, which is less than last year’s $42 million budget.
Baker has to meet the bond covenant by June 30, 2010. Lindahl is positive all requirements will be met.