Louisiana Public Universities Grapple with Financial Exigency


A number of public universities in Louisiana could end up filing for financial exigency, or academic bankruptcy, if things don’t change for higher education funding in the state.

Governor Bobby Jindal is continuing to propose budget cuts that directly effect the higher education system in the state, causing schools to begin thinking about filing for financial exigency.  Doing so would allow the institutions to restructure and fire any tenured faculty, writes Chris Staiti for Bloomberg.

“We know the worst-case scenario, we know the timeframe, and we know what’s at stake,” President F. King Alexander of Louisiana State University said in a statement. He said he wants legislators to “mitigate the devastation these budget cuts promise.”

Financial exigency means that a school is facing such a drastic financial crisis that the entire ability for the institution to survive is in jeopardy.  While it allows schools to shut down programs and fire tenured faculty, the school’s reputation becomes tarnished, making it difficult to attract new faculty and students, reports Julia O’Donoghue for NOLA.

The state is facing a budget shortfall of $1.6 billion next year due to a decrease in oil-tax revenue in combination with the state failing to increase taxes after the economic downturn of 2009.

Jindal proposed cuts to the higher education system totaling over $200 million in the hopes of creating more revenue for the state.  If the tax changes are not approved by the legislature, the university system could end up with cuts totaling $608 million.

“This is exactly why we proposed cutting over $500 million in corporate welfare to help protect higher education,” said Kyle Plotkin, Jindal’s chief of staff. “There are some corporations in our state that are paying zero in taxes and getting free taxpayer-funded checks from the state.”

According to the latest plans, public colleges and universities in Louisiana could face aid cuts of 82%, which would cause per-student funding to fall from $3,500 to $660.  “States around the country spend more than that on their community colleges,” Alexander said.

A measure was advanced by the Louisiana House Education Committee which would allow institutions in the state to raise tuition and fees.  However, similar measures were voted down last year by lawmakers and are not guaranteed to pass this year.

“We are certainly anxious to see the budget solution as quickly as possible. Faculty decisions and hires need to be made now for next fall,” said Sandra Woodley, president of the University of Louisiana system.

Financial exigency is often used in place of Chapter 11 by schools.  Federal law states that schools that file for bankruptcy may not receive government-backed student aid.