University funding plan scrutinized

CARSON CITY -- A plan to raid the pool of money generated by the estate tax to help the university with short-term financial problems could create long-term problems, key legislators said today.

By law, the fund established for the estate tax -- generated by a tax on property left to heirs -- must maintain a principal high enough to generate $2.5 million in interest a year. Historically, the university system has been able to lightly tap into estate-tax funds for one-time expenditures.

But this year, the University Board of Regents has made it a priority to solve a funding disparity among the colleges and universities. For example, the University of Nevada, Reno, receives $534 per student more than UNLV.

A plan put forth to partially solve this disparity is to divert $63 million from the estate-tax principal to the University and Community College System of Nevada. This would leave about $40 million as the estate-tax principal, just barely enough to generate the required the interest.

Senate Majority Leader Bill Raggio, R-Reno, said today there are numerous questions that must be answered before the plan can be approved. His comments came as a legislative subcommittee on higher education met to review the regents' new proposal.

Raggio pointed out the estate tax money is used for one-time items and not continuing expenditures. He said he is very concerned about spending down the estate-tax balance.

"That's pretty thin," Raggio said, referring to the $40 million balance that would remain.

"You're creating a problem for the system and the Legislature," Raggio told Chancellor Richard Jarvis.

Assemblyman Morse Arberry, D-Las Vegas, Ways and Means Committee chairman, said before the meeting that this part of the plan gives him heartburn. He said using the money from this fund this time would mean it would have to be built in the base budget two years from now.

That means the university's general fund budget would automatically shoot up by an estimated $24 million. "They're (the regents) painting us into a corner," he said.

Jarvis defended the regents, saying they wanted to get a start in solving the equity problems.

Regent Mark Alden said that taking money from the estate-tax principal is a fair plan to take care of growth and part of the equity problems.

Gov. Kenny Guinn, in his original budget, agreed to allocate enough money for 2 percent growth a year. The system, in new figures, estimated it will have a 3.6 percent annual growth. Guinn has now committed an extra $4 million a year for growth.

To get even more money for equity, the regents want to slice $16 million from research, technology and equipment, which was to come from the estate tax. They would instead propose issuing bonds to recover that $16 million.

Raggio said there were "lots of questions" about the proposal from the regents and that the legislative budget staff would need time to "grind through the numbers."

A decision on the system budget is not expected until next week.

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