The Arizona Board of Regents sent a letter last week to Gov. Jan Brewer warning that university classes may be cut and employees laid off if the state continues to delay scheduled monthly payments.

For the third time in less than a year, the state in December did not make its monthly payment from the general fund to the university system.

The missing payments include $35 million for Arizona State University, $30 million for the University of Arizona, and $10 million for Northern Arizona University.

Arizona delayed the payment in order to provide more money for cash-flow needs as revenues continue to come in below expectations.

The state did make a total of $47 million in tuition payments to the schools. The universities turn their tuition revenue over to the state.

The schools receive a share of the tuition revenue each month along with the funds appropriated by the Legislature.

Officials at UA and NAU said they have only one month of cash reserves on hand. Morgan Olsen, chief financial officer at ASU, said the school has some flexibility over the near term.

The state has cut a total of $231.5 million in aid to the university system in fiscal 2009 and 2010.

The regents warned the governor that bond ratings could fall if the schools do not maintain sufficient cash reserves.

“The universities are not in a position to manage without these funds for a prolonged period,” Board of Regents president Ernest Calderón said in the letter to Brewer.

The regents asked the state to make a double payment in January.

Moody’s Investors Service rates the outstanding debt of UA and ASU at Aa3 and the outstanding debt of NAU at Aa2. Standard & Poor’s rates UA’s debt at AA, ASU at AA-minus, and NAU at A-plus.

ASU has $1.5 billion of outstanding debt. UA has $1.04 billion of outstanding debt, and NAU has $504 million of outstanding debt.

In a report issued earlier this month, Moody’s said the state’s economic situation could pose a problem for the schools’ ratings.

“Although we believe the universities have adequate cash balances to buffer against a short-term delay in state funding for operations, longer-term delays or ongoing major cuts in funding and an increased pace of borrowing could pressure the Arizona public universities’ credit profiles over the next few years,” the report said.

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