WASHINGTON — The Virginia College Building Authority tomorrow expects to competitively sell $237 million of revenue bonds for nine public higher education institutions, which may lose up to 15% of their state aid this fiscal year.
The colleges and universities will use the proceeds for a variety of projects, including the expansion of gyms, dining facilities, and student centers. Gov. Timothy M. Kaine said in September that Virginia may need to cut state college and university aid by as much as 15% in order to fill a $1.3 billion budget gap for fiscal 2010.
The Series B bonds are expected to mature between one and 30 years and are to be backed by the revenue of the institutions, which include tuition, fees, grants, and appropriations by the General Assembly.
The institutions have been appropriated $4 billion for fiscal 2010. The bonds will be further supported by the state’s intercept program. If an institution misses a loan repayment to the VCBA, the state comptroller is required to immediately make the payment from any funds that are due to the institution.
The bonds are rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Troutman Sanders LLP is bond counsel on the deal. Public Resources Advisory Group is the financial adviser.
This year, triple-A rated Virginia followed other states by slashing spending to cope with declining revenues. The state’s revenue fell by 9.2% in fiscal 2009. Virginia faces a 1.6% estimated revenue decline in fiscal 2010, which will open a $1.3 billion budget gap.
More than half of Virginia’s tax revenue comes from personal income taxes, which decreased 6.3% in fiscal 2009 and are estimated to fall 1.8% in fiscal 2010. Sales tax revenue is also down partially due to weak housing sales. About one-third of sales tax collections come from home sales, according to Moody’s.
Nationally, colleges and universities have cut tuition costs amid the recession even as undergraduate enrollment has increased, according to a Moody’s report on higher education published last week.
However, states are reluctant to make deep cuts to higher education budgets, making public universities more fiscally sound than their private counterparts, the report found.
“Public universities, as a whole, will likely experience little pressure on net tuition and revenue,” said Laura Sander, a Moody’s vice president and author of the report. Public institutions are expected to receive 92% of their expected increases in net tuition and fee revenue in fiscal 2010, she said.
All nine of the institutions supporting the Series B bonds had tuition and fee increases in the 2008-09 academic year from the prior year.
Kaine’s term ends Jan. 16, 2010, at which time Governor-elect Robert F. McDonnell will be sworn into office. State law requires that a budget proposal for fiscal 2011 be submitted by Dec. 20. However, McDonnell will have authority to propose his own budget once he takes office, sources said.
The General Assembly is expected to receive updated revenue forecasts for fiscal 2010 in December.