Florida Board of Governors

PECO running dry as revenue source for universities

Source: Florida Current, 01/17/13
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By James Call

Florida lawmakers face what one committee chairman calls an “extraordinary challenge” to pay for state university capital costs.

Revenue from a gross receipts tax on electricity and communication services peaked in 2007 at about $1.4 billion and is expected to decline this year to around $1 billion. That tax money is used to back bonds to pay for new construction, maintenance and renovation of facilities. The drop in collections is significant enough that last year lawmakers had to add $250 million from general revenue and the lottery to the Public Education Capital Outlay trust fund, the entity that finances education construction projects.

“It’s not the sexiest issue, (but) it is an important one,” said House Appropriations Chair Seth McKeel, R-Lakeland. “Whether the solution provides for a restructuring of fund distribution or simply a year-by-year commitment by us to do the right thing, I think it is incumbent upon us to address the situation.”

McKeel arranged a 90-minute presentation for committee members on the history of PECO, an examination of how other states pay for education construction projects, and a presentation of recommendations by the state university system’s Board of Governors.

Like Florida, 45 states require legislative approval for university capital projects and seven others have a dedicated revenue source. And like 16 other states, Florida has cut PECO funding since the 2008 recession. The current spending plan has no new money for construction.

“You have to go with the times. You can’t live with rules that were developed during times of plenty in times of shortages,” said University of West Florida President Judy Bense, who explained five recommendations from a BOG task force. The recommendations, for the most part, remove state oversight and give universities the option to raise construction dollars and spend them as they wish.

“You do things; raise and lower controls, as the times and crises change,” Bense said.

The BOG wants greater flexibility in funding sources, such as permission to enter into partnerships with private companies.

“I would like to build a building on my campus that has retail on the bottom, office and academic space in the middle and housing on top,” Bense said.

Two universities in Ohio have leveraged partnerships into new buildings and revenue sources. The Ohio State University assigned the rights to a parking garage for 50 years in exchange for $483 million in unrestricted funds. Wright State University partnered with a company to build a laboratory. Lawmakers indicated they are willing to explore the idea.

Rep. Dennis Baxley, R-Ocala, said whenever there is less money available people need the freedom to be creative.

“I think there are some answers there,” Baxley said. “Something can go wrong but I’m always on the side of freedom usually; let some things happen and a lot of good things will happen.”

Rep. Joe Gibbons, D-Hallandale Beach, said he enthusiastically embraces the concept.

“We no longer can solely depend on tax dollars,” Gibbons said. “All the universities are asking us to do is let them operate. They have the expertise and are smart enough to take advantage of the expertise they have on their boards to set up the oversight to delve into that type of funding.”

McKeel said the BOG’s recommendations were reasonable. He wants to look into under what circumstances it would be appropriate for a university to partner with an outside source on a construction project.

The committee’s next meeting is scheduled for February.