LSU is Preparing for Bankruptcy

Written by SK Ashby

The consequences of Louisiana Governor Bobby Jindal's proposal to obliterate higher education funding are becoming clear as Louisiana State University is preparing to file for "academic bankruptcy."

From the Times-Picayune:

Louisiana's flagship university began putting together the paperwork for declaring financial exigency this week when the Legislature appeared to make little progress on finding a state budget solution, according to F. King Alexander, president and chancellor of LSU.

"We don't say that to scare people," he said. "Basically, it is how we are going to survive."

When a university files for financial exigency, faculty and staff are laid off and entire departments and programs, including sports programs, can be eliminated to avoid total collapse.

LSU is facing a budget cut that would reduce funding by $3,500 per undergraduate student to $660 per undergraduate student according to the Times-Picayune, and there is no clear path to a solution in the state legislature.

And LSU is not the only school at risk. Governor Jindal unveiled a proposal in January that called for cutting higher education by up to $300 million which also happens to be the total operating cost of all community colleges in the state.

We discuss the economic situation in Kansas quite often, but Louisiana has already moved beyond the point of no return where state institutions are preparing for liquidation and bankruptcy.

As you might have guessed, state institutions are being torn apart because of a $1.6 billion hole in the state budget generated by tax cuts. Governor Jindal, like his colleague Kansas Governor Sam Brownback, embarked on a quest to eliminate income taxes but his plan ran into a problem: reality.

If necessary, Louisiana's public colleges and universities will coordinate their financial exigency filings, rather than have 16 to 20 different campuses putting in financial paperwork separately, according to higher education officials.

"If [state funding] doesn't materialize ... we would try to have all the systems going down that path together," said Joseph Rallo, Louisiana's higher education commissioner, of financial exigency.

I expect there will be a point in time in the near future when institutions in Kansas will be forced down this path.