The state wants the ability to borrow $1.7 billion from the University of California and California State University after slashing nearly a quarter of state funding for the beleaguered systems.
Legislation moving through the Capitol with scant notice, Senate Bill 79, would establish a new investment fund for UC, CSU, California Community Colleges and the Judicial Council. If necessary, the state could use that money to retire short-term loans from Wall Street or pay bills, while giving the universities above-market interest rates until a future payoff date.
UC plans to transfer $1 billion of cash reserves into the fund, while CSU will shift $700 million, according to officials at the two systems. The deal does nothing to relieve CSU or UC of the $650 million in cuts each system will absorb under the budget enacted nearly two weeks ago.
Gov. Jerry Brown's Department of Finance and Democratic lawmakers said AB 79 is necessary to persuade Wall Street to lend California money at competitive rates. Each year, the state receives the bulk of its tax revenue in the second half of the fiscal year and must borrow until then to pay bills.