Regents hope being thrifty doesn’t hurt funding

Debra D. Bass

Wednesday, Oct. 30, 1996 | 11:59 a.m.

For five years, your parents have given you $5 a day for lunch. Instead of spending it all, you put $2 a day under your mattress. Now, there's a bulge under the sheet you can't hide.

Your parents now have two choices: cutting you off and letting you spend what you have, or getting you a better savings account.

This scenario is playing out in a more grandiose fashion between the University and Community College System of Nevada and the state Legislature.

The university regents have accumulated more than $62 million in an endowment fund. That fund is now capable of generating more than $2.5 million in interest annually.

For its diligence and thrift, the university system stands to lose $8 million to $9 million in annual revenues.

It works like this:

In 1987, the Legislature took advantage of a federal tax credit on estate taxes -- otherwise known as death taxes because they are levied on people receiving property from someone after they have died.

This credit yields almost $20 million annually. Half goes to the public school system and half to the university system.

The public school system spends all its money each year on class-size reduction efforts. But the university was directed by statute to develop an endowment fund.

Of the $8 million to $9 million the system receives annually, only $2.5 million could be spent according to statute. The rest was allocated to the endowment "until the principal in the account is sufficient to yield income of $2.5 million" each year.

That time has finally arrived.

Though the statute says the regents can spend any money in excess of the amount needed to ensure $2.5 million in interest, it doesn't say the Legislature can't use that extra money against them in funding the system's budget.

"The trick is to get them to leave that money in there and not reduce our general fund," said Chancellor Richard Jarvis during an ad hoc regent committee meeting Tuesday in Reno held via videoconference.

University of Nevada, Reno President Joe Crowley was confident the university system could retain the $8 million to $9 million annually if it adheres to strict priorities that would otherwise go unfunded.

"There will be folks in the Legislature very happy to spend that money for us and not necessarily on our priorities," Crowley said. "We need to be aggressive in promoting the use of these dollars for our programs. We need to make it clear that these funds are to be supplemental, and not to supplant existing funds."'

The Nevada Constitution mandates that the money be used "only for the purpose of education, to be divided between the common schools and state university for their support and maintenance." The problem is that it doesn't mandate that the money be provided in addition to the system's normal operating budget.

So, it is possible for the Legislature to allocate the estate funds to the university and deduct an equal amount from its operating budget.

"Yes, that is very possible," said Assemblywoman Sandra Tiffany, R-Henderson.

But she added that the university system stands a good chance of keeping the money without penalty if they "can build a good case."

"The general attitude of the money committees is not to use this type of revenue for a fixed money source (something that would require funds year after year). We generally ask them to come up with one-shot appropriations," said Tiffany, who sits on the Commerce and Ways and Means committees.

"For instance, UNLV badly, badly, badly needs parking," she suggested.

Assembly Speaker Joe Dini, D-Yerington, agreed that the university's best chance is to present a good package.

"The university system certainly needs to grow and they certainly need a lot of money to do that and they certainly never have enough money, but approval will depend on the priorities they set and how it fits in with the other funding," Dini said.

The university system now uses the $2.5 million in funds for three priorities -- $232,000 to student grants, $350,000 to libraries and $1.9 million to provide matching funds for federal research grants. Ad hoc committee members reasoned that they would do well in developing proposals to expand allocations to those areas.

Regents balked at just going back to the Legislature and asking it to rewrite the statute and allow them to continue using the funds to build up the endowment indefinitely.

"I'd rather chew razor blades than go through that," said Regent Dorothy Gallagher, anticipating a battle. "If we tried that, we could end up with nothing."