It will be at least a month before Southern Illinois U. sees the money to cover the lack of state appropriations.
However, SIU administrators have started the process of borrowing funds and the university will look at interest rates as it plans to put itself on the market through public financing, said university spokesman Dave Gross.
“It will be the university issuing debt under its name, so there will be investors in there and pension funds and other types of investors who buy the debt in exchange for the interest rate that will be set,” Gross said.
The interest rate will be set within the next several weeks based on conversations between the SIU finance department and agencies who rate debts, Gross said. He said the interest rate would dictate how much the university will have to pay back to investors.
Gross said he is optimistic the interest rate will end up in the mid 1 percent.
“We hope it will be somewhere between 1.5 percent and 1.75 percent, but we will not know for sure until the debt is rated,” he said.
Illinois’ credit rating dropped twice this month, by Fitch Ratings and Moody’s Investors Service, but Gross said that should not reflect on the university’s rating.
The SIU Board of Trustees held an emergency meeting Thursday where the board unanimously approved the university to begin looking into borrowing the money owed to it by the state.
The bill allows all state universities to borrow up to 75 percent of what is owed to them in state appropriations. According to administrators, SIU is still owed about $106 million for fiscal year 2010, which ends June 30.
The resolution states the university may borrow money from time to time in anticipation of receiving tuition, payments from the State of Illinois or other revenues as long as the money is repaid within one year with interest.
Although the resolution states the university can borrow up to $85 million, Gross said the number will likely go down around $70 to $75 million.
SIU President Glenn Poshard said the bill was especially important after the appropriation deadline for FY10 was extended from August to January. He said the delay and the ending of the federal stimulus funds are the major challenges facing the university now.
Gross said SIU has shown in its past that it is a university which can be trusted to pay back its loans, but Illinois’ economy complicates the issue.
“We’ve had an outstanding relationship in the past in terms of issuing debts,” Gross said. “This university is well known in that we’ve borrowed funds to pay for buildings. It’s likely, and we hope this debt can be raised at the higher level.
“But don’t question anything coming out of the State of Illinois right now. Everything has to be viewed through a different set of lenses — it’s a terrible budget situation right now.”