According to the San Francisco Chronicle, the University of California has announced that it will lend the state $199.8 million, to be paid back in three years at 3.2 percent interest. After layoffs, pay cuts, canceled classes and other budget woes, you may be surprised that the university is willing and able to lend the cash. Don't be. UC is lending the money to the state so that it--the state--can pay for UC capital projects on eight of its 10 campuses, including expanding medical classrooms, and building new biomedicine and telemedicine facilities. Normally, the university would pay for the projects using bonds issued by the state; however, because the state doesn't have the money to spend on the bonds, the building was put on hold.
As a public university system, the University of California can only spend its money on certain things. For example, the direct state funding (which was cut by 20 percent earlier this year) covers faculty costs and most undergraduate academic services, which lead to layoffs and canceled classes. The state spending on the proposed UC capital projects was approved in 2006, and the university has been waiting to start construction since then.
In addition, UC will probably make some money out of the exchange. They borrowed the$200 mil. to loan the state at a lower interest rate than the 3.2 percent they are charging. So, in three years, the University of California will have some extra cash in addition to their new facilities. Not a bad deal.