University of California debt soars to $17 billion; regents consider new borrowing policy

Katy Murphy:

The University of California’s debt has ballooned to $17.2 billion since the start of the recession, more than doubling as the system borrowed to repair buildings, fund pensions, and build medical centers and student housing.

In the past decade, as states have cut support for capital projects, public universities across the U.S. have piled on debt to repair old buildings and build new ones. But some, including Gov. Jerry Brown, have expressed wariness about all the borrowing. Along with access to needed cash, UC is locking itself into more costs — and is fast approaching its limit for borrowing cheaply from the market.

But with the board of regents this week considering UC’s first-ever debt policy, university leaders insist the borrowing spree is strategic, given unusually low interest rates and federal tax exemptions on university financing.

“If we had not taken advantage of that and had to build buildings out of our operating budget, it would have been a risky or foolish way of doing it,” university CFO Nathan Brostrom said in an interview this week.