Politics & Government

May 21, 2014

SC State runs out of cash, seeks aid for salaries, debt payments

State University has run out of money to pay its employees and cover its debt payments, and will ask to draw at least $1.2 million from a $6 million emergency loan that the state offered last month, college president Thomas Elzey told The State on Wednesday.

S.C. State University has run out of money to pay its employees and cover its debt payments, and will ask to draw at least $1.2 million from a $6 million emergency loan that the state offered last month, college president Thomas Elzey told The State on Wednesday.

South Carolina’s only historically black public college had hoped to have enough money to last through July 1, when the state’s new fiscal year starts, infusing the school with cash. Instead, after revising budget projections, S.C. State needs about $500,000 to pay salaries next week and another $700,000 for debt payments in June, Elzey said.

S.C. State has struggled financially for years with shrinking enrollment, state funding and federal student aid. The school has $13.6 million in unpaid bills, dating back to the beginning of the school year.

During a special board meeting Wednesday on its Orangeburg campus, some trustees said they are worried that government leaders would use the latest crisis to assume control of the college.

“A funnel cloud hangs low over (the school), waiting to touch down and destroy its history and outstanding accomplishments,” trustee Patricia Lott said. “The clouds I and others feel have all been manufactured as distractions by persons in higher places to have an excuse for a takeover.”

Another trustee, Carlotta Redish, said S.C. State already was in “unofficial receivership,” based on comments by Gov. Nikki Haley and other state political leaders about the poor condition of the school’s finances when it was granted the $6 million loan.

“There’s no dispute that we have shot ourselves in the foot, but while we were doing that, someone was shooting us in the chest,” trustees chairman William Small Jr. said.

State leaders have said they are committed to seeing S.C. State prosper.

Small and three other S.C. State trustees will meet for the first time Friday with a panel of current and former S.C. public college presidents, including Harris Pastides of the University of South Carolina and Jim Barker of Clemson University. The panel was assembled by Senate Finance Committee chairman Hugh Leatherman, R-Florence, as part of an effort to help the school recover financially.

Trustees and Elzey said they were concerned about the amount of authority that the panel of presidents might have over S.C. State, already under a “warning” status from its accrediting agency related to concerns about its governance and finances.

“We just need clarity,” Elzey said.

The presidential advisers are not the only outside help the school will receive. The state’s emergency loan requires S.C. State to spend up to $500,000 on a financial consultant.

The university has trimmed some costs – instituting a hiring freeze and cutting its women’s golf program – and worked to turn around enrollment, which has dropped by a third since 2007. Applications are up more than 50 percent from a year ago, S.C. State officials said.

With expectations that S.C. State would have enough money to cover its salaries and bond debt, the $6 million emergency loan – approved by a group of state leaders, including Republican Gov. Haley – was expected to go toward shrinking the school’s $13.6 million in unpaid bills.

But the university made “a few miscalculations” on projected budgets, especially when it expected to get some federal grant money, Elzey said.

That has left the school about $500,000 short of the money it needs to meet the payroll due by next Friday to the college’s 955 employees, he said. The school laid off 90 temporary workers last week to save $225,000 by June 30. The school also cut another 90 jobs during the school year.

Elzey, who arrived at S.C. State less than a year ago, did not rule out seeking more money to cover paychecks next month.

The school also plans to ask for about $700,000 from the $6 million state loan to make debt payments due in June on $75 million in bonds, Elzey said.

The $1.2 million Elzey plans to seek should cover S.C. State’s shortfalls for salaries and debt this fiscal year. S.C. State expects to have an $832,000 shortfall on July 1, according to a cash-flow report the college provided to the State Budget and Control Board dated last week.

However, vendors, including those that provide food service and maintenance on the 3,100-student campus, still have not been paid.

S.C. State had been covering deficits for seven years by borrowing money from a community development program. But that practice stopped after it was questioned in a state inspector general’s report this year.

Elzey’s planned requests show the state was right to provide the school a lifeline to get through next month, when the current budget year ends, the governor’s office said Wednesday.

The remainder of the emergency loan could pay vendors – though the agreement with state leaders requires verifying contracts and bills. That work is under way, Elzey said. The school must receive the balance of the state loan by June 30, according to the agreement.

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