Growing debt costs limit investments, says UMass chief

“It’s just untenable,’’ Caret said during a State House hearing attended by two of the 10-member House Committee on Bonding, Capital Expenditures, and State Assets.

Caret said the UMass system - with five campuses, 16,000 employees, 68,200 students, and a $2.7 billion operating budget - shoulders 85 percent of costs associated with borrowing to support construction and renovation of buildings and facilities. At its Amherst campus, he said, the school is spending 8 percent of its operating budget on debt service. Each campus, he said, is responsible for its own debt costs.

Representative Antonio F.D. Cabral, Democrat of New Bedford, the committee chairman, has concerns that the UMass system has become nearly as costly as private universities around the state.

“Certainly in my area, some kids are priced out,’’ Cabral said. “I really hate to see that.’’

Cabral - joined by Representative James M. Cantwell, Democrat of Marshfield - said he sympathizes with the concerns of university officials about borrowing costs. But whether the university or the state shoulders the debt burden Cabral said, “in essence, it’s all the Commonwealth.’’

“I’m hearing you, and I understand that adds tremendous pressure on your operating budget,’’ Cabral said. “That translates to fees, tuition. It’s an ongoing discussion with you and UMass as a whole in terms of how we strike a better balance.’’

Caret succeeded Jack Wilson at the helm of UMass this summer. He described a growing demand for access to UMass schools - 17 percent enrollment growth over the last five years - and a backlog of maintenance projects. Caret said university officials hope to reduce that load in the next 5 to 15 years, and he intends to push for access to capital funds authorized in state life sciences and higher education borrowing legislation enacted in 2008.

“Education really is the cornerstone of our democracy,’’ he said. “If you want that in Massachusetts, if you want Massachusetts to be one of the bellwether states, then you need educational institutions that help you do that.’’

Caret said that UMass has a $550 million research and development budget, and he called for legislation that would use state bond funds to leverage millions of dollars in private or federal matching investments. He said he expects to meet with Secretary of Administration and Finance Jay Gonzalez next week and recently met with other state budget officials to discuss the university’s priorities.

Richard Freeland, Governor Deval Patrick’s commissioner of higher education, said all but five of the state higher education institutions outside the UMass system have been granted funds from the 2008 higher education borrowing bill, a 10-year, $2 billion plan. Freeland said that of the $891 million in that bill committed to state and community institutions, $700 million has been programmed and is in some stage of study, design, construction, or completion.

Stephen Lenhardt, deputy higher education commissioner, told the committee that state higher education institutions outside the UMass system each carry less than $10 million in debt service.

“There is a fair amount of capacity there for some of the institutions to assume more debt,’’ he said.

Freeland also said that state colleges and universities have, in recent years, spent about 5 percent of their operating budgets on capital and infrastructure needs to address large backlogs of deferred maintenance.

“It has been a pattern, but it is not a pattern we necessarily want to continue,’’ he said, adding: “We’re behind the curve. We shouldn’t kid ourselves about where we are as a state.’’

Freeland said Massachusetts is part of a long-term national trend of state governments decreasing support for their public colleges and universities.

“When I started at UMass Boston 40 years ago, the state provided 85 percent of the operating budget at that institution,’’ he said. “Today, it provides 40 percent. . . . Our state universities are getting only about 45 percent of their funding from the state budget. Scholarship dollars have not kept up with this cost shift.’’

He said student costs at public institutions are split at about 80 percent in fees and 20 percent from tuition. Fees are retained by the universities, while tuition revenue is sent to the state.

“What has happened . . . as costs have shifted from the state appropriation to students, that has not been reflected in tuition increases, which have stayed pretty level,’’ he said. “It has been reflected in fees.’’

Freeland said the department hopes to use some of the funds available in the higher education bond bill to address deferred maintenance projects.

Lenhardt said he expected the full $891 million contained in the higher education bond bill for state colleges to be spent over the next four or five years on new construction. An additional $130 million not yet earmarked, he said, may be spent on a deferred maintenance program.