Shots fired: What’s the meaning and the fallout over LSU’s decision to threaten exigency?

By Robert Mann

The word about LSU’s financial woes, particularly the threat of academic bankruptcy, is now national news. From the Boston Globe to Bloomberg News to the Houston Chronicle to Al Jazeera America, the news is out that LSU is on the ropes.

First, LSU President F. King Alexander issued a statement on Wednesday, in which he said, “Based on the current status of the budget debate, we have decided to begin contingency planning for exigency as many of our campuses may be impacted, as well as other campuses across the state.”

Exigency is the academic equivalent of bankruptcy or insolvency. It would allow the university to fire or furlough tenured faculty and instructors. Even partial exigency will ruin a university’s reputation.

Already, it’s sure bet that recruiters from the University of Alabama, Ole Miss and LSU’s other regional competitors are reminding their academic prospects that LSU might not be open for business in the fall.

And you can bet Tiger Stadium that Nick Saban and his recruiters (as well as coaches from other schools that compete against LSU for top athletic talent) are telling high school prospects, “Do you really want to take a chance on a school that’s telling the world it might not be open for classes in the fall?”

Even before Alexanders’s remarkable statement on Wednesday, the news was bad for LSU. As NOLA.com reported on Wednesday:

Moody’s Investors Service has lowered LSU’s credit outlook, a trend that, if it continues, could cost the university more money for construction projects.

The credit rating agency said LSU’s credit outlook had been lowered because of expected reductions to the university’s public funding as well as the institution’s inability to raise its own tuition. The growing costs of pensions and other employee benefits were also a factor. 

Moody’s made that decision before the news from Alexander about possible exigency. On Friday, however, the news got worse, as several important LSU bond deals feel apart. Again, as NOLA.com reported:

Investors pulled back from funding for LSU construction projects after hearing the school is drafting paperwork for financial exigency, essentially academic bankruptcy.

Louisiana’s flagship university announced Friday (April 24) it would not issue $114.5 million worth of bonds, meaning that construction of a new residential hall, family housing and a student health center have been put on hold. 

“Under the current circumstances and due to the continued unpredictably of our state budget, we believe this is the responsible thing to do, and we will reevaluate the offering once the state’s financial picture becomes clearer,” said LSU in a prepared statement.  

Finally, on Friday, the week’s awful news was complete with the announcement that the university was putting on hold half of its searches to fill vacant faculty positions. Again, from NOLA.com:

LSU, anticipating significant budget cuts from the state, is scaling back on the hiring of new faculty.

“We’re going ahead with our course offerings but we have scaled back hiring,” LSU President F. King Alexander, also chancellor at the Baton Rouge campus, said.

The university had planned on hiring 125 new faculty members, a majority of which are replacements due to retirements and open vacancies, but Alexander said that figure will be scaled back by some 50 percent. Instead, LSU will look to hire 60 new faculty members.

In all, it was a dreadful news week for LSU. Some of it, of course, was created by Alexander, who undoubtedly calculated that his announcement would make a powerful point, even at the risk of harming student recruiting and  the university’s national reputation.

He did not have to announce the news about exigency contingency planning — but he did, I suspect, to fire a cannon ball over the bow of the Jindal administration and those legislators reluctant to pass the tax increases necessary to save LSU and the rest of higher education.

Perhaps he also did it to tell his own LSU Board members that someday soon he will be asking them to decide between their slavish loyalty to Jindal or the good of the university.

Whatever some LSU board members have told Jindal about the threat to the school, it clearly hasn’t worked. Jindal this week threatened to veto the entire state budget if it contained tax credit suspensions that he and Americans for Tax Reform regard as tax increases.

Of course, Jindal and his pals on the LSU Board also posses cannons. And they may have fired back at Alexander at some point on Thursday or Friday. I can only imagine the angry phone call Alexander received from Jindal’s former (and now de facto) chief of staff, Timmy Teepell.

Whatever transpired, it resulted in this odd statement from LSU on Friday morning around 10 a.m.

Contrary to inaccurate media reports, LSU has not begun the process of filing for financial exigency, but we do continue to explore a wide range of contingency plans in light of the state’s $1.6 billion shortfall. In light of recent events, LSU has decided to postpone the issuance of Series 2015 Auxiliary Revenue and Refunding Bonds in the amount of $114.5 million. Under the current circumstances and due to the continued unpredictably of our state budget, we believe this is the responsible thing to do, and we will reevaluate the offering once the state’s financial picture becomes clearer.

We remain hopeful that the Legislature will develop solutions to protect funding for LSU and higher education in Louisiana, but we owe it to our students, faculty and staff to prepare for every possible outcome, as any responsible fiscal manager would do.

Blaming the news media for “inaccurate” reporting was interesting and wrong. For one thing, LSU officials were clearly not challenging the reporting about this story on Wednesday and Thursday. There was nary a peep from Alexander or his spokespeople about this until Friday morning, when LSU suddenly had the urge to blame the “media” for getting the story wrong. Perhaps they don’t read the week’s papers at University Relations until Friday morning?

What’s more likely is that Jindal and his friends on the LSU Board decided that Alexander had gone too far. It also didn’t help that the bond issue was cancelled on Friday. But that cannot be blamed entirely — or, perhaps, at all — on Alexander’s statement on exigency. Remember, Moody’s had already signaled on Wednesday morning that it was concerned about LSU’s financial situation. That LSU officials didn’t send investors and the bond houses Alexander’s statement doesn’t mean those people wait until Friday to read the papers. The bond markets have known for months about the precarious nature of LSU’s state funding.

So, what does all this mean?

First, Alexander is not averse to playing hardball, even if it means taking the risk of damaging LSU’s reputation in the short-term. It’s very likely that he and his staff believe that Jindal and legislators will be unable to agree on a plan to save the school’s funding. Wednesday’s announcement was clearly meant as a wake-up call for state leaders and the public. It probably worked, even if the spillover effect for LSU might have hurt Les Miles’ recruiting efforts a bit.

Second, Alexander was actually not freelancing and was not alone. At the bottom of the first NOLA.com story on Wednesday by reporter Julia O’Donoghue was this interesting tidbit, which indicates that Alexander and state Higher Education Commissioner Joseph Rallo are working in tandem:

If necessary, Louisiana’s public colleges and universities will coordinate their financial exigency filings, rather than have 16 to 20 different campuses putting in financial paperwork separately, according to higher education officials.

“If [state funding] doesn’t materialize … we would try to have all the systems going down that path together,” said Joseph Rallo, Louisiana’s higher education commissioner, of financial exigency. 

Third, it’s likely that Alexander’s gambit angered Jindal and some LSU Board members. I’m guessing that’s the reason for the Friday statement blaming the news media. Maybe it had something to do with the postponement of the bond sale, but remember the university’s bond downgrade happened before any public talk about exigency.

Fourth, the LSU attack on the media was misdirected and a cheap shot at Louisiana journalists who simply reported, accurately, what Alexander said. It might have been more accurate to blame “some national media organizations” for getting the story wrong. For example, the Al Jezeera America story clearly went too far: “Louisiana State University officials have begun the process of filing for bankruptcy amid deep cuts in state funding for the school.”

To implicitly target local reporters — who got the story correct and who never heard a contrary word from LSU for more than 48 hours — is wrong and won’t do much to help LSU’s credibility with Louisiana reporters.

The bottom line is that Alexander and Rallo are willing to play hardball with Jindal and legislators in the fight over higher education funding. That’s welcome news and long overdue, as higher education leaders have been far too cowardly in the past when it came to publicly challenging Jindal. That game changed this week.

One question is: Will Jindal or his LSU Board board muzzle Alexander (the conservative web publication, The Hayride, has already demanded that the LSU Board fire him for mentioning exigency) or will he continue to take the fight to Jindal and lawmakers?

Another question is what impact will all this have on the university’s national reputation? And what impact will it have on recruiting, not just football students, but those high school seniors (and potential graduate students) who are today deciding whether they should take a chance on LSU or head east to Mississippi or Alabama?