Education Restructuring Bill Clears Committee, but What Will It Cost?

Amended bill raises ire of Rutgers representatives, who had no say in drafting revisions

Even though the legislation still lacks a serious cost estimate, a powerful New Jersey Senate committee yesterday approved the controversial higher education bill that would restructure Rutgers University, the University of Medicine and Dentistry of NJ, and Rowan University. The legislation included 16 amendments, many designed to appease Essex County representatives.

But the amendments, one of which would delay the merger for a year — until July 1, 2013 — did nothing to appease Sen. Ronald Rice (D-Essex). Nor did it pacify those at Rutgers, who had no say in drafting the revisions to the New Jersey Medical and Health Sciences Education Restructuring Act and continue to oppose the merger of the Camden campus with Rowan University.

More than nine hours after the advertised start of the Senate Budget Committee hearing, the committee finally began listening to testimony on a significantly revised S2063, which would transfer almost all of the University of Medicine and Dentistry of New Jersey to Rutgers University, with the School of Osteopathic Medicine and Rutgers-Camden moved into Rowan.

The amended bill, which was introduced just last week, still lacks a formal cost estimate. Despite acknowledging this, all but one of the Senators from both parties voted for it. Only Sen. Nellie Pou (D-Passaic) abstained, saying she could not vote because all the questions had not yet been answered.

Memo from Treasury

The only financial estimates members did receive came in the form of a memo that the state treasurer’s office sent to the Office of Legislative Services — though inexplicably not on treasury letterhead — with a few dollar amounts based on the bill before the amendments. Those include a one-year cost of $86 million for central support of UMDNJ, a net $40 million saved by refinancing bonds, and $4.3 million in annual operating savings.

It did not include the $40 million Rutgers had estimated it would cost to absorb portions of UMDNJ, nor the $155 million the university said it would cost in early prepayment penalties and other bond defeasement costs due to the merger of Rutgers-Camden and Rowan. It also did not address any additional annual state aid needed by the reformed institutions, nor the cost of investing in Rowan University to create a research institution.

A 2010 committee report had put the cost of a similar higher education restructuring at $1.2 billion, and the state’s higher education secretary has promised that a panel of world-class experts was studying the costs and would provide a full estimate.

“Building another research university is a good thing,” said Sen. Paul Sarlo (D-Bergen), chair of the committee. He said there will be “significant” costs involved in building doctoral degree programs needed to boost Rowan’s status. “That’s going to be a significant investment. The bill does not include that … If we’re go to put more state commitments there, how we do that without hurting the other state colleges?”

When asked point-blank by Sen. Jeff Van Drew (D-Cape May) about the position of the Rutgers Board of Governors on the bill, Candace Straight, a member of that board, said she could not support the bill as written.

Several minutes later, though, she said she is not opposed to the merger in theory, just opposed to the bill as drafted. The amendments were not completed until yesterday and Rutgers officials had not seen them all yet.

Incomplete Due Diligence

She said the legislation “proposes a very large and complex transaction impacting higher education” but that “due diligence has not been completed.” UMDNJ has about $150 million in outstanding medical malpractice claims that Rutgers would have to assume and every $100 million Rutgers has to absorb would mean a 15 percent tuition increase, she said.

“That’s a pretty heavy increase on undergraduates, 90 percent of whom are New Jersey residents,” said Straight. “I do not want to finance this transaction on the backs of New Jersey students and their families.”

Senate Democratic staff said one of the bill’s amendments would address the question of the bond covenants and ensure that Rutgers not incur the $155 million defeasement penalty.

In the last of the day’s surreal moments, Rutgers issued a statement from Straight saying that she would fully support the bill if all the amendments she had discussed are approved.

Statement of Principles

Dudley Rivers, vice president of the Rutgers Board of Trustees, said the amendments did not address the statement of principles the Rutgers boards jointly approved earlier this month. If the autonomy of Rutgers-Camden is not ensured in the bill, apart from a joint governing board with Rowan, Rivers said it “will not withstand a legal challenge.”

One of the amendments would limit the decisions that the joint Rutgers-Rowan board could make, but that is still unacceptable to the Rutgers-Camden faculty.

Several Rutgers professors said the university is willing to go to court to challenge the restructuring. Rutgers has sought assistance from former acting U.S. Solicitor General Neal Katyal to advise the university on the potential legal issues surrounding the bill.

Among the amendments were several seeking to protect University Hospital by limiting Rowan’s obligation for the debt from the school of osteopathy. Rutgers-Newark would also get a chancellor to oversee the medical schools. There were other amendments meant to appease Essex County, including an assurance that Rutgers board members be from Newark.

Just Say “No”

But these did not satisfy Rice, who loudly urged members not to approve the bill.

“Integrity is necessary in the legislative process,” he said. “There are questions about the cost of this bill … There are questions the treasurer could not even answer about the bond debt.”

Rice placed the cost of the merger at $1.6 billion.

Perhaps the most plainspoken of those who testified was not one of the Rutgers faculty, but a woman from Gloucester County.

“If I was a teacher in class I’d flunk y’all. You came unprepared to class,” said Nora Craig, who waited all day to testify on the bill. “This is a political deal and I do understand how that works. But the bottom line is you work for the taxpayer first and foremost.” She said that given all of the questions that remain, moving the bill “would be incompetent.”

But after two-and-a-half hours of debate, Republicans and Democrats voted to support the bill, which is based on a commission appointed by Gov. Chris Christie. The full Senate is expected to act on the bill on Thursday.

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