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Michigan State's $500M payout could mean tuition hike, using taxpayer money  2 Days ago

Source:   USA Today  

DETROIT — With Wednesday's announcement that Michigan State University and 332 people have settled lawsuits relating to Larry Nassar's sexual assaults, one big question remains — how is the university going to come up with $500 million?

That's a problem the university is currently working on, said Michigan State University spokeswoman Emily Guerrant.

Here are some ways it could go:

• Hike tuition. University interim President John Engler has been saying for a couple of months that tuition dollars probably will be used to cover the cost of any settlement. However, state lawmakers have expressed displeasure with any plan that would hike tuition above a 3.8% cap. Michigan State brought in $859 million in tuition revenue in 2016-17, according to its audited financial statements. That's 29% of its total revenue of $2.9 billion.

• Hike tuition for graduate and out-of-state students. One way around the tuition cap is hiking tuition by a massive amount on out-of-state and graduate students.

• Get more money from the state. Lawmakers have expressed displeasure with this plan.

• Dip into its reserves. Michigan State ended the last fiscal year with $1.1 billion in unrestricted net assets. That's money that isn't legally contracted to a certain project, but often is set aside for particular projects. It's like a family's savings account where money is set aside for a new car, a new roof for the house and other projects. It can be switched to something else, or to cover an emergency, but that means those initial projects can't be covered. The two biggest chunks of what Michigan State has set aside are its unrestricted net assets for infrastructure ($557 million) and programs ($400 million). 

• Borrow the money. The school could bond for the cost and pay it back over time. However ratings agencies have lowered their outlook and rating for the university, meaning the school will pay higher interest rates.

• Go after insurance. Michigan State University has some insurance to cover the costs. However, Penn State had to sue its insurance carriers to get some money after the Jerry Sandusky scandal.

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