Trustee explains board decision to use bonds for litigation settlement
MSU is expected to pay off its $500 million settlement between the university and survivors of ex-MSU and USA Gymnastics doctor Larry Nassar's sexual abuse with general revenue bonds.
In light of the settlement, many members of the MSU community have expressed concerns with how the settlement would be paid and whether or not it would come out of students' tuition. But at the MSU Board of Trustees meeting on June 22, the board voted unanimously to approve issuing bonds in order to pay for the settlement, rather than drawing in the money from student tuition or state funding.
In a press release, university officials said they believe "bonding is the quickest process to establish the settlement fund with least amount of impact on MSU programs and services" and that MSU is "still in negotiations with applicable insurance providers to be reimbursed on those policies."
Trustee Brian Mosallam said the board wanted to make it clear to MSU students that their tuition was not going to be increased in order to pay off the settlement.
The board unanimously voted to implement a tuition freeze for in-state freshmen students and a $360 increase per academic year for in-state and out of state sophomores, juniors and seniors for the 2018-19 school year at the meeting.
"I thought it was important to send a message that an increase in tuition will not be tied to any type of settlement," Mosallam told The State News after the meeting. "We are fiscally healthy as a university. Mark Haas and our finance team have done a great job, so I thought it was important that we sent that message to the Spartan community coming forward."
Mosallam also said that issuing bonds to pay for the settlement was the wisest choice for the university at this point in time.
"We're at the 200-year lows in interest rates, we have the debt capacity," he said. "We actually will make roughly $25 million annually by not using cash because some of it will be invested and the rest will be there to pay off that service, so it was the more fiscally-prudent way to use bonds instead of cash at this point."
The settlement between MSU and the survivors of Nassar's sexual abuse who sued the university in light of their handling of the cases against Nassar was announced in May 2018.