Fines to be paid with internal loans, reserves

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Penn State has pledged that state money, tuition and donations won't be used to pay the National Collegiate Athletic Association fines of $60 million over five years, which is about one year's worth of football revenue.

Instead, the university will turn to other sources of revenue, including the capital maintenance budget, internal loans and the athletic reserve fund, according to university spokesmen. The use of the capital budget and internal loans will result in the delay of some maintenance and construction work.

On the capital budget, university spokeswoman Lisa Powers said in an email, "The last five-year, university capital plan was on the order of $1.1 billion, and as Penn State works through the next five-year capital plan (starting with 2013-14) it will be able to absorb the fine."

As for the internal loans, the university has committed internal money to lend to self-supporting units of the university for capital projects since 1970. Interest income on the university's money accumulates in a reserve fund for project contingencies, reinvestment in future projects or both.

The accumulated program funds, the size of which was not immediately available, "are now available to support an internal loan to athletics to pay the fine until a revised long-term athletics budget plan can be put into place," said Ms. Powers.

"In using this interest for the NCAA payoff, we may have to slow down other construction projects related to our self-supporting auxiliary enterprises," said Ms. Powers.

One other potential source of money is the athletic reserve fund, which had about $24.7 million late last year. That has already been tapped for related costs and contract buyouts for coaches who were not retained, and a firm, up-to-date figure is not yet available.



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