Winston-Salem Journal
The General Assembly’s aggressive spending this decade may cost North Carolina college students important financial aid in coming years.

That is the assessment of Treasurer Janet Cowell, and her calculations look pretty sound.

After the recession early in this decade, legislators raced to catch up on all the spending they’d missed. They freed money for new spending by shifting it among accounts.

One switch took scholarship money out of the General Fund for use elsewhere. Then the scholarship programs were restored with principal from the state’s Escheats Fund, The Associated Press reported.

The Escheats Fund is a repository for money about which North Carolina residents have forgotten. Two common sources are insurance policies that were never cashed and utility deposits that were left behind.
The fund now contains $584 million, and the state constitution says its proceeds must be used to help needy students attend public colleges. But that balance will fall quickly, Cowell said recently, because the General Assembly has been using its principal.

During this fiscal year, the Escheats Fund is expected to provide $210 million in financial aid, some $60 million of that going toward the state’s new EARN Scholars initiative. Low-income students in that program get $4,000 annual grants that, along with other funding, often allow them to graduate from college debt free. It is very possible that every dime involved in the legislature’s money switch went to very worthwhile causes. EARN is a laudable program that, by helping low-income youngsters to attend college, will prove a long-term investment winner for North Carolina.

But sound long-term investments are not built upon spending plans that involve the figurative eating of one’s seed corn. That is what the state is doing here by taking principal from the Escheats Fund. If the fund drops as much as Cowell predicts, it will contain only $83 million in 2011. That will end an awful lot of financial aid.

House Speaker Joe Hackney reacted to Cowell’s warnings by telling the AP that the legislature has the entire legislative session to figure out what to do with scholarships. But “we’ll think of something” is not a reassuring answer when the numbers are so compelling.

That’s especially true when we see record numbers of families applying for financial aid, when the College Foundation of North Carolina reports that parents are withdrawing college savings for non-college reasons and when enrollment at the state’s public universities and community colleges are all rising rapidly.
When the General Assembly figures out what to do, one component should be the return to the policy of using only earnings, and not principal, from the Escheats Fund. To do otherwise is foolish.