MSU's $500M payout could mean tuition hike, using taxpayer money

Now 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, MSU spokeswoman Emily Guerrant told the Free Press.

Here are some ways it could go:

• Hike tuition. MSU Interim President John Engler has been saying for a couple of months that tuition dollars will likely 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. MSU 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. MSU 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 MSU 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 back over time. However ratings agencies have lowered their outlook and rating for MSU, meaning the school will pay higher interest rates.
• Go after insurance. MSU has some insurance to cover the costs. However, Penn State had to sue it insurance carriers to get some money after the Jerry Sandusky scandal.

Also read:

Nassar survivors, others react to MSU settlement

How will MSU pay for Nassar victim settlements?

Engler on his MSU job: 'I'm ready to go now'

Contact David Jesse: 313-222-8851 or djesse@freepress.com. Follow him on Twitter: @reporterdavidj