University of Kentucky administrators think the institution makes enough money through tuition, research grants, private giving, and other non-state sources of revenue to fund about $200 million worth of construction over the next few years.

In most states, that would be a pretty natural conclusion. But unfortunately for the university, the state’s lawmakers don’t want the debt from those projects on the state's books.

Even though the university would fund its new debt through non-state revenues, lawmakers in the Kentucky state legislature, which wrapped up its budget process earlier this month, denied the state’s universities the authority to issue any bonds for the next two years, fearing that more debt by state institutions could hurt the state’s credit ratings.

Now the state’s universities will likely not be able to finance projects through debt until the legislature reconvenes in two years, and there is no guarantee that it lawmakers will approve bonds then. For the University of Kentucky, that means the university will put off several projects, and the already old infrastructure will continue to age, which administrators say could hinder student and faculty recruitment. The university could also lose out on historically low interest rates, which could have saved the university millions of dollars in the long run.

As states pull back higher education appropriations, public colleges and universities are increasingly financing construction through alternative means...