5

             A REPORT ON THE UNIVERSITY'S FINANCES

                       H. L. Donovan, President


      More than a quarter of a century ago the president of a Kentucky state
college overspent the appropriation made for his institution and created a
deficit of some thousands of dollars. He requested the General Assembly
to bail his institution out of this financial dilemma. Very reluctantly the
state administration and the legislature made an appropriation covering the
deficit and at the same time enacted a law which stated in substance that
in the future if any college president permitted his institution to incur a def-
icit, he would be subject to a fine and a prison sentence.

      Since I prefer to reside in Lexington rather than at La Grange, I have
during my twenty-six years as a college president scrupulously obeyed this
law.

      During my thirteen years as President of Eastern Kentucky State Teach-
ers College and during the thirteen years I have been President of the Univer-
sity of Kentucky; these institutions have been operated in such a manner as
to have always a surplus at the end of every year. In order to administer
these institutions and come out at the end of the year with a small surplus it
is often necessary to delay needed repairs to buildings, eliminate the purchase
of books, scientific equipment and other supplies vital to instruction. In-
creases in salaries so sorely needed by faculty personnel have been withheld
to a later date. Good business practices have always been followed in the
institutions for which I have been responsible regardless of what sacrifices
were necessary to keep them from falling into debt.

      On Sunday, January 31, my good friend, Mr. Hugh Morris, Frankfort
correspondent for the Courier-Journal, published an article in which he
stated that "During the last decade, the University of Kentucky has wound
up each fiscal year with substantial surpluses and unencumbered balances
in its three principal funds. e He then proceeded to analyze these funds in
his article in which he leaves the reader to infer that "the University hasll' t
been spending the money it does have", and, therefore, doesn' t need any
increase in its appropriation at least until all of its unrestricted, restricted
and plant funds are spent.

     On Thursday before this article was published the following Sunday, Mr.
Morris called me on the telephone and discussed with me briefly the substance
of the article he was preparing and asked me a few questions about these funds.
I begged him to come to Lexington and sit down with Comptroller Frank D.
Peterson and me and permit us to explain each item about which he had some
question.  He indicated that he would attempt to get permission from the
Courier-Journal to come to Lexington, and that he would call me later and
make a definite appointment if his "boss" would give him permission to do so.
Mr. Morris did not call me again,

     I desire to report to the Board the things I would have told Mr. Morris
if he had come to discuss this subject with me.

     The total assets of the University of Kentucky as of June 30, 1953,
were $38, 844, 737. 81. Its total budget will range from approximately $7, 000 000
to $10, 000, 000 annually depending somewhat on the amount of construction it