* Moody’s lowered credit ratings by one notch yesterday for several state universities, including NIU, Governors State, Eastern and Northeastern. The ratings agency also revised its outlook to “Negative” for for ISU, WIU and SIU.
The ratings and outlooks were lowered because of the state’s poor budget health. Reuters…
The credit rating agency also warned that further deterioration of Illinois’ general obligation rating, future higher education funding cuts and payment delays could also pull the universities’ ratings down. […]
Moody’s said a review it launched in December was due to the universities’ significant dependence - ranging from 31 percent to 46 percent - on Illinois for operating revenue and continued delays in the payment of those funds.
The University of Illinois, the biggest state system, received a negative outlook on its long-term ratings of Aa2, Aa3 and A1, affecting $1.56 billion of debt. The system has had to resort to tuition hikes, unpaid days off for workers and salary freezes to cope with the state’s financial problems, according to Tom Hardy, executive director of university relations. […]
Eastern Illinois University, which Moody’s downgraded to A3 from A2, has received only 20 percent of its $44 million annual appropriation and could have a $2.2 million funding cut in fiscal 2014, said Paul McCann, the university’s treasurer and business services director.
Just the other day, Moody’s whacked some Chicago debt ratings because of the precarious state budget.
* React from Treasurer Dan Rutherford…
“As state leaders continue to drag their feet on meaningful and constitutional pension reform, Moody’s Investors Service has more terrible news for Illinois. Moody’s has downgraded the ratings of Governors State University, Northeastern Illinois University, Northern Illinois University and Eastern Illinois University. These are universities that rely heavily on state funds for operations. This comes after Moody’s placed the long-term ratings of all Illinois public universities under review for possible downgrade on December 18, 2012, due to ‘significant dependence on the state for operating funds and fringe benefits, as well as extensive appropriation payment delays in a challenging budget environment that continues to pressure Illinois’ public universities cash flow and liquidity.’ Moody’s also said in December 2012 that the state’s credit rating can go up with a sustainable pension reform plan, and three months later, there still has not been any significant action.”
“This means it will cost these universities more to borrow money. Therefore, I fear these downgrades will hinder the universities from borrowing money to make essential improvements to their institutions. I do not think it is fair to students, parents and teachers to put residence hall and educational building upgrades in limbo because state leaders cannot pass solid pension reform measures. If universities do want to make these upgrades, will the increased cost be passed onto parents and students through higher fees for tuition, room and board? Illinois needs to have strong and competitive universities to offer a better future for our children.”