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* 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.”
posted by Rich Miller
Wednesday, Mar 20, 13 @ 9:26 am
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http://centereducationpolicy.illinoisstate.edu/
You can compare state higher Ed Funding here. There is little or no interest in higher ed in Springfield and the constant attacks on state employees and their benefits is chasing talent away from Higher Ed
The Civic Club has the Phutocrat University of Chicago as a member….It would not have any interest in destroying its competition would it?
Comment by RNUG Fan Wednesday, Mar 20, 13 @ 9:41 am
The head-in-the-vise squeeze continues from the rating agencies.
I imagine they’re working down the list of rated Illinois debt that’s dependent in any way on state revenue. More to come, I’m sure.
The rating agencies have had the remorseful zealotry of the recently converted after their sinful bender with sub-prime mortgage-backed securities.
They whacked the U.S. and the UK — who’s not a sinner in their eyes these days?
Google “rating agency downgrades” and you’ll find plenty of munis. Do the same with “rating agency upgrades” and not so much — except Greece, lol.
Comment by wordslinger Wednesday, Mar 20, 13 @ 9:50 am
The only interest in higher ed in Springfield is micro-managing the public universities and bogging them down with more unfunded mandates.
Comment by Because I Say So... Wednesday, Mar 20, 13 @ 9:51 am
Typical Rutherford: state the obvious, try not to offend ANYONE and offer no solution. The only surprise is there was no request for a donation attached
Comment by Veritas Wednesday, Mar 20, 13 @ 10:06 am
hardy’s spin is a little out of date..the u of i hasnt taken furlough days or gone without payraises for years–uh, buit they have jacked tuition every year..this adminstrative operation could be cut and cut and cut again without any impact on students–except may be saving some unneeded tuition increases
Comment by anon Wednesday, Mar 20, 13 @ 10:06 am
The universities have bloated up on administrative positions and luxury upgrades to facilities for quite a while now, and outside of some of the hard science type disciplines, they aren’t turning out grads that are as good as they used to be. Perhaps this will be part of the inspiration to get better focused on the core items of their mission
Comment by titan Wednesday, Mar 20, 13 @ 11:07 am
I’m seeing an announcement by third parties that Moody’s is tightening standards on state and local government debt in April. Could not verify on Moody’s site but noted a seminar on evaluating public debt. Wonder if Illinois is being used as an example in the course.
Looks like the rating agencies in fact have taken out the long knives.
Moody’s and the other big rating houses are NRSROs or Nationally Recognized Statistical Rating Organizations. I believe they need federal government sponsorship to maintain their status. So, it seems we must view their recent activity in downgrading state and local government debt as involving some or perhaps a lot of federal government prodding.
Comment by Cook County Commoner Wednesday, Mar 20, 13 @ 11:14 am
If the national college debt becomes the next bursting economic bubble, like many economists are predicting, then higher education will be feeling more pain in the future.
Higher education administrative costs appear to be higher than other industry sectors.
There are also too many stories about University inefficiencies.
An example I heard first hand was from a plumber whom was given a work order to unclog a toilet. After arriving at the restroom with the problem, it was discovered the light bulb overhead was not working. The plumber placed a work order to have the light bulb replaced. He then waited three days (work hours) at the restroom for the electrician to show up before he could unclog the toilet.
The plumber bragged this story to me and others.
Tuition is escalating at a rate much higher than inflation and the consumers are waking up and beginning to take notice.
Comment by Endangered Moderate Species Wednesday, Mar 20, 13 @ 11:59 am
Uh, Dan…are you not a state leader…or are you taking a page from the Quinn play book and just throwing hand grenades?
Comment by Commonsense in Illinois Wednesday, Mar 20, 13 @ 12:27 pm
The Big U just wrapped up an $3 Billion fundraising campaign.
Every year the “beige book” of UI officials and salaries is a little fatter and has a few more interesting names.
No tears here, Mr. Hardy.
OTOH, it’s sad that EIU can’t get more than 5% of its approp by now.
Comment by Arthur Andersen Wednesday, Mar 20, 13 @ 1:23 pm
mjm sec the sec ruling didnt hurt ill mmmmmm
Comment by county chairman Wednesday, Mar 20, 13 @ 10:06 pm
–mjm sec the sec ruling didnt hurt ill mmmmmm–
County Chairman, well said.
As always, I look forward to your leadership on the issues facing our state,
What’e your county, anyway? Because, dude, you need a ride home, and I’ll pay for it. No judgement, been there.
Comment by wordslinger Wednesday, Mar 20, 13 @ 10:58 pm