Moody’s Investors Service this week downgraded the credit ratings of seven public Illinois universities in the wake of the state’s ongoing budget battle.
Governors State University, Northeastern Illinois and Eastern Illinois universities each was downgraded to some degree of junk status. Northern Illinois University also had the majority of its bonds made junk status; and Southern Illinois University and Illinois State each had their credit rating dropped to the minimal rank for investment grade.
Although it still has a stellar credit rating overall, the University of Illinois had some revenue bonds downgraded as well.
The state’s budget fight has hurt public university cash flow, which is at the core of Moody’s actions.
David Merriman, a professor at the Institute of Government and Public Affairs, said that a lower credit rating makes it more expensive for a college to borrow funds, which could make that school less willing to do capital improvements and infrastructure maintenance.
“That has the add-on effect that it may reduce their ability to compete for students, which also drives down tuition revenue,” he said.
Merriman said he believes colleges in Illinois are trying to figure out their financial pictures and how to operate with uncertain or less state support.
“What they’ve got to do is convince credit-rating agencies that even if the state doesn’t come up with funds, they’ll be able to operate independently, that they have streams of revenue,” he said.
–Illinois News Network