CHICAGO – Seven of Illinois' public universities face a review for downgrade from Moody's Investors Service.
The move came Friday, two days after Moody's dropped the state government's general obligation and sales tax backed ratings one notch to Baa2 from Baa1 citing the prolonged state budget impasse.
The seven universities are the flagship University of Illinois which carries ratings of between A2 and Aa3 depending on the credit backing; Illinois State University, which is rated A3, Southern Illinois University, rated Baa1, Northern Illinois University, rated Baa2, Governors State University, rated Baa3, Northeastern Illinois University, rated Baa3, and Eastern Illinois University, which carries ratings of between Ba3 and Ba1.
Moody's, which has previously downgraded the universities over their fiscal challenges due to the state, rates approximately $2.3 billion of public university debt.
"The reviews collectively will focus on the exposure of each university to the continuing state budget challenges and its independent ability to adjust to either delayed receipt of state funding or reduced operating appropriations," Moody's said.
The assessment will cover projected liquidity and operating performance for each university for the fiscal year ending June 30, budgeted fiscal year 2017 operations and assumptions, and contingency plans to cope with lower state operating appropriations.
"We will also assess each university's near-term debt service commitments against pledged revenues and related reserves, including factoring in the impact of any enrollment declines on auxiliary revenues," Moody's said.
The reviews for the three public universities rated higher than the state – the University of Illinois, Illinois State University and Southern Illinois University -- will include a focus on the financial and governmental linkages with the state and the relative positioning of these universities.
The analysis for the four rated at or below the state's rating will include a review of actions undertaken to preserve liquidity while recruiting and educating students.
All nine of the state's public universities have warned of potential layoffs with at least one warning it could have to close due to the state budget impasse that left them starved for their state aid. Lawmakers earlier this spring approved and Gov. Bruce Rauner signed legislation freeing up $600 million. The package provided only about 30% of the schools' annual support, although for Chicago State University, which is not rated by Moody's, it amounted to more than 50%.
Also on Friday, Rauner vetoed legislation that would have freed up $3.9 billion for public higher education institutions and social services, calling on lawmakers to adopt fiscal 2016 and 2017 balanced budgets.
"Senate Bill 2046 is an empty promise. The bill purports to appropriate $3.89 billion, including more than $3 billion in general funds that the state does not have, for higher education and social service providers, but provides no source of funding. Students, universities, community colleges, social service agencies, and our most vulnerable residents need real solutions and real funding, which Senate Bill 2046 does not provide," Rauner said in his veto message.
The measure passed the Senate with a veto-proof majority but fell a few votes shy of that threshold in the House.
