DALLAS — A long-running power struggle at the University of Texas that led to a legislative censure of UT Regent Wallace Hall has negative credit implications for the UT System, according to Moody's Investors Service.
"This unusual legislative action is the latest in a protracted and widely publicized governance struggle at this large and prominent U.S. public university system," Moody's wrote in a report Aug. 18. "The strained relationship among system board members, the system chancellor, and the long-serving president of its flagship university creates reputational challenges that are likely to hamper the system's ability to attract and retain high-quality executives and faculty and deter some donors."
In the aftermath of the public power struggle, UT system chancellor Francisco Cigarroa has resigned and UT president Bill Powers has negotiated a resignation effective in 2015.
Hall, an appointee of Gov. Rick Perry, has been accused of conducting a "witch hunt" against Powers by requesting scores of documents involving the operations of the university.
"The state-university governance environment is not likely to improve given the board member's defense of his actions and the fact that his term does not expire until February 2017," Moody's noted. "A new chancellor has been appointed, but the ability to attract the highest talent to the presidency of the University of Texas-Austin risks being thwarted by the current politically charged environment."
Although fundraising has held up thus far and UT-Austin is successfully nearing the completion of a $3 billion campaign, some donors will be deterred over the next several years by uncertainty surrounding the system's and university's ability to effectively implement key initiatives in an environment marked by governance debates and lack of a unified strategic direction, Moody's said.
The Texas House Committee on Transparency in State Agencies committee investigated Hall and reprimanded him Aug. 11 amid calls for Hall's impeachment.
Hall said "the committee's findings are based on distortions, untruths, and intentional misrepresentations."
The UT Regents operate nine academic campuses and six healthcare institutions with operating revenue of nearly $15 billion and cash and investments of $30 billion. Strong investment returns and Permanent University Fund earnings will further bolster the financial health of the system in the fiscal year ending 31 August 2014.
"These strengths, along with the system's strong centralized administration, robust reporting infrastructure, careful monitoring of business lines and strong fiscal stewardship continue to support its current Aaa rating," Moody's said. "However, prolonged infighting and its effect on personnel and philanthropy would slowly diminish the system's competitive edge."
