CHICAGO — The fiscal strain in Illinois that has led to record long bill payment delays this week prompted Moody’s Investors Service to downgrade five of eight state-supported universities that are owed $735 million by the state.

The move comes as the universities held a news conference Wednesday and released a letter sent last week asking Gov. Pat Quinn and Comptroller Dan Hynes to establish a payment schedule on the $735 million in late payments. “We are all surprised that things could get as perilous as they are,” said University of Illinois interim president Stan Ikenberry.

State officials said they are exploring options with the schools to meet their commitment as quickly as possible. “We continue to exhaust every possible avenue to improve our cash flow situation, including exploring responsible borrowing approaches, help from the federal government, increases in revenue and reductions in spending,” a state budget office statement read.

Concerned over the long-term stability of state funding and the payments delays, Moody’s placed the long-term ratings of the eight public universities on watch list for possible downgrades in December after its lowering of the state’s general obligation rating to A2 with a negative outlook.

Moody’s acted Wednesday on the watch list credits.

Analysts downgraded to A3 from A2 Illinois State University’s $130 million of debt and kept the credit on negative watch to reflect analyst concerns over the impact of the payment delays and the long-term stability of state funding. The school, which is based in Normal and serves 18,387 students, has received just 30% of its annual state appropriation.

Moody’s also downgraded Western Illinois University’s $50 million of debt one notch to A3 and left it on negative watch. The school — located in Macomb with 11,100 students — has received just 43% of its annual appropriation.

Moody’s also downgraded Southern Illinois University’s $327 million of debt by two notches to A3 and left it on negative watch. The school, which has 28,652 students and is located in Carbondale, has received only 28% of its appropriated payments.

Moody’s also downgraded Eastern Illinois University one notch to A3, affecting $142.2 million of debt, and left the credit on negative watch. The school — located in Charleston — has received just 34% of its appropriated payment. It serves 10,557 students.

Moody’s downgraded Northern Illinois University in Dekalb one notch to A3 and left it on watch, affecting $105 million of debt.

The state’s flagship University of Illinois is weathering the payment delays better. Moody’s affirmed the school’s Aa3 rating on its auxiliary facilities revenue bonds and certificates of participation and A1 for its south campus bonds. Moody’s assigned a negative outlook to the credit. The university’s health system bonds, that are rated A2, remain stable. The action impacts a total of $1.6 billion of debt.

“The removal from watch list reflects Moody’s belief that the university can successfully manage delays in state funding through its careful management of liquidity, its large, diverse revenue base with significant cash flow … and expense controls including faculty and staff furloughs,” analysts wrote. The school has received just $132 million, or 18% of its budgeted appropriation for fiscal 2009.

Moody’s affirmed Governor’s State University’s A3 rating but left it on negative watch. The school — which serves 4,154 students and is located in University Park a far south suburb of Chicago — has $28.4 million of debt and has received 49% of its appropriation.

Moody’s affirmed Northeastern Illinois University’s A3 rating on $32 million of debt but left it on negative watch. The Chicago school, which serves 7,150 students, has received just 39% of its appropriated payments.

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