CHICAGO – The ratings of 19 Illinois community colleges and their $855 million of debt are under threat of a downgrade as Gov. Bruce Rauner's budget feud the General Assembly's Democratic majority drags on.
Moody's Investor's Service on Thursday put the ratings of 19 public, two-year schools on review for a possible downgrade.
The warning came on the same day the Senate, in a partisan vote, passed legislation freeing up $3.8 billion in aid for higher education institutions. Rauner has said he would veto the bill.
The measure is slightly different from a package previously approved by the House, so that chamber must concur on the changes. Lawmakers aren't scheduled to return to the capital until early next month. Rauner vetoed a $700 million bill that would have funded community colleges. The House failed to override that veto earlier this month.
The Senate's defiance of Rauner's veto threat shows there's no signs of easing tensions between the GOP governor and the General Assembly's Democratic majority.
While 90% of state spending goes on under continuing appropriations and court orders, no appropriation is in place to provide the state's community colleges and four-year universities with their scheduled aid. The last aid and grant payments were received in September for the prior fiscal year, which ended June 30. Many of the state's four year schools have announced layoffs and their accreditation is at risk.
"The review was prompted by the State of Illinois' continued budget stalemate and its effect on community college districts' revenues," Moody's said "While most community college districts have sufficient reserves and cash flow options to manage through the year, the continued delay in the adoption of the state budget increasingly poses risks to colleges' financial position or debt profile. Furthermore, the state's ongoing financial challenges increase the risk of future state aid cuts or delays."
Moody's rates a total of 27 community colleges in Illinois and has already taken action on eight since last November. The 19 districts under review account for the remainder of the rating agency's portfolio.
"The rating reviews will focus on an analysis of each issuer's dependence on state appropriations and the impact of the budget impasse on each district's liquidity, financial position and debt profile," Moody's said. The reviews are expected to be completed within 60 days.
The colleges under review include four Aaa-rated schools: Elgin Community College District 509; Oakton Community College District 535; Lake County Community College District 532; and Harper Community College District 512.
The four Aa1-rated schools on review include Joliet Community College District 525; McHenry Community College District 528; Triton Community College District 504; and Waubonsee Community College District 516.
Heartland Community College District 540 carries a general obligation unlimited tax rating of Aa2 and limited tax rating of Aa3.
Four schools are rated Aa2, including: Illinois Central Community College District 514; Parkland Community College District 505; Rock Valley Community College District 511; and Southwestern Community College District 522.
The six Aa3 rated schools on review include: Black Hawk Community College District 503; Carl Sandburg Community College District 518; John Wood Community College District 539; Lakeland Community College District 517; Rend Lake Community College District 521; and Richland Community College District 537.
The $3.8 billion bill approved by Democratic senators Thursday provides funding for the state's public colleges, student grants, human services providers, and rail service. About $3.1 billion would come from the general fund and the remainder from non-general fund accounts.
Rauner's budget director Tim Nuding issued a commentary opposing the package.
"There are no corresponding proposals to reform government programs, to reduce other spending or to free up resources to fund this bill within existing resources," he said.
The administration backs its own bill that would free up funding from colleges and student grants, but Democrats oppose a provision that would give Rauner sweeping powers to withhold and redirect appropriated funds.
Nuding said the state comptroller's office is currently holding $7.6 billion in unpaid bills. The office reiterated its warning this week that the backlog could hit, or even top, $10 billion, a record, by the close of the fiscal year June 30.
After the vote, Rauner called on lawmakers to resume their session.
"Rather than adding billions to our debt and risk further delaying payments to social service providers, the General Assembly needs to stay in Springfield and negotiate a balanced budget alongside structural reforms that create jobs and grow our economy," his spokeswoman, Catherine Kelly, said in a statement.
The eight college ratings previously acted on by Moody’s included three rating affirmations and five downgrades, although not all of the downgrades were due to pressures from the lack of state aid.
