BRADENTON, Fla. — Moody's Investors Service has warned that Louisiana's growing budget problems will pressure finances at the state's public universities.
As the state tries to close its widening budget gap, Louisiana public universities will face additional reductions in state appropriations, Moody's analyst Faiza Mawjee said in a special report Feb. 19.
"After five years of the deepest funding cuts to public higher education in the nation and significant expense reductions, these universities are ill-equipped to face additional credit stress," Mawjee said.
Louisiana public university credit quality is lower than the median A1 nationally, reflecting historically weak state funding, anemic operating performance, and limited liquidity, Moody's said.
Of the state's 17 universities offering four-year programs, Moody's rates eight institutions and all have single-A ratings. The state's flagship institution, Louisiana State University, has the highest rating at A1, with a positive outlook.
"The timing and magnitude of state appropriation reductions, ability of universities to quickly align expenses with revenue, and degree of financial cushion to absorb operating volatility will factor into our assessment of ratings and outlooks for individual universities," Mawjee said.
Gov. Bobby Jindal's administration is poised to impose a second round of budget cuts in the current fiscal year because of lower revenues due to oil prices. The state faces a projected deficit of $1.6 billion in fiscal 2016.
On Feb. 13, Moody's and Standard & Poor's turned the state's outlook negative because of ongoing budget problems. Moody's affirmed Louisiana's general obligation bond ratings at Aa2, and S&P affirmed its AA-minus ratings.
Fitch Ratings on Feb. 11 affirmed its AA rating on the state's GOs, and maintained a stable outlook.
The rating agencies assigned their GO ratings to the state's upcoming $250 million general obligation refunding.
State Treasurer John Kennedy said Feb. 19 that the deal is "out of the money, so we're just watching the market" to schedule its pricing.
