The University of Kansas in Lawrence is the state’s flagship university.

DALLAS - Moody's Investors Service lowered its rating on the University of Kansas to Aa2 from Aa1 Wednesday in the wake of its downgrade of the state government.

The agency assigned the same Aa2 rating to Kansas State University's upcoming $127 million bond sale, while downgrading Emporia State University to A2 from A1, and affirming Wichita State University at Aa3 and Washburn University at A1.

The downgrade on $397 million of outstanding debt reflects KU's "thin operating performance and limited liquidity as it confronts a period of additional revenue pressures related to the state's budgetary challenges, as well as declining enrollment," wrote Moody's analysts Michael Osborn and Karen Kedem.

Moody's downgraded Kansas to Aa2 from Aa1 on April 30, citing the impact of cutting taxes without offsetting spending cuts in a weak economic recovery. Republican Gov. Sam Brownback, who promoted the tax cuts that have reduced state revenues, is running for re-election this year. Brownback blamed the state's problems on President Obama.

KU in Lawrence, the state's flagship university, has faced years of declining enrollment while providing guaranteed tuition pricing and state funding below pre-recession levels, analysts said.

Kansas State University in Manhattan has seen growing enrollment, a factor in Moody's decision to affirm its Aa2 rating with a stable outlook.

"The rating also incorporates constrained state appropriations given state budgetary challenges and additional capital needs to support enrollment growth and remain competitive," Osborn noted.

KSU is preparing to issue about $127 million of bonds for an engineering building on the main campus, a new dining center and residence hall, and advance refund a portion of Housing System Revenue Bonds Series 2005A and Series 2007A.

While pointing to the same budget pressures on Wichita State University, Moody's affirmed WSU's Aa3 rating with a stable outlook. The rating affects $84.2 million of outstanding revenue bonds.

Emporia State University remains on Moody's watch for a further downgrade after the university's credit rating fell to A2 from A1 May 7.

In addition to the state budget pressures, Osborn and Kedem cited "deepening operating deficits resulting in insufficient cash flow to cover annual debt service and the rapid erosion of unrestricted liquidity."

Based in the eastern Kansas town of Emporia, Emporia State enrolls about 6,000 students and has about $13 million of outstanding debt.

Washburn University, a small public university with about 7,400 students in Topeka, fared better in Moody's ratings actions, keeping its A1 credit and stable outlook. The university has about $10.6 million of outstanding debt.

Washburn plans to build new student housing in 2015 using a combination of debt, gifts and reserves. The amount of debt for the project hasn't been determined, according to Moody's.

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