CHICAGO — The ratings of Illinois' eight public universities and their collective $2.5 billion of debt face a potential downgrade over exposure to the state's fiscal woes, Moody's Investors Service warned.

Moody's placed the ratings of the eight on review for a downgrade. The action impacts Eastern Illinois University, Governors State University, Illinois State University, Northeastern Illinois University, Northern Illinois University, Southern Illinois University, Western Illinois University, and the flagship University of Illinois. The review is expected to be completed in 90 days.

The move follows Moody's downgrade of the state's general obligation bond rating to A3 from A2 and assignment of a negative outlook in a review that offered a scolding of the General Assembly's failure to solve the state's pension crisis during its regular session that ended late last month.

Placement of the schools' ratings on review "reflects the close financial, economic, and governmental/political linkages between the state of Illinois and its public universities," Moody's wrote in the report issued late Monday.

Moody's cross-sector rating methodology finds "a government-related institution's rating will weaken along with the sovereign or state entity given the high level of support from the state."

All of the schools depend heavily on chronically late state aid payments to fund operations, which strains their cash flow although the flagship school enjoys more diverse revenue streams and greater flexibility in managing with the state's liquidity woes, Moody's said. The reliance ranges from 32% to 46% of total operating revenues.

Other linkages include the universities' role as drivers of economic development in the state with degree programs often tailored to particular skills needed for the state's economy. Governance linkages include state oversight of governance and management at the state universities, such as appointment of board of trustee members.

"Our review of the Illinois public university ratings will focus on the linkages between the state and the public universities, and the expected impact of state financial and budget pressures on the universities' credit strength," Moody's said. "In addition, we will evaluate how robust the public university ratings are to further state funding cuts and payment delays.'

Operating results, liquidity options, cash flow and reserve levels, projected debt service coverage levels, and enrollment will be assessed as part of the review.

Eastern, Governors State, Northeastern, and Northern are currently rated A3. Illinois State, Southern, and Western are rated A2. The University of Illinois' general facilities revenue bonds are rated Aa2 and its south campus bonds are rated Aa3 while its health care system bonds are rated A1.

Moody's in its downgrade last week chastised state leaders for their failure to solve the pension funding crisis — underscored by $95 billion of unfunded liabilities in a system just 40% funded — and expressed skepticism that reforms could be achieved in the near-term given political differences. Its negative outlook reflects the looming strain on the state's balance sheet from the partial expiration of a temporary state income tax increase in fiscal 2015.

Moody's has undertaken similar reviews of the universities' ratings following past moves on the state's GO rating. In March, it downgraded four of the universities after an analysis sparked by a December revision of the state's outlook to negative. Governors, Northeastern, Northern, and Eastern were downgraded while the other four were confirmed but assigned a negative outlook. Moody's also had the ratings on watch earlier in 2012 but affirmed the ratings in April 2012.

A special session is set for next week on pension reform and Gov. Pat Quinn on Monday pitched the resurrection of a hybrid plan that marries rival packages pushed by House Speaker Michael Madigan, D-Chicago, and Senate President John Cullerton, D-Chicago. Similar legislation previously floated failed to muster sufficient legislative support.

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