BRADENTON, Fla. - Five Louisiana universities avoided rating downgrades by Standard & Poor's because the state bolstered their 2016 budgets instead of enacting new cuts.

S&P on July 29 removed its CreditWatch with negative implications from bonds issued on behalf of the institutions citing action by lawmakers during this year's legislative session.

The affected institutions are Nicholls State University, the University of Louisiana Lafayette, the University of New Orleans Research Foundation, the Louisiana State University Bogalusa Community Medical Center Project, and Delgado Community College Foundation.

The universities were placed on CreditWatch April 28 because of deep state budget cuts in prior years, and proposed reductions for higher education in 2016.

"These latter budget cuts did not occur, so we are removing the bonds from CreditWatch," said analyst Debra Boyd. "However, we believe the impact of the historic cuts could still present rating pressure for each university, which will need to be evaluated during their next full review."

House Bill 152 was signed into law on July 1 and authorizes state college systems to raise fees, within certain limits. At least 5% of the increase must be used for financial assistance to students.

"In our view, the passage of this bill provides Louisiana universities additional revenue generating flexibility through the law's expiration of June 30, 2017," Boyd said.

According to a May study by the Center on Budget Priorities and Policies, Louisiana slashed state funding for higher education by 42% between 2008 and 2015 - the second-largest cut behind Arizona.

Universities - including the state's flagship Louisiana State University - prepared for major budget cuts amid a $1.6 billion deficit that lawmakers closed in the adopted fiscal 2016 budget.

The spending plan provides higher education institutions with a 3.8% increase in funding over last year, according to administration commissioner Kristy Nichols.

"It has always been our goal to keep higher education fully funded," Nichols said. "We outlined a path to protect higher education and with the help of the Legislature we delivered on that promise."

In addition to raising certain fees, universities also have a year to increase tuition to generate new revenue.

"We will continue to monitor each university's respective response to the budget and its impact on fiscal 2016 enrollment and finances," S&P said.

 

 

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.