CHICAGO - Standard & Poor's hit two of Illinois' public universities with negative credit action Monday.

Standard & Poor's downgraded Western Illinois University to A-minus from A and assigned a negative outlook. It also revised its outlook on Governors State University's A-minus rating to negative.

Analysts attributed the action on Western's credit to enrollment declines and weakened operations.

"Continued enrollment declines have accelerated in the past two years, which are creating net tuition revenue and housing occupancy pressures, and operating performance in fiscal 2013 -- based on unaudited results -- was substantially weaker and is projected to be similar for fiscal 2014, compared with more robust financial operations in prior years," said analyst Shivani Singh.

Those factors, coupled with WIU's balance sheet characteristics which are only just adequate for the rating category, put WIU's enterprise and financial profile more in line with other A-minus public universities in Illinois, Singh said.

Western's negative outlook is based on the agency's higher education criteria which states that without overwhelming demand or financial strength, a state university's creditworthiness usually does not exceed or even equal that of its sponsor state. That's because state universities typically are reliant on the state's annual budget which is at the discretion of the legislature.

"In our opinion, given WIU's substantial budgetary reliance on state appropriations that accounted for 43.6% of fiscal 2013 operating revenues, lack of broad revenue diversity, a demand profile that is not highly selective, and relatively small endowment size, we have determined WIU's outlook should be revised to negative," Singh wrote. The state is rated A-minus with a developing outlook.

On Monday, the agency affirmed Governors State University Board of Trustees' A-minus rating but revised its outlook to negative to reflect the state's credit position.

"Given GSU's substantial budgetary reliance on state appropriations that accounted for 49.3% of fiscal 2013 operating revenues, lack of broad revenue diversity, a demand profile that is not highly selective, and very small endowment size, we have determined GSU's creditworthiness does not exceed that of the state and have therefore revised our outlook to negative," said Singh.

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.