William Paterson University in Wayne, N.J. had its credit rating cut one notch with a negative outlook by Moody's Investors Service, which cited the regional public college's weakened student demand and likelihood of decreased state support.
Moody's downgraded WPU to A2 late on June 12 affecting $165 million issued through the New Jersey Educational Facilities Authority.
"The downgrade to A2 and revision of the outlook to negative reflects narrowing of the university's financial operations over the last few years," said Moody's analyst Pranav Sharma in the June 12 report. "Revenue growth potential is limited, with weakening student demand and a highly price sensitive student population."
Sharma said WPU's challenges attracting students is coupled with the "heightened likelihood" that support from New Jersey will be lessened due to the state struggling with its finances. New Jersey was cut one notch by Moody's on April 16 to A2 with a negative outlook due largely to a budget imbalance.
"With somewhat more limited independent revenue raising capabilities in a competitive environment, the university will be challenged to adjust to what will be a multi-year constrained funding environment," Sharma said. "The university relies on the State of New Jersey for approximately a third of its operating budget, inclusive of funding for fringe benefits."
WPU has more than 8,600 full-time equivalent students and generates $213 million of operating revenue, according to Moody's.
WPU Provost Warren Sandmann emphasized in response to the Moody's downgrade that the university has strong financial reserves.
"Moody's expressed concern about continuing reductions in state appropriations as well as concern about enrollment projections, especially given the decline in high school graduates," said Sandmann, who is also senior vice president for academic affairs. "As noted by Moody's, we have been adjusting our strategic plan for enrollment due to the changing demographics and continue to implement strategies to operate as efficiently as possible."
