Article archive / March 1, 2016
Originally published: . Volume 7, No. 3. Source pages: 1, 3.
Moody’s Set to Downgrade 8 Universities
Moody’s Investors Services has put eight Louisiana public universities on a list to be reviewed for downgrade, and impacting the organizations’ ability to borrow money and to sustain brand. In their February 22 news release, Moody’s also noted that the budget cuts currently being proposed will “limit the universities flexibility to adjust revenue or expenses, …”
Moody’s wrote, “The action reflects looming state funding cuts, including an unexpected contraction in state scholarship aid. Funding cuts implemented more than halfway through FY 2016 limit the universities' financial flexibility to adjust revenue or expenses, as spring term enrollment and student charges have been established. The uncertainty for FY 2017 state funding may adversely affect enrollment, as decisions on the state budget, including scholarship availability, will coincide student choices for fall 2016.”
“While the credit impact will be distinct for each university,” wrote Moody’s, “public universities in Louisiana operate in a very challenging environment.
“Louisiana's four-year universities have endured a severe 47% decline in operating appropriations between 2010 and 2014 compared to a median of 9% for our rated US public universities. To mitigate those cuts, universities without a solid brand in the region may have exhausted pricing power by increasing tuition by an average of 52% since FY 2010 compared to the US average of 13%.”
The eight universities and are:
Louisiana State University: A1 (Debt)
University of New Orleans Research and Technology: A2 (Debt)
University of Louisiana at Monroe: A2 (Issuer)
LSU Health Sciences Center in New Orleans: A3 (Debt)
Louisiana Tech University: A3 (Debt)
Southeastern Louisiana University: A3 (Debt)
McNeese State University: A3 (Debt)
Southern University System: Baa2 (Issuer) Baa3 (Debt)
Governor John Bel Ewards released a statement following Moody’s announcement.
Edwards said, ““Over the last eight years, Louisiana’s higher education institutions have faced the largest disinvestment in the country,” said Gov. Edwards. “Now, faced with the largest budget deficit in our state’s history, further cuts will be necessary if the legislature will not work with me to bring in additional revenue. We cannot continue to chip away at funding for higher education and expect them to have the ability to invest in our children’s education. This announcement should serve as a wakeup call for anyone who thinks we can simply cut our way out of this crisis, and I am hopeful this will bring folks to the table to work with me to avoid making these cuts that will have a negative long-term impact on higher education in this state.”
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