Moody's Investors Service has placed six Illinois public universities on review for downgrade, impacting a total of approximately $2.2 billion of public university debt. According to a release issued by the company, the review is prompted by "failure of the State of Illinois to enact a budget providing full operating funding to the universities for the current fiscal year 2017 and resulting operational and liquidity strains on the universities."
The reviews will focus on each university's exposure to state budget pressure and the use of each university's own liquidity to cover the shortfall. The release says Moody's will review contingency plans and other expense actions initiated to cope with the shortfall.
Ted Hampton, a senior credit officer with Moody's, says the lack of a budget is making a "bad situation even worse."
"The immediate pressure from the impasse is a situation that leaders of the state could choose to address and could quickly rectify,” he said, “but their failure to take that step up until now is having real consequences. Paralysis in the weeks ahead could make Illinois even more of an outlier among states than it already is."
Moody's says it will review credit ratings for Northern Illinois University, the University of Illinois, Illinois State University, Eastern Illinois University, Southern Illinois University, and Governors State University.
This week, the company downgraded Northeastern Illinois University citing a "weakened cash flow" caused in part by a protracted state budget impasse.
- You can hear more about the credit rating process with Ted Hampton of Moody's on this week's Friday Forum.
