- Eastern Illinois University cut below investment grade
- Northern, Northeastern Illinois dropped to just above junk
One Illinois public university had its credit ratings lowered to junk, and two others had their debt downgraded by Moody’s Investors Service because the state’s record budget impasse has wrecked havoc on college finances.
The credit-rating company lowered Eastern Illinois University’s auxiliary facilities system revenue bonds by one step to Ba1, and the certificates of participation by three steps to Ba3. That’s one and three levels below investment grade respectively. Northern Illinois University was also lowered one grade to Baa2, while Northeastern Illinois University was cut to Baa3.
“The downgrade is driven by EIU’s increasing vulnerability to the ongoing state budget impasse given its thin liquidity, declining enrollment, and high reliance on state funding,” Moody’s said in a statement on Wednesday. “Liquid reserves are expected to be exhausted by the end of the fiscal year.”
Illinois is in its eighth month without a spending plan for the year that started July 1, and public universities haven’t received any funding this fiscal year, weakening the finances of the higher education institutions in the state.
Moody’s kept its Aa3 rating, the fourth-highest investment grade, on the University of Illinois’s revenue bonds. It has a negative outlook on the school system, and the other seven Illinois universities it rates, signaling a downgrade is possible.
“The affirmation of the ratings reflects University of Illinois’ very good liquidity that provides it with significant flexibility to manage the lack of direct state funding as the state budget impasse continues,” Moody’s said in a separate statement.
Moody’s kept its rating of A3, four steps above junk, unchanged on Illinois State, affirmed its Baa1 rating on Southern, and kept Governor’s State and Western unchanged at Baa3, according to David Jacobson, a spokesman for Moody’s.