The student news site of Southern Illinois University

Daily Egyptian

University’s credit rating drops to junk

By Bill Lukitsch

A national credit rating agency has reduced the university’s credit to junk status and attributes the decline to the ongoing Illinois budget impasse.

Standard & Poor’s on Thursday dropped SIU’s rating three notches — from “BBB” to “BB” — with a negative outlook on the university system’s credit based on the belief that the state will not pass a budget to fund higher education before the end of the fiscal year.  The Illinois Legislature has partially funded public higher education with stop-gap money since 2015.

Eastern Illinois University and Western Illinois University were also lowered to the junk bond level. Northeastern Illinois University saw the worst as its already-junk-bond status fell to the even lower “B” rating. University of Illinois saw a dip as well, but its bonds remain investment grade.

Advertisement

The news comes after Moody’s Investor’s Service on Monday placed SIU and five other state universities on review to be downgraded.

S&P’s said the credit drop had to do with the Illinois budget impasse that has left public universities in the state without full funding for nearly two years. It pointed to the SIU system’s dependence on state appropriations, which amounted to 34 percent of its revenue.

All the universities were given a negative outlook from S&P’s, meaning the credit agency thinks the financial conditions are apt to worsen. The agency also referenced the university’s recent enrollment decline and operating deficit as factors in the downgrade.

Lower bond ratings can make borrowing costlier for the university and signal higher risk to investors. In 2016, the SIU Board of Trustees adopted a new housing plan that relies on investments from the private sector to would replace the Towers on East Campus.

In 2016, two stopgap measures passed through the Legislature totaled $83 million in support for the university; those funds, for the most part, were used to pay the bills from the 2016 fiscal year. But the budget stalemate between Republican Gov. Bruce Rauner and Democrats who control the state Legislature, including House Speaker Michael Madigan, has left Illinois universities with no money in 2017. That has put public universities in the position of stretching a year’s worth of appropriations over nearly two years.

SIU President Randy Dunn in March announced the Carbondale campus would cut $30 million from its budget and suggested the university declare a state of financial emergency. The president also said the university could essentially borrow money on paper from Southern Illinois University Edwardsville to keep from going into deficit spending.

That measure is expected to be addressed during a special meeting of the SIU Board of Trustees in May.

Campus editor Bill Lukitsch can be reached at 618-536-3326 or at editor@dailyegyptian.com.

To stay up to date with all your SIU news, follow the Daily Egyptian on Facebook and Twitter.

Advertisement

Hang on for a minute...we're trying to find some more stories you might like.


Leave a Comment

If you want a picture to show with your comment, go get a gravatar.




The student news site of Southern Illinois University