Moody's downgrades College of DuPage
The College of Dupage is the latest casualty of the budget stalemate in the Illinois legislature as Moody's Investors Services downgraded its credit ratings recently, along with those of a dozen other colleges.
The state budget impasse has affected all of the institutions of higher learning. Without state funding, boards and administrators have scrambled to keep colleges and universities open. The uncertainty affects the colleges' ability to pay their credit obligations and day-to-day operating expenses.
“Despite the State of Illinois' (Baa2 negative) unprecedented year-long delay in approving a full higher education budget, the credit quality of rated Illinois community colleges remains strong due to their sound reserves and diverse revenue streams,” Moody’s said in its report. “However, the state's fiscal challenges have taken a toll, weakening colleges' financial positions and leaving them vulnerable to further state aid delays and potential increases in pension costs.”
Moody’s added that 23 of Illinois’ colleges “now carry a negative outlook.” When the state eventually does pass a budget, the downgrade will not be reversed.
“Our recent rating actions reflect colleges’ exposure to the fiscally challenged State of Illinois for operating support, program and scholarship grants and pension funding,” the report said. “This exposure will continue beyond passage of a state budget. We would consider reviewing the credits in a positive direction if the state’s credit quality were to improve.”
Last month, Moody’s placed the University of Illinois and six other state universities on review for downgrade after downgrading the state of Illinois from Baa1 to Baa2. All the schools were eventually downgraded.
By design, community colleges depend on state appropriations, tuition and property tax revenue to run operations, unlike state universities, which rely primarily on state appropriations and tuition. Despite the added stream of revenue, the budget has wreaked havoc on community colleges.
“The state has gone nearly a year without adopting a full budget, leaving community colleges with only a fraction of the state support they were expecting,” Moody’s said. “Most entered the fiscal year with healthy reserves providing some cushion against the revenue shortfalls. Based on our conversations with community college officials, we expect most will close fiscal 2016 with reduced, though still sound, cash levels. The weakest colleges will likely have narrow reserves but still retain sufficient liquidity.”
In response to decreased state funding, community college officials have reduced expenditures, and increased tuition rates and issuance of short- and long-term debt.
The College of DuPage opened in 1967. During the first year classes were held in a variety of leased locations and office trailers. The following year, the college acquired a site and in 1969, three interim buildings were built. The first permanent building opened in 1973.
Since its humble beginnings, the College of DuPage has grown and now has a far-reaching impact in the community. The original Community College District 502, made up of 10 school districts, has grown to include 51 communities and more than 1 million residents. The district's boundaries extend into Cook and Will counties, and encompass most of DuPage County.
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