CHICAGO, April 18 Illinois' record-breaking
stretch without a complete budget could push the credit ratings
of two more state universities into the junk level.
Moody's Investors Service on Monday said it placed seven
state universities under review for potential downgrades
affecting $2.2 billion of debt because Illinois has failed to
provide them with full operating funding.
Four universities, Northeastern Illinois, Northern Illinois,
Governors State, and Eastern Illinois, already have some or all
of their debt rated junk. Multi-notch downgrades would push
ratings for Illinois State and Southern Illinois universities
"We will review contingency plans and other expense actions
initiated to cope with the shortfall in state operating
appropriations. Also included in the reviews are budgeted
(fiscal) 2018 operations and assumptions," the credit rating
agency said in a statement.
Illinois is limping towards the June 30 end of a
second-straight fiscal year without a complete budget due to a
stalemate between its Republican governor and Democrats who
control the legislature.
Moody's said the potential exists for multi-notch downgrades
depending on a university's liquidity and ongoing ability to
adjust to the lack of state funding.
The state's biggest system, the University of Illinois, has
so far escaped a downgrade of its Aa3 Moody's rating since the
budget impasse began in 2015.
Moody's last review resulted in downgrades for six of the
universities in June 2016.
Only about four public universities in three other states
and Puerto Rico are currently rated junk by Moody's.
Ahead of its review, Moody's on Monday cut Northeastern
Illinois' certificates of participation rating two notches
deeper into junk, to B1 from Ba2, citing the school's "continued
rapid liquidity deterioration due to weakened cash flow caused
in part by a protracted state budget impasse."
Northeastern's Interim President Richard Helldobler said he
was not surprised by the move.
"The real tragedy here is that after a long history of
fiscal responsibility and sound planning, the financial
reputations of Northeastern Illinois University and other
Illinois public universities are at stake, and this is really
reflection of Springfield's inaction regarding the state's
budget," he said in a statement.
The Illinois House earlier this month passed $817 million in
spending to provide a lifeline to higher education and other
state programs. But the measure's fate is unclear
in the Senate, which returns from a spring break next week. A
spokesman for Senate President John Cullerton said on Tuesday
the bill remains under review.
(Reporting By Karen Pierog; Editing by Cynthia Osterman)