NEIU Among Six State Schools to Receive Credit Downgrade

Moody’s Investor Service has downgraded NEIU’s credit rating for the second time in two years . The downgrade comes from an Oct. 26 report released by the bonds rating agency, which measures risk when investing in a business or government institution. The school now carries a rating of Baa2, downgraded from Baa1.

According a Moody’s report, NEIU’s downgrade comes from “significant exposure to the State of Illinois (Baa1 negative), which contributes a large portion of its operating revenue.”

The report also cited declining enrollment as one of the reasons for the downgrade.

Illinois has not had an operating budge since July 1, putting institutions that rely on state appropriations in a financial tight spot. The lack of a budget comes from a stalemate between Gov. Bruce Rauner and the Democrat controlled state assembly. Among other proposed cuts, Rauner sought to reduce state funds for public universities by 31.5 percent.

Several credit agencies, including Moody’s and Fitch Ratings, have downgraded the state’s rating. According to multiple news sources, Illinois has the lowest rating of any state.

Moody’s outlook on NEIU is marked as negative, with “expectations that future state budget pressure or additional material declines to enrollment could lead to further deterioration of the university’s finances and liquidity.”

The report also explains what factors could contribute to an upgrade in the rating. These include “reduced reliance on state support, combined with stronger cash flow,” as well as increased student enrollment.

Though the contents of the downgrade report may be news to investors, university administrators and trustees have openly talked about the school’s monetary issues.

An Oct. 15 meeting of the school’s finance committee was largely about the diminishing funding from the state.

The committee is considering recommending increasing tuition anywhere from 6 to 10 percent, though it could only be applied to new students, graduate students and students enrolled at the university for more than six years. However, a majority of board members and administrators acknowledged that decreasing NEIU’s reliance on state funding and finding other more stable forms of income would be a more viable long-term plan.

Five other schools, Eastern Illinois University, Governors State University, Northern Illinois University, Southern Illinois University, and Western Illinois University have been downgraded in the absence of a state budget.

Both Illinois State University and University of Illinois kept their ratings, but were given negative outlooks.

According to an NEIU spokesperson, “No institution is pleased to be downgraded by a ratings agency like Moody’s. However, this downgrade is clearly tied to the state’s financial condition more than any changes in Northeastern’s particular financial situation.

“We continue to await our state appropriation. We hope that a budget will be passed in the near future, and that it will provide the resources for the state’s public universities to deliver a quality education.”