S&P Downgrades University Credit Ratings

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Just days after Moody’s warned of a potential credit downgrade for Illinois’ public universities, Standard & Poor’s took action to lower the credit of a couple – and placed three on a negative watch list.

Southern Illinois University and the University of Illinois saw credit downgrades. Illinois State University joins them on the watch list with a negative outlook.

SIU President Randy Dunn says it’s not surprising – he says the way back has to include an end to the state budget impasse, along with other reforms.
 
“Getting state support coming back to us, in a predictable fashion, and adjusting to that – and becoming even more sustainable, and then also, continuing to tackle the enrollment problem we have at Carbondale.”

Dunn says the three-notch slip in ratings from “BB” to “BBB” is a direct result of the state’s budget impasse – and could affect efforts the university is hoping to use to attract new students.
 
“We’re looking at a public-private partnership, for instance, for construction of new student housing to replace The Towers over on the east side of the SIUC campus. This could make that deal tougher to do.”
 
Dunn says bonding and other borrowing will cost more as a result of the downgrade – but he points out the university was not planning to do that for a couple of years.

S&P says it dropped SIU’s rating because of the risk to its cash flow because of the state’s nearly two-year long budget impasse. Illinois State University and the University of Illinois also received downgrades or were placed in a watch category with a negative outlook.

 

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April 20, 2017 at 09:57AM

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S&P Downgrades University Credit Ratings

Illinois Public Universities Trying to Find Efficiencies During Budget Impasse

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It’s a mixed bag for Illinois’ public universities, which have gone two years without full appropriations from state taxpayers. Some say they’re managing, while others say they’re crumbling.

 

During a House Higher Education Committee hearing last week in Springfield, Illinois State University President Larry Dietz said ISU will continue to find efficiencies and savings in lieu of state funding.

 

 

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“And to try and restore some of that lost confidence in the state, I will ask our board of trustees in May to not increase tuition, fee, room and board rates for the upcoming academic year,” Dietz said, adding that he’s not sure ISU can continue to hold the line in the future. H said he’s optimistic state lawmakers will pass a budget for the coming fiscal year that starts July 1.

 

In the past 22 months, some state tax dollars have gone to public universities and tuition assistance through stopgap funding measures, but the most recent spending plan expired at the beginning of this year and lawmakers have since not acted on releasing funds by passing a budget on to the governor.

 

Moody’s Investors Service said Monday it’s placing the state’s public universities under review for downgrade because of the nearly 22-month-long budget impasse.

 

Northern Illinois University’s Douglas Baker said NIU is struggling to maintain core functions and long-deferred maintenance projects to “fix the roofs, fix the roads, become more energy efficient and replace critical issues like boilers.”

 

Eastern Illinois University President David Glassman said steps have been taken to maintain operations without putting pain on students on EIU’s campus and they continue “to look for additional efficiencies in facilities, additional efficiencies in marketing and enrollment management, student services, academic programs and so on to look at the entire university holistically.”

 

Glassman also said some staff have taken on additional responsibilities.

 

It’s a different story for Chicago State University, where President Cecil Lucy said the university has laid off staff and had freshman enrollment of just 86 students in 2016.

 

“What is happening in the state of Illinois is having a negative impact on accreditation and we must treat this as a crisis,” Lucy said.

 

During last week’s hearing, no university officials or lawmakers discussed the growing cost of pensions.

 

According to the Illinois Board of Higher Education, between the years of 2005 and 2015, funding from the state increased nearly 50 percent. When including money for higher education pensions, funding increased from $2.4 billion to $3.5 billion.

 

The National Center for Education Statistics puts the average total cost of Illinois’ public universities fourth highest of all 50 states.

 

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April 19, 2017 at 05:02PM

Illinois Public Universities Trying to Find Efficiencies During Budget Impasse

Moody’s downgrades NEIU, warns of credit declines for 6 schools

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After nearly two years of state budget gridlock, Illinois’ public universities could soon face a tougher time borrowing money after a major credit agency downgraded the rating for one school and warned that six others could face the same fate.

In reports issued Tuesday, Moody’s Investors Service announced that it had bumped Northeastern Illinois University down two levels, from a Ba2 to a B1 rating, citing “weakened cash flow” in part caused by the state budget impasse, now in its 22nd month. The downgrade puts Northeastern’s credit three steps below what is commonly known as “junk” status.

Credit ratings are a sign of how likely a borrower is to pay back bonds. A “B” rating in the Moody’s scale indicates “high credit risk.” Lower credit ratings often mean paying higher interest rates to borrow money.

“The downgrade is very disappointing but not surprising,” Northeastern’s interim President Richard J. Helldobler said in a statement. “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.”

Republican Gov. Bruce Rauner and the Democratic-controlled state legislature have been unable to agree on a state spending plan since July 2015. The two sides agreed on stopgap bills last summer, providing most schools with about 80 to 90 percent of the funding they had received in recent years.

But no state money has been allocated to the universities in 2017, meaning they have had to stretch out less than one year’s worth of funding over 22 months.

Moody’s said Tuesday that within the next 90 days, it will review the state’s other public universities for potential downgrades, including the University of Illinois, Illinois State University, Eastern Illinois University, Southern Illinois University, Northern Illinois University and Governors State University. Moody’s also will examine Northeastern for another potential downgrade in addition to the one announced Tuesday, officials said.

The agency will review the universities’ current fiscal health, actions taken to cope with the state funding shortfall, and plans for the next fiscal year that starts in July.

“The reviews will focus on each university’s exposure to continuing state budget pressure given failure of the state to adopt a budget for the current fiscal year and the resulting use of each university’s own liquidity to bridge the funding shortfall,” the agency said.

The agency warned that after the reviews, the universities could face rating downgrades “depending on liquidity and ongoing ability to adjust.”

Moody’s includes all University of Illinois and Southern Illinois campuses in one rating, and does not review Western Illinois or Chicago State universities.

Northeastern Illinois University, on Chicago’s Northwest Side, has been particularly hard hit by the budget impasse in recent months.

The university shut down campus and furloughed all employees during its spring break, closing computer labs, the library and other academic services during that week. Students with state-funded campus jobs also were unable to report to work. The campus also closed for two days last week and will be closed again May 1.

Northeastern received about $30.2 million through the two emergency bills, compared to about $37 million in 2015, the most recent year of full funding.

“With continued pressure on enrollment and sustained state funding uncertainty, the university has limited avenues by which it can improve its liquidity position over the medium term,” Moody’s wrote about Northeastern.

In a report last month, Moody’s warned that prolonging state operations without a budget could result in the state defaulting on loans, cutting pension contributions, and long-term damage to public universities and social service providers. Analysts also said the timing for a budget agreement is critical with the end of the legislative session approaching, adding that state finances could begin to stabilize fairly quickly once Rauner and Democrats make a deal.

Moody’s downgraded Eastern Illinois and Governors State in June 2016, and pointed to the budget crisis as a major factor in those decisions.

Eastern’s rating fell several notches after the agency noted the Charleston-based school spent nearly all of its cash by the end of last fiscal year and still had no imminent guarantee of state funding. Governors State’s rating fell to “junk” status, with analysts pointing to its heavy dependence on state support as well as the ongoing challenges of transitioning from an upper-division school to a four-year institution.

drhodes@chicagotribune.com

@rhodes_dawn

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April 18, 2017 at 06:36AM

Moody’s downgrades NEIU, warns of credit declines for 6 schools

Eastern waiting out budget impasse

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CHARLESTON — There was hardly a moment of doubt for Eastern Illinois University leaders that an Illinois state budget would be passed and passed relatively soon back in 2015.

Even though a budget was not passed by the end of the legislative session May 31 that year, EIU President David Glassman said it was not a worry just yet.

“That is not the first time, for the state, that they haven’t completed a budget by the end of the session,” Glassman said. “So, I wasn’t particularly concerned because that has happened before.”

In 2007, the state lawmakers and the governor at the time, Rod Blagojevich, were at odds, unable to pass a budget for a six-week stint.

“The assumption is that it would get done in the next month or couple of months, and then we would have our budget and everything would run as it normally has,” Glassman said. “We just always assumed a budget would come.”

Even for state leaders, the expectation was that it would happen relatively soon.

“I always had it in the back of my head that, you know, it was not going to play out the way it would play out,” State Rep. Reggie Phillips, R-Charleston, said. “I always thought, somehow, that we would get some sort of budget.”

But days passed, then months and Illinoisans had yet to see their lawmakers pass a budget.

“There would be various deadlines that we would hear about,” Glassman said. “Those deadlines kept getting extended and extended.”

State lawmakers said it would be the next month. Then, they would say it would come by the end of the year, but the impasse continued.

And still today, state lawmakers and the governor have yet to come to an agreement on a budget — one year and nine months into the budget impasse, making this not the first, but the longest time the state has taken to hammer out a budget.

As each month passed, budget tightening at state universities became more frequent.

EIU responded fairly quickly to the news that money would not be coming down the pipeline. After the budget failed to make it through, Eastern furloughed 222 administrative and professional employees.

Soon after, development projects on the campus were halted and layoff notices went out. It would not be until January 2016, though, when the big cuts came. As tuition dollars started running thin and the state seemed none too eager to pass a budget, Eastern leaders made the decision to cut an estimated 200 positions.

This news prompted activism among many people in Charleston and started one of the bigger rallies, of which there have been many now, calling for the state to fund the universities as well as sparking a funding effort to aid laid off workers.

Soon after employees were laid off, a Charleston area group, Support EIU Employees, began to collect funds for those recently laid off employees to pay bills and other necessary items.

After a couple fundraising efforts, the group amassed $16,000 for EIU employees in need.

Andy Eggers, Support EIU Employees member, said it was a swell of surprising support from the community that made the funding efforts possible.

“It was impressive to me — the idea that everyone in the community was a part of it,” Eggers said.

“Made me realize how many people are dependent on EIU and how many people realize that,” he continued.

The group still has funds they are willing to distribute. Leaders have now opened up their parameters to include any EIU employee, former or otherwise, who has fallen on hard times. They can be contacted through their Facebook page.

Another group, Fund EIU, sought to work on state funding for the university. The initial “Fund EIU” rally on Eastern’s campus, along with other rallies at places struggling more at the time, such as Chicago State University, garnered significant media attention and shone a spotlight on what the budget standoff, just months in, had done to universities that rely on state funding.

Universities have yet to receive additional funding beyond what was given to them by the end of the year.

While Eastern officials have made no mention of cuts either in the near future or down the road, other universities such as Southern Illinois University have taken such steps. SIU officials recently announced $30 million in potential cuts to the university to offset the lack of state funding, according to the Southern Illinoisan newspaper.

Another school, Northeastern Illinois University, has been temporarily furloughing employees numerous times in recent weeks, according to the Chicago Tribune.

Today, state leaders are still sparring over the details of Gov. Bruce Rauner’s agenda, which includes items such as term limits and worker’s compensation reform, and the long-term budget impasse appears to have no end in sight.

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April 17, 2017 at 03:50PM

Eastern waiting out budget impasse

Letter-writer, EIU professor has questions for Rauner

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MONTICELLO — After 30 years in a profession about which she is passionate, Parley Ann Boswell is counting the days until her May 31 retirement.

Unlike many in her shoes, however, the 63-year-old Monticello woman is not gleeful. She felt she had to leave her position as an English professor at Eastern Illinois University in Charleston because of the broken financial condition that Illinois is in.

She made her break in a “Dear John” letter to Gov. Bruce Rauner about a month ago that’s been published in at least three newspapers, including The News-Gazette on March 12.

“I’m breaking up with you. Because ours has been a committed relationship, you deserve to know why I’m breaking up with you,” began the open letter.

In it, she spelled out her three main reasons: a lack of mutual respect, a lack of communication and a difference in values.

The daughter of a state circuit judge, Boswell articulated plainly how she felt disrespected and alarmed when the governor called state workers “overpaid” and said “there’s a bunch of baloney going on.”

She wrote that she didn’t understand what he means by his oft-repeated phrases such as “structural reforms,” “layers of bureaucracy,” “collectivist economy” and “opportunity zones.”

“Because I’m a scholar, I’m too little and I don’t have any power, but I know how to study and began to study other governors who talk like he does,” she said.

What she realized was that she had more questions than answers for Rauner.

“What do you mean when you say ‘business-friendly?’ Is my work at a public university ‘business friendly?’ Who are ‘job creators?’ Am I a ‘job creator?'” she wrote.

Jim Thompson was governor when Boswell joined the EIU faculty in 1987. She said what she knows for certain is that previous administrations “did not portray state workers as villains” and “did not blame us when things went wrong.”

“I love my work and I love my students. I’m coming to terms with this. I think I made the right decision,” said Boswell, who is ready to pursue other work.

Although she’s heard nothing from Rauner or his office, Boswell said she’s had “almost all positive feedback” from folks thanking her for saying what they felt.

“I was angry,” she said of the thought process that brought her to publicly challenge the governor in her letter, first published online March 8 on Reboot Illinois.

A year earlier, a number of her junior and senior students had traveled to Springfield to participate in rallies to get legislators’ attention about the painful effects of not having a budget.

When they brought it up in class, “they were very worried and frustrated and angry. They didn’t understand and I certainly didn’t. A couple of them burst into tears and within 10 minutes we were all crying,” she said.

“This is unacceptable for the people who employ me to behave in such a way that this is happening to a public state university,” she said. “It horrified me.”

Worse, she feared that the uncertainty of continued funding for her and hundreds of other EIU employees would start to take a toll on her health.

“I couldn’t concentrate on my work. I couldn’t concentrate on my students. It was just too hard,” said Boswell, who’s grateful to be in a position to retire.

“Last year at Eastern was such a difficult year for us. We’ve had no funding in a year-and-a-half. They laid off 300 employees, some of them instructors,” she said. “We don’t even have garbage pickup in our offices or classrooms. We have communal places in the hall where they pick up every couple of days and the people doing it are working really hard. People are so good-natured about it.”

A prolific publisher of academic articles and books on film and American literature from colonial America through the early 19th century, Boswell said she had never written a letter to the editor before her “Dear Bruce” missive.

“My friends are all stunned because I love a low profile. I don’t want people to know what I’m thinking. But it was almost like auto-pilot,” she said of her cathartic letter. “I thought about it for months. I had written it in my head.”

Boswell said she fantasizes about sitting down over a sandwich with Rauner in her office in Coleman Hall.

“I will be happy to provide lunch, no baloney,” she wrote.

“I want to ask him questions about his approach, his strategies for being governor and the ideas behind what he said,” she said, adding, “I am a doctor of language. If I don’t understand, who does?”

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April 17, 2017 at 12:11AM

Letter-writer, EIU professor has questions for Rauner

U Of I Springfield Faculty Vote To Authorize Strike

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Back when it was called Sangamon State University, the Springfield campus had a faculty union. But since joining the University of Illinois system, professors have been without a bargaining unit. For more than a year, they’ve been trying to get an agreement that would retain the rights they had before. Now, frustrated by the slow pace of talks, they’ve voted to authorize a strike. Kristi Barnwell, a history professor, says negotiations have thus far been more about grievance procedures and tenure, than dollars and cents. “We also have some economic requests, but what we’ve been stalling out on is those non-economic requests that are important to creating stability on this campus for both faculty and students," she said. Barnwell says the vote doesn’t necessarily mean they will strike. “We’re still hoping that we don’t have to, and that the university’s administration will make some meaningful progress in negotiations at our next bargaining session," she said. "But we needed to let them

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April 14, 2017 at 08:47AM

U Of I Springfield Faculty Vote To Authorize Strike

U Of I Springfield Faculty Vote To Authorize Strike

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Back when it was called Sangamon State University, the Springfield campus had a faculty union. But since joining the University of Illinois system, professors have been without a bargaining unit. For more than a year, they’ve been trying to get an agreement that would retain the rights they had before. Now, frustrated by the slow pace of talks, they’ve voted to authorize a strike. Kristi Barnwell, a history professor, says negotiations have thus far been more about grievance procedures and tenure, than dollars and cents. “We also have some economic requests, but what we’ve been stalling out on is those non-economic requests that are important to creating stability on this campus for both faculty and students," she said. Barnwell says the vote doesn’t necessarily mean they will strike. “We’re still hoping that we don’t have to, and that the university’s administration will make some meaningful progress in negotiations at our next bargaining session," she said. "But we needed to let them

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April 14, 2017 at 08:47AM

U Of I Springfield Faculty Vote To Authorize Strike