West Cook News

Moraine Valley Community College in Palos Hills was recently downgraded by Moody’s Investors Service, along with 14 other Illinois community colleges, slipping from an Aaa to an Aa1 rating.

Serving Illinois students since 1967, Moraine Valley and the other community colleges are the latest casualties of the onging budget stalemate. The district currently bears $103.3 million in general obligation unlimited tax (GOULT) debt outstanding, and the downgrade decision partly reflected declining enrollment figures.

The institution offers unique hybrid programs that combine online learning with traditional campus settings to serve students’ diverse needs.  

“Despite the State of Illinois' 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, noting that 23 of Illinois’ colleges “now carry a negative outlook.”

 “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 said

The other downgraded colleges are College of DuPage, John A. Logan College, Joliet Junior College, Parkland College, Southwestern Illinois College, Triton College, John Wood Community College, Rock Valley College, Lake Land College, Richland Community College, Rend Lake College, Black Hawk College, Prairie State College and Kaskaskia College.

When the state eventually does pass a budget, the downgrade will not be reversed, Moody’s said. Moraine Valley’s profile could be positively impacted, however, by factors such as demographic profile enhancement and/or improved revenue sources.

“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.

 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 impasse has taken a heavy toll 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.