Moody's Investor Services downgraded Western Illinois University's bond rating to BAA3 last fall, and now Moody's has confirmed that rating after a recent review of the school's finances.
WIU Budget Director Matt Bierman said Moody’s rating is directly tied to the Illinois’ ongoing budget impasse. Western and the state's other public universities have gone more than eight months without receiving state aid payments. Bierman said Western has dipped significantly into its reserves to cover costs.
He also said Western’s rating will be in junk bond status if it falls any further.
“If we were to go out and borrow right now, we would be penalized for having that low of a debt rating. We don’t have any intention of going out to borrow any time soon but it is something for us to consider that we would have to pay more in interest rates," Bierman said.
Moody’s recommended Western reduce its reliance on state funding to improve its rating. The school’s budget is mostly compromised of state aid and the tuition, fees, room and board paid by students. “We are a much more limited operation in terms of revenue. So we don’t have the diversity of revenue that other universities have,” Bierman said.
Bierman said since Western is a teaching university it can be hard to get state, federal, and corporate grants, but the school does apply for them. He said Western’s best bet is to increase student enrollment. The school hopes its decision to lower tuition rates for incoming students will attract a larger number of students for this fall.
In the meantime, Bierman said it’s important Western make adjustments while awaiting funding from the state.
“Make sure our income and expenses are in line and that our overall financial numbers are in a positive state. That’s why we are making some of the decisions that we are making. Not because of our rating, but that rating will be hopefully positively impacted by some of the decisions we are having to make,” Bierman said.
Standard and Poor’s continues to rank Western more favorably than Moody's. S & P's rating for WIU is A minus.