By David Struett
Illinois’ budget crisis dragged down City Colleges’ credit rating by four notches to “BBB” from “A+”, according to Standard & Poor’s credit rating agency, which gave the new rating.
“Weakened…assets” and movement toward a “negative fund balance” were stated as reasons by S&P for the downgrade.
“Other factors include declining enrollment and potential risks of a weakened financial position should the state fail to adopt a fiscal 2017 and 2018 state budget,” according to S&P’s statement.
A credit rating could be lowered again in 90 days if the college goes without “an articulated plan” to address Illinois’ budget crisis, according to S&P.
The new credit rating is based on City Colleges’ outstanding bonds from 2013 which the school took out to pay for the new Malcolm X campus and currently stalled Olive Harvey transportation, distribution and logistics building.
City Colleges of Chicago was not the only university affected. Six Illinois public university had their credit rating lowered. S&P warned that a continuing budget crisis could cause their ratings to be lowered again.
The teacher union, Local 1600, attributed the credit downgrade to “Governor Rauner’s efforts to starve higher education.” The union asked faculty and students to join them in demanding funding for the schools.
Currently, one third of City Colleges’ funding depends on state money. For the 2017 fiscal year, City Colleges received only $25 million in funding out of $70 million they expected. This is the second year Illinois has gone without a full budget.
The Governor’s office said Rauner “understands and is gravely concerned about the severe financial challenges facing our students, colleges and universities” and placed blame for the lack of a budget on the “General Assembly’s failure to pass a balanced budget.”
Governor Rauner has remained committed to veto unbalanced budgets and is holding out for the Democrat-controlled legislature to pass a balanced one.
City Colleges’ new chancellor, Juan Salgado, will have to make the budget a priority, said Harold Washington President Margie Martyn. She noted that City Colleges gets one-third of its money from the state budget, but that the Colleges is in a better position than Chicago State University, which has been put on probation by their accreditor because of poor finances.
Five other Illinois universities were also warned by S&P that their ratings could be lowered if the Illinois continues without a budget. All Illinois public universities rely on state money for part of their budgets.