Moody’s Lowers Rating For One State School, Threatens To Do Same For Six Others

Moody's Investors Service has downgraded the credit rating of Northeastern Illinois University in Chicago by two steps. The lower rating of B1 takes Northeastern well become so-called junk status. Tthe bond credit rating company says the rating could be lowered even further.

And Moody’s says it will review six state universities for potential credit downgrades over the next three months. Those six are the University of Illinois, Illinois State and Governor State Universities, and Eastern, Northern and Southern Illinois Universities.

Moody’s cited “weakened cash flow” in its reasons for downgrading the credit rating for  Northeastern Illinois University, due in part to the state budget impasse.

Ted Hampton is a senior credit officer with Moody's. He says the lack of a budget is making a "bad situation even worse."

“The immediate pressure from the impasse is a situation that leaders of the state could choose to address and could quickly rectify, but their failure to take that step up until now is some having real consequences,” said Hampton. “Paralysis in the weeks ahead… the last few weeks of this legislative session… could make Illinois even more of an outlier among states than it already is."

Illinois has been without a full state budget for 22 months, and state universities have not received state funding for the current budget year. But Hampton says simply passing a budget won't guarantee an credit upgrade from Moody’s. He says the state has to show steps toward passing a balanced budget plan.