John A. Logan College in Carterville was recently downgraded by Moody’s Investors Service from an A1 to an A2 ranking, joining 14 other Illinois institutions of higher learning that saw their ratings slip.
Providing a diverse learning and teaching community committed to improving individual lives and society through quality accessible programs, John A. Logan College offers approximately 40 courses of study, ranging from industrial and technical instruction to specialized office skills, designed to lead students to gainful employment.
John A. Logan College was among over one dozen of Illinois’ community college programs to become the latest casualties in the yearlong battle for a full budget.
“Despite the state of Illinois' unprecedented yearlong 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 added.
Other downgraded colleges are College of DuPage, Moraine Valley CC, Joliet Junior College, Parkland College (CCD 505), 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 full budget, the downgrade will not be reversed, Moody’s said.
“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 primarily rely on state appropriations and tuition. Despite the added stream of revenue, the budget has wreaked havoc 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, increased tuition rates and issuance of short and long-term debt.
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