Excerpt from the Dayton Daily News
Moody’s Investors Service has downgraded Wright State University’s credit rating as school officials are dealing with an ongoing financial crisis.
Moody’s decreased Wright State’s rating from A2 to Baa2 based on the college’s “severe financial deterioration in a short period of time.” Wright State is projected to have overspent by more than $120 million over the past six years, spending down most of its reserve funds.
“We shouldn’t be surprised after years of overspending,” said Doug Fecher, chairman of the WSU board of trustees finance committee. “It was inevitable there was going to be a downgrade like this.”
Universities sometimes take out loans to build new buildings on campus, something the new Moody’s rating could prevent WSU from doing.
“With a rating like this, we simply wouldn’t be able to,” Fecher said.
The school does not have any plans to take out loans for anything anytime soon though, officials have said. The downgrade will not have an impact on the $68 million in outstanding debt WSU already has, Fecher said.
“This is more of a reputational issue than a financial issue,” Fecher said of the downgrade.
Wright State officials must slash $25 million from the school’s upcoming budget while also boosting reserves by $5 million.
The university is expected to lay off up to 120 people to save $8 million. As many as 50 more jobs may remain vacant to save another $5 million, according to an outline of proposed budget cuts.
The credit report from Moody’s cited WSU’s “inflexible expense base” as to why it will be difficult for the college to regain its financial footing.
“Realizing adequate savings to align with revenues will prove challenging,” the report reads. “Should the university not accomplish its expense realignment plan, it will continue to have deficit operations and potential further draw downs on liquidity, which could trigger additional downward rating pressure.”
The college has already implemented some preliminary cuts such as prohibiting overnight travel for officials and no longer reimbursing employees for work-related cell phone use.
To improve its credit rating, Wright State would need to improve its cash flow and reserves relative to its debt, according to Moody’s. Failure to so could lead to another credit downgrade.
Fecher said he’s confident the university will be able to realign its budget and eventually turn the rating around though.
“It’s just part of what we have to go through to get to where we have to go,” Fecher said. “We’re moving forward with the budget remediation. We have to.”
Read more in the Dayton Daily News
