For the first time since it began providing a single outlook for all of higher education in 2013, Moody's Investors Service has given the enterprise a "stable" rather than "negative" assessment, the ratings agency announced Tuesday. The outlook, which projects the business conditions over the next 12-18 months for the 500-plus colleges and universities that the agency rates, projects that there will be no "material worsening or improving of business conditions" over that period, Edith Behr, one of the authors of the report, said in an interview. "We don't expect another shoe to drop."
The "stable" level at which economic conditions for higher education seem to be settling isn't a great one; operating revenue growth will sit just above the rate of inflation, at about 3 percent, Moody's says. But colleges and universities over all have done a good enough job containing costs, which along with solid investment returns, slightly growing spending by states and stabilizing net tuition revenue should be enough to help most colleges get through the period reasonably well.
Moody's is clear, though, that about 20 percent of the institutions it rates will struggle more than others, as it said in another report last week. And because Moody's only examines the institutions it rates, many of the most vulnerable small independent colleges are not fully captured in its analyses.
After months of discussions of a possible merger, Salem State University and Montserrat College of Art announced Tuesday that they will remain independent. “Montserrat College of Art is an exceptional, small art college with an outstanding faculty and programs that Salem State would have been pleased to add to its curriculum, but the numbers just didn’t work at this time,” said a statement from Salem State's president, Patricia Maguire Meservey.
Standard & Poor's Rating Services released its annual reports on median ratios for public and nonprofit private institutions this week. The rating agency found that of the 163 public institutions it rates, the number with negative outlooks (10 percent) is more than the number of institutions with positive outlooks (7 percent), a trend continuing from last year. Meanwhile, 81 percent of all rated public institutions have stable outlooks.
Among the 263 private institutions the agency rates, the number of institutions with negative outlooks (11 percent) is more than double the number of institutions with positive outlooks (5 percent).
The University of Akron on Friday announced a three-year plan to save $60 million. The plan includes the elimination of 215 jobs (none of them faculty positions). In addition, the baseball team will be cut. Northeast Ohio Media Group reported that many students are outraged by the cuts, and that campaigns have been launched to reverse some of the cuts, especially of the baseball team.
The University of Michigan today announced a $60 million gift to support entrepreneurial education efforts at its business school. The gift, from the Zell Family Foundation, will support the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies and also create a $10 million fund to invest in student businesses.
The University of Wisconsin Board of Regents on Thursday approved a budget based on a $125 million cut in state funds to the system over the next year, The Wisconsin State Journal reported. Legislators and Governor Scott Walker, a Republican, have already approved a budget plan that cuts $250 million over two years and also freezes in-state tuition rates. The largest cuts are planned for the flagship campus at Madison. Most board members said that they had no choice but to approve the cuts. But one, Charles Pruitt, voted against the budget, saying that he wanted to express “profound disagreement” with state legislators who voted for the cuts in the state budget.
Moody's is considering changing the approach it uses to rate the financial health of more than 500 colleges and universities. The investors' service put out a call for comments on potential methodology changes on Wednesday.
If changes occur as proposed, Moody's predicts an updated formula will affect the ratings of about 5 percent of the postsecondary institutions it rates. The proposed changes include a scorecard that rates institutions based on their market profile, operating performance, wealth and liquidity, and the strength and diversity of their funding sources as well as their risk appetite.
Moody's rates 230 four-year public universities and university systems in the U.S., 275 nonprofit private colleges and universities, and 21 universities outside of the U.S. Combined, these organizations had approximately $235 billion of debt outstanding as of the end of the 2014 fiscal year.