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Moody's Offers Downbeat Analysis of Public Colleges

August 15, 2013

Public colleges and universities saw their revenue growth fall by more than half and their median expenses grow at almost double the rate of inflation in 2012, Moody's Investors Service said in a report Wednesday. The analysis, which examined median financial data, showed that revenues for public institutions grew by 1.7 percent, down from 4.8 percent in 2011, and that expenses grew at 3.3 percent, a combination that the ratings agency called "unsustainable." "Future expense reductions will likely need to be more significant and include re-evaluation of existing business models to maintain long-term financial health," a Moody's analyst said in the report.

A second report from the service, about median financial data for private colleges and universities, found a slightly more positive picture, as operating margins remained in the 4-5 percent range. "Governing boards and management teams continue to exhibit fiscal stewardship of private colleges and universities by holding median operating margins relatively constant over the last five years even as revenue declined," a Moody's official said.


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