Executive Summary - 6 year plan and fiscal year budget upda…

University Credit Rating – Impact of new Debt

 The expect that the University is able to maintain its current Moody’s credit rating of A1 with the additional debt  The latest Moody’s report from July 2016 is summarized below:

Strengths • Significant growth in state operating support that offsets a mandated total 20% reduction in undergraduate resident tuition charges in FYs 2016 and 2017 • Improving debt service coverage from pledged revenues; 1.6 times projected coverage in FY 2016 following very thin coverage in FY 2015 • Resumed enrollment growth of 4.7% since fall 2013; nearly 10,600 FTE student in fall 2015 • Receiving $150 million in capital appropriations over the 2015-2017 biennium Challenges • Operating deficits due to strategic investments; three-year average operating margin of -3.9% between FY 2013-15 • Thin reserves relative to operations; spendable cash and investments covered expenses a low 0.3 times in FY 2015 • Substantial other debt-like obligations through large pension liability • Historically volatile enrollment provides budget challenges

What could make the rating go up • Significant growth of liquidity and overall university wealth • Consistent trend of university surpluses and much stronger debt service coverage from pledged revenues

What could make the rating go down • Return to weak debt service coverage from pledged revenues • Material decline in unrestricted liquidity

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