By Ted Sherman, NJ Advance Media for NJ.com
TRENTON — New Jersey’s public universities are getting an education this week about the consequences of the state’s budget woes, with many being hit with credit downgrades or outlook warnings by Wall Street because of New Jersey’s troubled financial situation.
Moody’s Investors Service downgraded the credit rating of William Paterson University on Monday to A2 on $165 million of debt —a negative rating, although still considered an upper-medium grade and low credit risk. The agency also gave the school a negative outlook.
Rutgers University received a negative financial outlook as well, although Moody’s made no changes in the ratings on $2 billion of bonds issued by the state’s largest public university.
The actions come just days after Moody’s revised Montclair State University’s outlook to negative, and assigned an A1 rating to a planned $72.7million bond issue. It also downgraded New Jersey City University to A3, affecting outstanding $163 million in debt issued through the New Jersey Educational Facilities Authority. And while the agency reconfirmed its current ratings for Rowan University and New Jersey Institute of Technology debt, it similarly gave negative outlooks to both schools.
Last month, Moody’s downgraded Stockton University in Galloway to A3, affecting $234 million in debt, and revised the school’s outlook to negative, noting its high degree of financial leverage while facing a weakening state funding environment.
The ratings moves could raise borrowing costs of the various institutions.
In all cases, the ratings were attributed to the ongoing uncertainty over state funding—with the potential for continued declines in state operational support—as well as the growing risk that a portion of fringe benefits now funded by the state might be shifted to the universities.
In April, Moody’s separately downgraded New Jersey’s own debt rating—the ninth ratings cut since Gov. Chris Christie took office—amid the state’s underfunded pension system and concerns over the state’s worsening financial condition it said was likely to drive further downgrades.
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