OHIO — The coronavirus has hit college and university finances pretty hard. Moody’s Investor Service says just over 30 percent of public universities and nearly 30 percent of private universities were already in the red. Now as schools across the country have opened and quickly closed due to COVID-19 outbreaks, it’s not clear when they’ll rebound. But for those that do, it may come at the cost of more faculty and staff cuts.
Even though colleges and universities across the country received federal relief, they continue to experience significant amounts of financial stress. Fixed costs, lost revenue, and limited streams of income have put them in the hole and it’s impacting credit ratings. That’s in addition to the onslaught of COVID-19 expenses.
For schools that were already struggling financially before the pandemic, Moody’s Investor Service Analyst Christopher Collins said, “In order to maintain their, their fiscal stability going forward, what it’s going to take is further budget cuts, reductions in faculty and staff.” He said some of that’s going to be tough to do quickly. “Most of their costs are tied to faculty and staff. And in many cases there are issues of tenure, there are issues of unions, and these things just make it a little bit difficult.”
In Ohio, Wright State is currently at the bottom of Moody’s credit rating scale, while university and medical center revenue losses forced Moody’s to downgrade the University of Toledo’s credit rating a few months ago. Others like Kent State, Case Western Reserve, and Miami University remain at a stable or positive rating. Still, all schools in Ohio face competitive pressure.
Collins said, “What we’ve seen in Ohio, is that the demographic trends are pretty challenging. It’s projected to have continued declines in the number of high school graduates, and yet the number of schools remains the same.” Leaving the same number of colleges to go after the same pool of students in the same region.
Based on a fitness tracker analysis run by the Hechinger Report, at least 36 schools in Ohio are in financial trouble right now. Enrollment, tuition revenue, endowments, and student retention rates were determining factors.
While 2020 has been a rocky year, Collins said it could get worse before it gets better. “The upcoming fiscal 2021 is really going to be when I think we see some potential for operating performance deterioration potential stemmed out of liquidity.” But not everyone will hit bottom. Analysts say those who can weather the storm best will be the colleges who are not reliant on tuition, have healthy endowments and multiple streams of revenue from things like research and profitable medical centers. For now, they are keeping an eye on what occurs this fall as the pandemic continues.
Collins said this fall, there is still a big concern about students remaining through the entire school year, and their ability to pay based on family income. Moody’s has already indicated that if there’s further disruption to classes and colleges see signifiant drops in enrollment, more financial stress could cause some schools to declare a financial crisis.
