S&P keeps watchful eye on university credit

Because of heavy reliance by higher education on appropriations from state government, Standard & Poor's Ratings Services says it will keep a watchful an eye on Minnesota's public university systems in the event of a state government shutdown.

Ken Rodgers in S&P's public finance department says a state government shutdown could eventually disrupt the finances of Minnesota's public universities, or even its health systems. While higher education can draw from reserves, tuition, and endowments in the short term, a lengthy shutdown could affect their credit ratings.

"For example, with the University of Minnesota, that's the academic affiliate of Fairview Health Services, so the potential extends beyond public universities as well," Rodgers said.

However, it's unlikely that S&P would downgrade the credit ratings of the higher ed systems unless a state government shutdown lasts more than a month or two, Rodgers said. If a shutdown dragged on, S&P might "alert bond holders to a potential credit rating downgrade."

University of Minnesota officials are concerned about having required levels of cash in the event of a protracted shutdown. And the universities might have to take unusual actions, such as selling off securities, to fund day-to-day cash operations.

"Let's just say if it went more than a month or two, that could cause problems, potentially, for certain organizations," Rodgers said, although the state's overall credit rating probably would not suffer due to a shutdown.