Credit rating revised to match University’s budget outlook

Samira Felix
News Editor 

Moody’s Investors Services revised the University of La Verne’s stable outlook to negative after affirming its “A3” issuer and revenue bond rating last month. Moody’s Investors Services provides corporations and institutions in-depth credit ratings regarding their ability to meet financial obligations.

The negative outlook is due to the University’s sustained decline in enrollment and student revenue over the past few years. The decline in enrollment was also reflected in the University’s revenue defensibility rating from finance and insurance company Fitch Ratings last year. 

Rick Hasse, instructor of accounting and finance and co-chair of the Faculty Compensation and Budget Committee, said having various credit ratings allows the University to have a steady viewpoint of its finances.

“It’s good to have different perspectives, different viewpoints from different organizations or different people to give a balanced view of the University’s credit or financial situation,” Hasse said.

There are four categories in Moody’s outlook ratings; stable, positive, negative and developing. The University’s negative outlook indicates a higher likelihood of a rating change. 

Hasse said the negative outlook has not affected the University’s ability to borrow money or do business with vendors because its credit rating did not change. 

“It just gives us a warning saying we better be careful,” Hasse said. “We better watch out and try to do new things and that’s what the administration, the faculty and the staff are doing.”

Moody’s ratings are based on a long-term and short-term rating scale. The long-term ratings are opinions based on the credit risk of meeting financial obligations that are one year or more. The categories are “Aaa-C.” The short-term scale is based on the corporations or institutions ability to meet short-term obligations. The categories are “P-1-NP.”

An “A3” rating signifies the University’s low credit risk for long term obligations and its ability to repay short-term debt obligations. 

The University has received a credit from Moody’s almost every year since 1993. The rating was a “Baa2 ” when the University was first rated. It rose to a “Baa1” in 2014, and to an “A3” in 2017, where it has remained today. 

Moody’s analysis includes the factors that could lead to an upgraded rating and the factors that could lead to a downgraded rating.

A demonstrated increase in student enrollment, fundraising and revenue could lead to an upgraded rating. While an inability to stabilize the decline in enrollment and revenue could lead to a downgraded rating. 

Avo Kechichian, the University’s chief financial officer, said the University is focusing on avoiding a downgrade by creating strategies that would not affect students, but increase enrollment and grow the tuition revenue. 

“We are being very methodical, very strategic in terms of how we balance the budget,” Kechichian said. “We do not want services to be impacted both for students, faculty and staff,” 

The Board of Trustees recently endorsed the framework for the University’s sustainability plan known as Future Forward Thriving Leos. 

Future Forward Thriving Leos will have four work groups that focus on enrollment management, administrative services, instructional capacity and academic support services. 

Shannon Capaldi, assistant vice president of strategy and implementation, said the four workgroups are going to look deeply at how the University is currently operating in each area. The groups will look for opportunities where expenses can be reduced and where new revenue can be brought in.

The work groups will be made up of students, faculty and staff members and each group will have an estimated 10 to 12 individuals.

Hasse said he thinks the plan is the University’s way of avoiding criticism regarding the way things are done. 

“I think it’s more of a spin to defer criticism of certain programs and defer to say, ‘Oh yeah, we’re going to take care of it. We’re taking a look at it,” but in the process of sustainability, it is not really taking a look at it,” Hasse said. “It’s more like a public relations campaign.”

Kechichian said the plan will help bring additional revenue to the institution, while looking at its expenditures to create efficiencies that will help save funds.

The Board of Trustees has also approved the purchase of the Professional Development Courses Program that the University has partnered with in the past few years. 

Hasse said this program is expected to add an estimated $5 million to the University’s revenue streams.

Kechichian believes that the strategies that are in place and that are being created will help the University achieve the goals it has regarding the improvement of enrollment and revenue. 

Capaldi added that the recommendations regarding changes will not negatively impact students.

“Everything that we are wanting to look for, and any decision that is made will be made with keeping the students’ experience and the students’ success at the top of the list,” Capaldi said.

Samira Felix can be reached at samira.felix@laverne.edu.

Samira Felix, a junior journalism major with a concentration in print-online journalism, is news editor for the Campus Times. She previously served as a staff writer.

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