Citing lower enrollment trends and budget pressures, Standard & Poor's Ratings Services revised its outlook on the University System of Maryland's bonds from stable to negative.
About $95 million in bonds refinanced this year also were assigned a negative outlook, S&P announced Tuesday. The credit rating agency reaffirmed its AA+ rating on USM's existing bonds and assigned a AA+ rating to the refinanced bonds, but the negative outlook means S&P could downgrade its rating of the debt in the future.
The change comes as the state university system, which includes all public universities except Morgan State University and St. Mary's College of Maryland, faces a mid-year budget cut last month of $40.3 million and the expectation of further belt-tightening as required expenses such as health care and financial aid outpace the amount of money expected to be allocated by the state.
Standard & Poor's credit analyst Ken Rodgers said in a statement the university system's financial resource ratios were "not considered strong" and "could weaken further."
Overall enrollment has declined systemwide in the past couple of years, primarily driven by declines at the University of Maryland, University College. Though UMUC is now including some overseas students in its count, the S&P analyst said demand still was projected to be soft.
The state university system had $2.2 billion in cash and cash equivalents at the end of the last fiscal year, and outgoing USM Chancellor William E. Kirwan told lawmakers Monday the large fund balance was helpful to keeping its debt ratings stable. The system has about $1.2 billion in outstanding debt.
Two other ratings agencies, Fitch Ratings and Moody's Investors Services, recently reaffirmed the ratings for USM's bonds and did not revise their outlooks.