Budget impasse affects Western Pennsylvania community college bonds
Citing concerns about Pennsylvania’s continuing budget impasse, a Wall Street ratings agency has downgraded the credit ratings of the Community Colleges of Allegheny and Butler counties and the Community College of Philadelphia.
The downgrades that Moody’s Investor’s Service issued Tuesday means the colleges will have to pay bondholders more to borrow money.
Moody’s said $75 million in outstanding CACC debt will be affected by the downgrade, while $20 million at the Butler County college will be affected.
Credit ratings for the schools in Western Pennsylvania dropped two notches, from A1 to A3. The rating for Philadelphia Community College fell from A1 to A2.
In each case, the agency cited concerns about school finances as well as declining enrollment at CCAC and modest operating deficits at Butler. The schools rely on a combination of tuition and state and county subsidies for operating funds.
Their state subsidies have been tied up as Gov. Tom Wolf, a Democrat, and the Republican-controlled General Assembly struggle to reach agreement on a spending plan four months into the fiscal year.
Elizabeth Bolden, president and CEO of the Pennsylvania Commission for Community Colleges, said the budget stalemate had exacted a toll on many of the state’s 14 community colleges even before the credit downgrade.
“Many of the colleges have had to seek lines of credit event before the downgrade,” Bolden said.
In addition to delays in state support, Bolden said many of the schools have experienced delays in payments from their county and school district sponsors. She said those sponsors have said they can’t pay their bills until the state pays them.
Bolden said all of the colleges have allowed the students who rely on state grants for tuition to continue attending classes, even though they haven’t yet received those grants.
Spokesmen for CCAC did not return calls for comment.
“The Commonwealth can’t adopt a budget, and we’re the ones suffering the consequences,” said Jim Hrabosky, vice president for administration and finance at Butler.
Hrabosky said Moody’s seemed to be referring to a series of state budget delays in recent years when analysts said predictable support from the state could help boost the school’s credit rating.
Carnegie Mellon University economist Robert Strauss called the situation distressing.
“Everybody knows the Legislature is being paid on a credit card now. A negative outlook (from Wall Street) wasn’t enough to drive them to the table; maybe a real downgrade will,” he said.
Auditor General Eugene DePasquale, who previously warned of the toll the budget impasse was taking on school districts, predicted such downgrades will spread if the budget impasse continues.
“It is not surprising. From our analysts’ perspective, we look to mid-November, when things start to reach the tipping point for many schools and social service agencies,” DePasquale said.
Debra Erdley is a staff writer for Trib Total Media. She can be reached at 412-320-7996 or [email protected]