Budgetary stresses of the past year have left many public colleges financially weaker, despite above-average increases in enrollment and growth in tuition revenue per student, a new report from Moody's Investors Service shows.
The report, "U.S. Public University Medians for Fiscal Year 2009 Show Tuition Pricing Power Amidst Rising Challenges," also highlights how colleges' debt burdens have continued to mount.
The median level of debt for 200-plus public institutions rated by Moody's—$176.9-million as of the end of the 2009 fiscal year—has grown by 31 percent over four years. That's notably greater than the rate of revenue growth (25 percent), total financial resource growth (15 percent), and enrollment growth (13 percent) during that same period.
For the first time, colleges' debt per student ($13,665) exceeded their financial resources per student ($12,893).
The costs of servicing that debt, along with other expenses, also drove down the median operating margin to 1.6 percent, the lowest it has been in five years. Higher-rated institutions had margins of above 3 percent, while at the lowest-rated ones, the margin was negative 4 percent.
Moody's has predicted continuing financial difficulties for public colleges in many states. Still, the Moody's analyst who wrote this latest report, Stephanie Woeppel, noted that "most public universities will be able to raise tuition and fees to help absorb the revenue gaps" that result from cuts in state support, weakened endowments, and the higher expenses associated with growing enrollments.
As with its assessment of private colleges in June, the "medians" report for the first time includes data on colleges' liquidity. By one measure, the public colleges were more liquid. Their median for total financial resources was $202.5-million, with more than half of that amount available to spend within a month or a year. For private universities, the median for total financial resources was slightly higher (about $213-million), but the shares of that total that could be readily available to spend within a month (about $77.5-million) and within a year (about $85-million) were smaller.
Among the highest-rated public universities, liquidity levels were significantly weaker than for similarly rated private universities. But public institutions "typically have other sources of liquidity and more conservative debt structures," Ms. Woeppel noted.
The report is available to Moody's subscribers.