David Jesse

Detroit Free Press

Rating agency cites drop in enrollment over past several years

University says its working on enrollment growth

Standard and Poor's Rating Services has downgraded its outlook for Wayne State University from stable to negative, citing enrollment declines over the past several years.

The agency didn't drop its bond ratings for the school, but said if enrollment declines continued, it would. That could hurt the school by not letting them get the best interest rates when they borrow money. WSU's rating is currently AA-.

"The outlook revision reflects our view of WSU's decreasing enrollment with headcount having declined for five consecutive years," said Standard & Poor's credit analyst Shivani Singh in a press release post on the agency's web site. The agency said declining state aid also played into the decision.

However, the agency said its public research status, diverse academic programs, growing endowment size, strong operating cash and diverse operating revenue streams kept the rating in the AA- line, which is below AA.

"In our opinion, the university has managed recent large state appropriation cuts and enrollment-related budgetary shortfalls well by engaging in extensive cost-cutting. Further strengthening WSU's position, in our view, is its manageable debt burden and conservative debt structure…."

In a statement provided to the Free Press, WSU CFO Rick Nork said the university has been working hard to manage its finances.

"We have managed well in this recent environment of revenue decline by taking the necessary cost-reduction actions," Nork said. "However, there is no denying that enrollment declines and reduced state appropriations over the past five years have put financial pressure on the university, which is reflected in the ratings outlook.

"Increased enrollment, retention, graduation rates and research awards are all focus areas of our strategic plan, and we are confident that we will be able to stabilize and grow enrollment levels during the next few years.

"Already, we have seen our fall 2014 credit hours remain essentially flat with last year's levels and, based on winter enrollment data so far, we expect to show slight growth compared to winter semester 2014."

State aid has been cut over the past decade to each of Michigan's public universities. However, in the last couple of years, the state has added money back, largely by using a formula measuring growth, graduation rates and other variables. WSU has consistently gotten the least amount of money from this of any of Michigan's 15 public universities.

The ratings agency said if the enrollment trend continues, it could take further action and drop the rating. It also said that if the university continues to manage it money well and grows its enrollment, it could revise its outlook projection.

Contact David Jesse: 313-222-8851 or djesse@freepress.com. Follow him on Twitter: @reporterdavidj