CHICAGO – Governors State University lost its investment grade rating in the latest credit fallout to hit Illinois higher education institutions from the state's budget mess.

On Friday, S&P Global Ratings dropped GSU's facilities system revenue bonds and certificates of participation three notches to BB-plus from BBB-plus and left it with a negative outlook.

"The downgrade and negative outlook reflect our view of Illinois' ongoing severe challenges due to its weak financial position, and the resultant impact on GSU's financial position which, in our opinion, creates significant liquidity risk for the university and without correction or intervention, could result in a negative cash balance by August 2017," wrote analyst Jessica Wood.

"Additionally, the university's operations have been deficit on a full-accrual basis for the past couple of years, and this is expected to continue given the state pressures," she said.

The state entered both fiscal 2016 and fiscal 2017 without a full spending plan in place, leaving the state's nine public universities starved for their state aid. Lawmakers approved about $600 million in the spring for higher education and in a stopgap spending plan designed to see the state through December approved another $1 billion earlier this summer. The funding falls far short of what the schools had expected for the two fiscal years.

Longer term pressures also abound as Gov. Bruce Rauner and lawmakers will try to hash out a balanced, long term spending plan early next year following the November elections.

"Given the length of the fiscal 2016 budget impasse and the absence of a substantial agreement among elected leaders, it is our opinion that state appropriation outcomes will remain uncertain through at least fiscal 2017," S&P said.

The Friday action followed S&P's move earlier in the week to lower Illinois State University's auxiliary facilities system revenue bonds and COPs one notch to A from A-plus. The outlook is negative.

"The downgrade reflects our view of ongoing operational and liquidity uncertainty attributable to budgetary stresses at the state level," said analyst Ashley Ramchandani. "While the state has provided stop-gap funding and ISU does not have immediate liquidity pressures, state budgetary pressures have, and will, in our view, continue to negatively affect the university such that we believe its credit profile is now more consistent with the 'A' rating."

S&P last month dropped Western Illinois University two notches to the lowest rung on the investment grade scale, citing the state's prolonged budget mess. The rating agency had just hit the university with a one-notch downgrade in May. Southern Illinois University also took a second rating hit over the strain of managing through the state's prolonged budget gridlock, falling to BBB-plus, in July.

In addition to several rounds of rating downgrades, schools have announced layoffs and warned of long term damage to their reputation, ability to attract top professors and students due to the prolonged funding uncertainty.