The University of Nebraska has been deemed financially sound by a credit rating agency, earning the second-highest rating available for its performance in 2020-21.
S&P Global confirmed the “AA” rating of the UN system bonds in a letter dated June 30 included in the documents for the August 11 Board of Governors meeting.
The rating signals that NU is able to pay its debts and keep its lights on, and will ensure that the university can continue to borrow money at lower interest rates in the future, allowing students and taxpayers to save money.
In particular, S&P Global noted that NU started the Fall 2021 and Spring 2022 semesters on time and in person, losing only 1% of its total enrollment in the process.
Combined with a self-implemented budget cut and with federal COVID funds, NU was able to exceed its budgeted expectations, the rating agency wrote, operating with a surplus of $48.5 million, a margin of about 2% due to stable state funding, growing research, and increased donor donations.
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“We assessed NU’s corporate profile as very strong, characterized by large and generally stable enrollments across four campuses, a strong market position as Nebraska’s only public research university, and strong fundraising capabilities. fund,” S&P Global wrote.
The fact that NU did not receive an “AA+” rating, or the highest rating given by S&P Global, was the potential for declining enrollment “due to demographic pressures and stiff competition for students; and slightly lower retention and graduation rates compared to similarly rated peers.”
S&P Global said it would consider raising NU’s credit profile if it reports growth in its endowment and consistent financial operations in the future. The agency also said it may consider negative rating action if listings decline significantly or if NU issues significant additional debt.
As of June 30, 2021, NU’s debt was approximately $1.3 billion, including $400 million in bonds issued by the university under a facility renewal and renovation program created through Legislative at the Capitol.
But, the agency noted that there was a plan to pay off the large debt issue.
“The system expects to receive approximately $18 million annually from fiscal year 2022 through 2026 through the facility expansion program with the State of Nebraska,” S&P Global wrote. “Although the State of Nebraska must appropriate these funds each year, it has a long history of funding this commitment.”
President Ted Carter said NU’s “AA” rating assertion showed the university system with campuses in Lincoln, Omaha and Kearney has been a responsible steward of its resources.
“We’ve been careful in our planning, we’ve built strong partnerships with Nebraskanians, and we’ve been willing to make tough decisions to keep our budget balanced,” Carter said.
Regent Bob Phares of North Platte, chairman of the board this year, said the note reflected the “diligent and long-term approach” that NU has taken to managing its finances during turbulent economic times.
“We want to make sure Nebraskans get the best possible return for what they invest in their university,” Phares said.
And Regent Rob Schafer de Beatrice, who chairs the business and finance committee, said the council’s approach has been to keep the university in a position of strength “even in times of volatility”.
“Having outside experts confirm our approach is a big win for Nebraskans,” Schafer said.
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