Improved leadership continuity, stable enrollment and continued strong revenues from health care gives the University of Missouri System a stable financial outlook, Moody’s Investor Services stated in a news release issued Tuesday.
University officials highlighted the news, which is an upgrade from the negative outlook issued by Moody’s in June 2017, when enrollment was declining sharply on the Columbia campus and state budget cuts were forcing hundreds of job cuts.
“This is fantastic news and demonstrates the quality of leadership that we have guiding the state of Missouri’s largest public university,” said Jon Sundvold, chair of the Board of Curators and owner of a financial services firm.
In the release, Moody’s left the university’s overall credit rating unchanged at Aa1, the second-highest possible on Moody’s charts, recognizing the low risk associated with debt issued by the university.
Enrollment on the Columbia campus exceeded 30,000 in September as MU had the first increase in student numbers since fall 2015. Overall, the system experienced a decline in enrollment of about 1 percent. Enrollment increased slight at University of Missouri-Kansas City and fell at University of Missouri-St. Louis and Missouri Science and Technology in Rolla. The biggest change was a 5.9 percent decline in Rolla.
And in the fiscal year that ended June 30, MU Health Care again reported increased patient revenue, to just under $1.1 billion, and net operating income of $102.1 million.
Moody’s noted that the university had a total revenue of $3.7 billion across its four campuses and health system. The university’s total assets, from property and buildings to increasing endowments, give it a total wealth of $4.6 billion, the release stated, giving UM the “fiscal flexibility to continue to address the constrained funding environment and ongoing investment needs.”
The improved outlook is good news as the university builds the new NextGen Precision Health Institute, a $221 million project financed in large part by borrowing on the university’s credit.
“The system has undertaken an ambitious and investment-intensive goal to elevate its health-related research capacities within a highly competitive landscape,” Moody’s noted.
The outlook isn’t completely rosy. Missouri’s high school population isn’t growing, which will force a greater reliance on recruiting to maintain enrollment growth. And the increasing share of revenues from MU Health Care, while currently performing well, adds risk.
“The stable outlook incorporates Moody's expectations that strong fiscal stewardship and a forward-looking budgetary management framework will maintain positive operating performance in line with newly established benchmarks,” the release stated. “Improved leadership continuity at both the system and individual university campuses also contributes to the stable outlook.”
The rating puts the university in the top 10 percent of public higher education institutions nationwide for financial health, System President Mun Choi said.
“My thanks goes to the leadership teams across the system — especially (Vice President for Finance) Ryan Rapp and the finance team — and MU Health Care that have worked so hard to make this happen,” Choi said.
Moody’s also noted UM’s opportunity for a better rating and events that could cause a downgrade.
If enrollment remains strong and the university can increase tuition or find additional sources of revenue through grants or partnerships, the rating could be raised, the release stated. But if enrollment was to fall sharply, or if health care revenues weaken, the university’s rating could be reduced.