A national credit rating agency may downgrade the credit scores of New Mexico’s research universities.
Moody’s Investors Service said the review of the universities was prompted by its decision to review the state of New Mexico’s credit rating, announced earlier this week,
“Each of the institution’s credit fundamentals are closely tied to the health of the state economy and to the state’s credit,” a news release said.
Moody’s said the University of New Mexico, which has an Aa2 rating, New Mexico State University (Aa3) and the New Mexico Institute of Technology and Mining (A1) are all currently under review along with the New Mexico Military Institute (Aa2).
“We will also examine each institution’s contingency plans to cope with and adapt to the potential direct and indirect impacts of the state’s current fiscal and economic challenges, as well as potential pressures on local government support,” the release said.
The report said the impact on each university could be different. A lower bond rating would lead to higher rates for future borrowing. Current bonds would not be affected.
Andrew Cullen, a UNM associate vice president who deals with the budget, said any credit review demands a serious response.
“That said, we are confident in the university’s finances and programs, with steady student enrollment figures and the Innovate ABQ initiative moving forward,” Cullen said in an email to the Journal.
Cullen said a lower bond rating wouldn’t necessarily mean fewer capital construction projects, such as new buildings, in the future.
Angela Throneberry, a NMSU vice president for administration and finance, said the review was expected given the state’s recent economic challenges. She said NMSU employees have worked over the past three years to find savings for the university.
“We believe Moody’s analysts will consider these efforts and resulting successes as part of their review,” Throneberry said.
New Mexico Tech President Stephen Wells said the university in Socorro is awaiting the result and “hoping there is not a significant change.”
Robert McEntyre, spokesman for the state Higher Education Department, said it makes sense that Moody’s would be looking at the state universities’ budgets given the recent crashes in oil and gas prices.
“That being said, it’s encouraging that these institutions are taking proactive steps to maintain stability,” he said in an email to the Journal.
The Moody’s review is the latest sign of economic turmoil for a state that has seen plenty in recent months.
After depleting its cash reserves, New Mexico is facing an estimated budget shortfall of $458 million for the fiscal year that started in July, along with a $131 million deficit for the just-ended budget year.
Martinez ordered state agencies last month to reduce their spending by at least 5 percent, but that directive did not apply to public schools and universities.
Still, more spending cuts may well be enacted after a special legislative session that Martinez is expected to call later this month. Some lawmakers have said steep budget cuts for higher education have been discussed, possibly in excess of 5 percent.