The credit rating committee of Moody's Corporation decided
earlier today to downgrade the credit rating of the University of Alaska
from its current A1 rating to Baa1 with a negative outlook. In informing
the university of the action, the committee said the downgrade is a result
of the “material impairment” on the university’s financial outlook as well
as the “significant execution risk,” caused by the significant reduction in
The decision drops UA’s credit by three notches, which now makes UA the
second lowest rated flagship university in the nation.
“This is a direct result of the state’s budget cut and demonstrates what we
have been saying -- the 41 percent [$136 million] budget cut to the
university continues to harm us every day,” said UA President Jim Johnsen.
“Today’s news just amplifies the impact of the state’s funding cut --
Moody’s downgrade harms our ability to bond or borrow money at favorable
interest rates and to be viewed as financially stable.”
According to the information provided to the university, there has never
been a three-point drop at one time in Moody’s institutional rating, and,
more significantly, a rating of Baa1 is just two notches from being viewed
as a non-investment grade debt.
If the Board of Regents votes to declare financial exigency, allowing more
rapid downsizing, it would not impact today’s downgrade, Johnsen said, but
it could change Moody’s outlook for UA to be more favorable.
UA currently has financial indebtedness on several of its buildings
including the UAF Engineering Building, the UAA University Center and the
UAF Power Plant.
In its rationale for cutting the university budget, the governor’s Office
of Management and Budget cited a 2017 Moody’s downgrade in UA’s bond
rating. However, that downgrade was precipitated by the state’s poor
financial condition and structural imbalance, and the state received a
number of downgrades during that period.