Fitch Ratings completed its review of ratings on five public universities in New Jersey that were placed Under Criteria Observation after the publication of revised U.S. College and University Rating Criteria in June.
The College of New Jersey, New Jersey City University and William Paterson University were all downgraded due to changes in underlying credit characteristics, while Montclair State University experienced the dip due to both credit and new criteria considerations. Meanwhile, Stockton University’s rating was affirmed.
TCNJ was downgraded to ‘A+’ from ‘AA-‘ with its outlook revised to stable from negative; MSU was downgraded to ‘A+’ from ‘AA-‘ with its outlook stable; NJCU was downgraded to ‘BBB’ from ‘A-‘ and its outlook was revised to negative from stable; Stockton was affirmed at ‘A-‘ with its outlook stable; and William Paterson was downgraded to ‘A-‘ from ‘A’ and its outlook revised to negative from stable.
Fitch’s fundamental credit criteria included: “a competitive demand environment and challenging demographic characteristics, broad reliance on student-fee generated revenue, and effectively flat state operating support which has not kept pace with expense growth.”
Fitch said it expects that level of support from the state to continue, which could contribute to more pressure on margins. In addition to the specific credit criteria, Fitch said the ratings also reflect an environment where competition continues to increase — placing limitations on the ability to increase tuition rates and reduced flexibility in spending, on top of “significant long-term liability burdens.”
Of the 28 institutions placed UCO by the release of revised criteria, Fitch has review “substantially” all, finding almost 60 percent saw upgrades and nearly 40 percent downgrades. Approximately 30 percent were attributed just to reframing; the rest were a combined genesis of criteria and credit driven actions.
Editor’s note: A previous version of this article indicated that Stockton University’s rating was downgraded. That is not correct, the rating was affirmed at ‘A-.’