Central Michigan University has maintained solid financial health, according to credit ratings by two agencies that rate higher education bonds.

Standard & Poor’s has given CMU an “A+” rating, and Moody’s has given an “A1″ rating, said Barrie Wilkes, associate vice president of financial services.

“It is a solid credit rating, but it certainly doesn’t indicate we’re rolling in money,” Wilkes said.

He said there are three firms that rate higher education bonds: Standard & Poor’s, Moody’s and Fitch. S&P uses the same rating scale as Fitch, while Moody’s scale is different, he said.

On both scales, CMU falls in the third-highest level, out of five investment grade ratings.

Wilkes said there are only four public institutions in the country with an “AAA” rating, the highest on the scale Standard & Poor’s and Fitch use.

He explained the process of determining a university’s credit status as one that encompasses a wide range of details.

“There are a lot of subjective things different agencies look at,” Wilkes said. “They look at the university’s financial statements – debt versus assets and revenue, enrollment and admissions ratios and retention, the academic quality of incoming classes, and the state’s economy – because state appropriations are a big part of our revenue.”

Wilkes said the status also is determined by the findings of agency representatives on visits to campus, and by the stability of the university’s management – financial management in particular.

“(Agencies) want to get a feel for how comfortable they are with our leadership,” he said. “They also look at the university’s plans for the future – if we are going to take on more debt, and what we would do if we get state cuts.”

Wilkes said CMU’s status has remained the same for at least 15 years, but assessments do open the door for change.

“(Agencies) are continually looking at schools and can downgrade you at any time,” he said, explaining that representatives likely re-examine a university’s rating every three to four years.

“It’s very hard to move up, because you must significantly reduce debt or increase reserves, which is tough to do,” he said.

Wilkes said that in comparison with other schools around Michigan, CMU rates higher than both Eastern Michigan University and Western Michigan University.

“(Agencies) like the fact that financially (CMU) is pretty conservative,” he said. “The board and administration has set aside $5.5 million to a differed maintenance fund. Some people wouldn’t do that.”

Wilkes said the state’s struggling economy presents continual challenges for any educational institution.

“It’s a huge black cloud hanging over the university with what is going on in the state,” he said. “If (the state) is heading into a recession, that is very scary.”

Other universities

Todd Ohmer, assistant to the vice president for business and finance at Eastern Michigan University, said EMU’s credit status has largely been affected by the university’s decrease in student enrollment during the last few years.

EMU has a long-term credit rating of “A2″ on Moody’s scale and an “A” with Standard and Poor’s, he said.

“We are one of the few public in-state universities where enrollment is down,” Ohmer said. “I think this is a direct relation to the poor economy because people are moving out of Michigan. The southeast Michigan area is in a worse condition than other parts of the state, and tuition is where we get a large part of our money.”

Ohmer said 75 percent of EMU’s revenue comes from tuition, and the other 25 percent comes from state appropriations, which have decreased by $8 million to $10 million during the last five years.

EMU has two large-scale construction projects currently on the docket, which together have maxed the university out to its highest debt capacity, he said.

“We are at a $146 million debt capacity now, and expect to be taking on another $71 million this fall (when the initial project costs come through); that will put us at $220 to $230 million,” he said.

Western Michigan University has a similar credit rating to EMU on Moody’s scale and is rated like CMU with S&P.

Patty Van Walbeck, WMU director of accounting services, said the university’s credit rating is an “A2″ with Moody’s and an “A+” with S&P.

“We have no major construction in progress we’re bonded for,” she said. “We also have not received any large state appropriations for projects in quite some time.”

Van Walbeck said WMU’s enrollment has remained steady over the last couple of years, and increased slightly last fall.

“(Credit) agencies definitely look at that,” she said.

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E-mail the author: Heidi Fenton