ASU holds steady with financial rating

ALAMOSA — Adams State University is holding its own financially, Chief Financial Officer Heather Heersink reported to the audit and finance committee on Wednesday and will report to the full ASU board of trustees during their meeting today.

“We are cautiously optimistic that we are moving in the right direction,” she said.

Moody’s Investors Service seems to agree. Heersink said Moody’s recently affirmed ASU’s A3 rating-outlook negative — “We were able to hold our rating” — but indicated that if positive changes continue to be made at the university, Moody’s will review the rating in about a year and possibly upgrade it to A3-stable outlook.

Regarding the “negative outlook” attached to the rating Heersink said, “That just reflects uncertainty.”

Uncertainty factors can include state funding and enrollment, for example.

“There’s a lot of factors in it,” Heersink explained. Moody’s looks at such factors as liquidity and overall debt, enrollment trends and retention trends as well as some intangible components like leadership and momentum. The positive resolution of the university’s accreditation status was also a factor.

Heersink said Moody’s was impressed with the university adopting a financial action plan for the fiscal year July 1, 2018 to June 30, 2019, and showing improved projected year-end statements. She said Moody’s stated, “Management expects improved operating performance in fiscal 2018 and fiscal 2019, driven by the impact of continued expense reductions.”

Heersink said, “I was happy they were willing to look at what we did” and to consider the direction the university is going “and give us credit for that.”

Heersink explained that A3 is the lowest in the A category, but a downgrade would lower the university into the B category, something ASU hopes to avoid and which some other institutions have not avoided. Western State University, for example, has a Baa rating from Moody’s.

“I would be happy to retain where we are,” said ASU Trustee Wendell Pryor who sits on the finance/audit committee.

Factors that could result in an upgrade to the Moody’s rating include higher enrollment and increased tuition revenue, increased cash and investments totals and stronger support from the state.

Downgrading factors, on the other hand, would include inability to maintain operating cash flow margins at or above 12-14 percent (something Heersink said should not be an issue), enrollment and subsequent tuition revenue declines, reduction in state funding and a material increase in debt.

Heersink said more fiscal year-end information should be available by the trustees’ October board meeting, but things are looking pretty positive at this point. She said the university has improved its financial condition over the previous fiscal year.