Umass finances called resilient

A major credit rating agency recently looked at the University of Massachusetts and determined that the system’s finances should “remain resilient” through the pressures the COVID-19 pandemic is putting on public higher education.

Fitch Ratings affirmed its ‘AA’ rating on about $320 million of refunding revenue bonds the Umass Building Authority plans to issue on behalf of the state’s public research system and said the rating outlook is stable.

The agency said its rating reflects the system’s “rigorous attention to managing cash flow needs in support of its material capital improvement program,” strong demand, solid state support and its “solid financial profile with adequate liquidity.”

“Umass is expected to maintain liquidity against its debt and expenses at a level consistent with the ‘aa’ assessment.

Umass had approximately $1.7 billion in available funds at fiscal 2019, equal to nearly 50% of total expenses and 44% of adjusted debt, and its leverage levels are expected to remain steady through Fitch’s stress case scenario, inclusive of additional debt plans,” Fitch said.

Fitch’s rating took into consideration the effects the pandemic has on the higher education sector. The agency said Umass went to a fully remote model in mid-march, received $46 million in federal CARES Act funding, and has resumed courses mostly under a remote learning model.

Fitch said its model for higher education “incorporates the sharp economic contraction in 2Q20, with an initial bounce in 3Q20 followed by a slower recovery trajectory from 4Q20” and “assumes the closure of most residential campuses for a three- to four-month period with continued sporadic closures through fall 2020.” Last week, Umass officials outlined steps the system is taking to prepare for the uncertain future.

President Marty Meehan said a projected $291 million shortfall necessitated “very tough expense reductions.” A Umass finance official said enrollment figures this fall were better than originally projected — instead of a 5% decline, actual enrollment was about half a percent below a year earlier.