S&P cites ‘very strong’ financial profile, sound leadership, and stable enrollment among reasons for affirming the credit rating for Maine’s public university system.
ORONO, Maine — The University of Maine System has retained its AA- credit rating during the COVID-19 pandemic. AA- means UMS has a “very strong capacity” to pay interest and repay principal on its outstanding debt.
UMS Vice Chancellor Ryan Low provided an overview of the report to the Finance, Facilities & Technology Committee on Sept. 15 via Zoom. The S&P review team noted UMS’ stable outlook is in contrast with the not-for-profit higher education sector that faces more dire challenges due to COVID-19.
S&P Global’s report indicated UMS management “maintains a disciplined debt policy, imparts fiscal discipline through using dashboard indicators and long-term financial planning, and adapts to the challenging demographics of Maine through newly developed initiatives.”
“Sound fiscal management is imperative to manage our costs, lower the cost of borrowing, and attract additional investments,” said UMS Chancellor Dannel Malloy. “Tax and donor dollars go farther because we are careful stewards of our resources.”
The System’s rating and outlook also were positively impacted by the transformational $240 million pledge from the Harold Alfond Foundation, which will be utilized over the coming years to drive student success and innovation.
S&P Global primary credit analyst Nicholas Fortin reported the fiscal 2020 UMS revenue stream was diverse: 37.9% came from student-related fees and tuition, 26.1% from state appropriations, 18.9% from auxiliary operations and other miscellaneous revenue sources, and 17.1% from grants and contracts.
The ratings agency also favorably noted modest annual increase in state appropriation in recent years supported by the Legislature and Governor but recognized the need to reduce a critical deferred maintenance backlog.
The report assessed UMS’ enterprise profile as strong, characterized by breadth and depth, and noted its enrollment has remained stable even with unfavorable state demographics and strong regional competition. The report also noted that UMS’ unified accreditation model will permit greater academic collaboration between universities and allow the UMS to offer academic programming that any one university doesn’t have resources to offer individually.
James Donnelly, vice chairman of the UMS Board of Trustees and executive vice president and chief commercial officer at Bangor Savings Bank, lauded the financial stewardship of university leaders.
“This rating reflects the expertise and vision of people with the University of Maine System and with each university,” he said. “We stand on a strong financial foundation from which our universities distinctly and effectively serve students and the state.”