Agency cites botched presidential research in UMaine system’s credit outlook decline

A global credit rating agency has revised its credit outlook for the University of Maine system from stable to negative for the second time in a decade, citing a failed search to replace Augusta campus president, a drop enrollment numbers and millions of dollars in anticipated budget shortfalls.

The outlook for the university system has changed from “stable” to “negative”, although the rating agency S&P Global has confirmed its underlying “AA-” rating, according to a report that the finance committee of the board of trustees included in its agenda for Wednesday’s meeting.

“The rating and outlook revision reflect our view of Maine’s lagging social capital and demographic trends,” S&P said in its report, released as the university system issued a series of revenue bonds totaling 122, $7 million last month. Credit scores play a major role in determining the interest rate a borrower will pay.

University System Bonds were issued to help fund projects such as the expansion of a residence hall and parking garage at the University of Southern Maine in Portland, the engineering and design center of $78 million recently opened at the flagship Orono campus and an energy project there, said Ryan Low, system treasurer and vice chancellor for finance and administration.

Although S&P touted the “strong finances” of the University of Maine system, it cited turnover among campus leaders as one reason for its diminished credit outlook.

“We believe there is high management and governance risk with some uncertainty around the implementation of current and future strategic initiatives at a time when the system is already facing registration and operations challenges. financials,” the rating agency wrote.

In addition to the failed attempt to fill the role of president of the University of Maine at Augusta, the seven-university system has also seen the departure of two other campus presidents over the past year, with Glenn Cummings leaving his president of the University of Southern Maine and Edward Serna is stepping down as head of the University of Maine at Farmington.

This is not the first time that the university system has seen its credit outlook decline. S&P changed its outlook to “negative” in 2015 for identical reasons, citing unstable leadership and declining enrollment and tuition revenue.

Low pointed out that S&P had kept the University of Maine system’s credit rating at the same level, at AA-, and that the agency had praised the system’s financial responsibility.

The revised credit outlook “barely” affected the university system’s ability to borrow money for the latest round of bonds, and the system was able to secure loans at 4.5% interest, less than a percentage point higher than the system would have been. able to find if he had a “stable” credit outlook, Low said.

“It’s not a headline, in the scheme of things,” he said.

The university system has been talking about its challenges “openly and publicly for some time,” Low said.

The revised negative outlook is a “chance to address some of these challenges that are being rated”, he said. “We feel like the changes we’re making absolutely address those negatives. I am very confident about these investments that we are making.

The university system has been embroiled in controversy since May, when it was revealed that Michael Laliberté, the candidate chosen to lead the UMA, had faced votes of no confidence at his former institution, a state university in New York.

The State University of New York-Delhi College Senate accused him of ‘enabling a culture of disrespect and hostility’ and being financially irresponsible during his six-year tenure. as president.

The chair of the WBU presidential search committee, a system administrator, knew about it but did not share this information with the other committee members. Laliberté subsequently retired from his job ahead of his August 1 start date, but the university system will be tasked with ensuring he is paid at least $235,000 a year – his salary of $205,000 plus a housing allowance of $30,000 – over the three-year life of his contract if he cannot find a comparable position.

Professors at the University of Maine at Augusta, the University of Southern Maine and the University of Maine at Farmington voted against Chancellor Dannel Malloy following the research debacle.

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