Falling enrollment, dorm debt squeezes Pa. state colleges

Moody's Investors Service has cut the credit rating on $1.5 billion borrowed by West Chester University, Cheney State University, and the 12 other Pennsylvania State System of Higher Education colleges to Aa3, from Aa2.

The state colleges face "weakening state support" under Gov. Tom Corbett, along with "declining enrollment" -- fulltime students dropped below 107,000 this fall, from 112,000 a year ago -- along with "weak" applications from feeder high schools, especially in economically depressed Western Pennsylvania. Moody's also cites "political limitations on the system's ability to raise tuition and fees, and challenges in reducing expenditures" under current labor contracts.

The schools also face "very large and growing liability" for unfunded pensions and healthcare promised retired professors and other staff, along with the Commonwealth of Pennsylvania's credit rating downgrade last July, which left the state rating at Aa2. 

The state colleges' debt load has risen significantly since 2004, thanks partly to fancy new dorms built at the local campuses to lure more students. The debt contributes to the colleges' "high leverage" compared to tuition income and other revenues. Still, Moody's concluded, current cash flow is enough to make bond payments.