Leveraging Knowledge

November 23, 2015

From Jessica Weinkle

In a financial report for the US Woods Hole Oceanographic Institute, I read about their S&P Credit rating.  Among other things, the rating rests on relatively stable Federal funding.  Following the trail, I turned up credit ratings for other large research groups entire academic institutions.
Brief skims of the credit reports indicates Federal funding as a key variable for credit rating decisions.  For instance, an except from Moody’s review of UCAR (closely associated with the National Center for Academic Research):

STRENGTH: A substantial portion of UCAR’s funding is received through a cooperative agreement from the National Science Foundation.

CHALLENGE: UCAR is heavily reliant on federal funding for its research (98% of operating revenues are grants and contracts), with limited revenue diversification, exposing the organization to the risk of contract termination.

A general report by S&P on non-profit universities mentions “tuition” at least 38 times.  To the extent that tuition availability is perceived to rest on American public support for student loans, then here is another connection between Federal funding and credit ratings.
In hindsight, it seems obvious that large institutions carry debt and have credit ratings.  But, in mulling it over, this seems to add a different twist to the science- social benefit connection.
Where credit worthiness is tied to Federal support, how does an investment market for academic and research debt affect expectations of those institutions?  Are nations beholden to these institutions for sake of economic stability regardless of their ability to serve other sorts of needs?
I don’t know that these are the right questions to ask.  But, I’m curious to know any thoughts or opinions. I am also curious to know if this is a US phenomena, though I am inclined to believe that this is not likely.

 

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