global recession and universities - oecd · higher education: a global growth sector rising...
TRANSCRIPT
Global Recession and Universities
Roger GoodmanVice President & Team Leader
Roger GoodmanVice President & Team Leader
June, 2009June, 2009
2
Overview
� Background on Moody’s and Role in Rating
Higher Education Institutions
� Trends in Global Higher Education Sector
� Financial Challenge for Universities
� Potential Roadmap for Future Direction of
Financial Management and Policy-setting
3
Moody’s Role and
Ratings
Perspective
4
Universities: Generally Highly Rated
Rated Universities: Canada
• Concordia University, Quebec – Aa2
• Lakehead University – A1
• McGill University, Quebec – Aa1
• Universite du Quebec a Montreal – Baa3
• University of Toronto – Aa1
• University of British Columbia – Aa1
• University of Ottawa, Canada - Aa1
• University of Ontario Inst Tech – A3
• University of Windsor – Aa3
Rated Universities: UK
• Brunel University – Aa1
• Keele University – Aa1
• Private Ratings & Estimate Coverage
Rated Universities: Other
• National University of Singapore - Aaa
• Benemerita Universidad Autonoma de Puebla – Ba1 (Mexico)
• Lebanese American University – A3 (Lebanon, U.S.)
Rated Universities: U.S.
• University of California – Aa1
• University of Michigan - Aaa
• University of Texas - Aaa
*Several more unpublished ratings used for variety of other transactions in UK and Non-US
*Moody’s rates over 200 public & 300 private universities in the U.S.
5
What Ratings Are Used For
� Debt Issuance (bonds, loans, etc)
� Board – evaluation of management, strategy, financial
position beyond auditors
� Donors – want opinion on viability and longevity of
organization
� Management – seek external opinion and dialogue on
emerging trends, strategy, financing issues; also seen as
competitive “ranking” tool generally
� Regulators/Accrediting Bodies – third-party opinion on
financial position that may be difficult within own process
6
Six Key Drivers for Stand-Alone Rating
1. Market position
2. Government Relationship
3. Governance and Management
4. Operating Performance
5. Debt Profile
6. Balance Sheet Strength
7
Trends in Global
Higher Education
Sector
8
Higher Education: A Global Growth Sector
� Rising governmental recognition of linkage of higher
education to economic development
� Most governments trying to increase funding, especially
with “stimulus” funding
� Some governments permitting universities more
flexibility to innovate and adapt revised business model
even if they can’t increase funds
� Globalizing trend—cross border flows of students,
faculties, financing
9
Enrollment Impact of Recessions
Enrollment Grows More Rapidly During and Year After Recession;
Largest Dips in Boom Years
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Total % Change in Enrollment
Indicates recessionary periods
Source: OECD Education at a Glance for Canada, France, Italy, Spain, UK and US
(only countries with complete data from 85 to present)
10
Higher Education Demand is Growing Rapidly
� Developed Countries:
– Economic and social policy goals clearly oriented toward
increasing participation rates, research capacity, quality
– Stature and breadth of higher education is a competitive issue
for nations
� Developing Countries:
– Often part of transition from labor intensive/natural resource
intensive economy
– In some cases, massive government investment already
underway (China, India, UAE, etc.)
11
Higher Education is Globalizing Rapidly
� Students are increasingly mobile, looking across borders
for best opportunities
� Research funding from corporations and foundations seek
out best academics and facilities without regard to borders
� Rising number of cross-border partnerships between
institutions
12
Financial
Challenge: Where
Are Resources to
Meet Demand?
13
Stimulus Funding: Good in Short-Term, But Then What?
Trend in General Government Budget Balance for Select OECD Countries
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F
United Kingdom United States of America Canada
Germany Mexico Australia
Eurozone OECD Median
14
Government Funding: Conflicting Goals?
� Can Universities really grow impact with slow to limited
growth in funding and no ability to control/set tuition?
– Appearance of societal equity and tradition vs. university
pursuit of quality, competitiveness and differentiation
– Affordability or subsidized pricing focus vs. means-
tested/market pricing for students
� Competing public funding needs means that funding may
be subject to peaks and valleys (at least in growth rate)
– Inability to plan for funding expectations reduces impact of
increased government funding
15
Endowments, Philanthropy, etc.
� Relatively few, but globally recognized universities, face
large challenges
– Liquidity loss
– Budget support from endowment
– Philanthropy pressure
� Capital markets disruption
– Fewer loans at higher cost
– Banks stressed
– Project financings tougher to execute
16
Where to from
here?
17
It doesn’t have to take generations for business model to change….
18
Managing through Global Recession
� Governments face growing pressure to increase
independence of universities as ability to fund outstripped
by demand
� Universities (regardless of policy changes) pursue non-
government resources
– Tuition (differential by faculty, international students, etc)
– Research (greater pursuit of corporate research contracts)
– Philanthropy (even now, large potential)
19
Potential roadmap
� Exploring efficiency and effectiveness issues
– Cost reductions
– Change in teaching models? (year-round, 3yr degrees, etc)
– Online education
� Capital financing models
– Public-private partnerships
– Direct borrowing by universities
20
© Copyright 2009, Moody’s Investors Service, Inc. and/or its licensors including Moody’s Assurance
Company, Inc. (together, “MOODY’S”). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS
PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE
REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR
RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM
OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN
CONSENT.
Roger Goodman Tel: +1 (212) 553-3842
Vice President/Team Leader Email: [email protected]