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ChiRedbirdfan
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Sun Nov 11, 2018 1:56 pm

Humdinger wrote:
Sun Nov 11, 2018 8:01 am
ChiRedbirdfan wrote:
Sun Nov 11, 2018 12:28 am

I am a very factual oriented so letting you know that before I ask you this question about your post..so what is the basis for saying that ISU “seems to be in good financial position”? If one looks at ISU’s debt rating (dropping over the last 5 years, one level above junk and also 5 levels below Indy state or Uni for comparison based upon Moody’s), shrinking endowment, lack of enrollment growth, and falling academic rankings then one should be deeply concerned. If you want to compare ISU to WIU, SIU, NIU OR Chciago State (whom all are failing in many ways) then yes we are better. I am not hammering ISU but believe all those that love and support ISU need to understand the reality of ISU’s finances if they want to make informed decisions on how to help and support ISU. I AM JUST SAYING.

Chi, not being a smarty pants here but I'm sincerely asking.
*Is the basis for ISU's debt rating because of the school's financial irresponsibility or because of our association in general with the state of IL? (broad question I realize) I realize many factors go into the rating (hmmm or do they?) but why has our debt rating dropped?
*Endowment. How much has it shrunk? From when to when? What's a healthy number for endowment?
*Enrollment growth. While we may not be growing, haven't we stayed consistent, generally, over the last 30 yrs? How much should we be growing? Does the University even want to grow? Is it in our best interests to grow enrollment? Interesting question- how much room do we have to grow?
*Falling academic rankings. According to who? What are those stats?

*In your view, from your informed basis, how do we best help and support ISU? Absolute sincere question. This is a good convo for all of us to have.
I am not expert but will give by two cents to your answers:

1. State of Illinois and their problems are certainly a part of ISU's falling debt rating. However the University of Illinois system's debt is rated 5 or 6 places higher by Moody's so some of it is ISU specific too. I believe some of ISU's challenges include its overall positioning...ie lack of some substantive degrees such as not having an engineering..etc. We can come up with likely a long list of excuses why the debt is rated near junk status but regardless of reason the reality is that ISU's debt rating is low and it will be harder/more expensive for ISU to borrow money.

2. The endowment seems to be hovering around $100,000,000 to $110,000,000 million but it looks like ISU was drawing down on some of it in recent years to help get through the financial crisis. That is understandable but that is not ideal and ISU really needs to grow their endowment as it is small for a university of its size and reputation when compared to other state universities. I do not know what size it should be but certainly it needs to grow. U of I system endowment is $3.4 Billion. That is not a fair comparison but it does give a perspective about the significant differences in endowment size.

3. I strongly believe meaningful and planned growth is needed over time. Many national state universities have increased enrollment significantly over the past 30 years....ie Iowa State, UIC, Michigan State...etc. This allows the universities to spread overhead costs amongst a lot of students vs a smaller set. For ISU it would also be a huge boost to the athletics since the students are the ones the are funding 80% of the athletics cost. Certainly stable enrollment is not a bad thing but gradual planned growth would be a very good. You mentioned that ISU enrollment has been stable for 30 years well the US population was 240,000,000 30 years ago and now it is 320,000,000. The state of Illinois population was 11.3 million 30 years ago and now it is near 13mm.

4. The academic rankings I am referring to are from US News and World report which i believe is likely the most recognized and utilized university ranking. ISU fell from 159 to 171 on the national university rankings during the past year. Usually movements of a few spots is noteworthy but increasing or decreasing 10 or so places is a big move. I am not sure what happened that drove ISU to fall 12 places in one year.

Yes ISU has faired much better recently than NIU, SIU, EIU and WIU and should be credited for outdoing those universities but to say and believe ISU is doing great/good is a stretch and not based on the facts/data, IMO.

bb fan
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Mon Nov 12, 2018 2:31 pm

Virtually all of ISU bond ratings have to do with the state of Illinois. We are often lumped closer with the directionals, when it should be more with the U of I system. We are now able to sell bonds locally, and are having excellent success with the most recent athletics offering. Investors are anxious to work with us.

We have maintained enrollment right around 20k for about 4 decades, now. No big drops. no big gains. It has been the number several presidents and Board of Trustees have found to be right in our wheelhouse, for the physical footprint we have. I think it is a credit to the strong and stable goals we have had. To be able to keep a handle on the enrollment and financial stability is something many U's admire. Especially with the terrible base our state government has provided. Regarding the engineering major, stay tuned....

Back to the conversation that lead to this, ISU has had, and still does have the financial resources to go FBS if that was the right thing to do. As I mentioned a couple of times, we came very close to this a couple of times. All the financial ducks were in order for this to happen. Should we have done it? Per the point I made earlier in this convo, I am thinking more and more it would have been a waste of $$$ and resources, watching how everything has shaken out the last number of years.

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Total Red
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Mon Nov 12, 2018 4:42 pm

^^^^ good info from the well informed

ChiRedbirdfan
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Mon Nov 12, 2018 4:45 pm

bb fan wrote:
Mon Nov 12, 2018 2:31 pm
Virtually all of ISU bond ratings have to do with the state of Illinois. We are often lumped closer with the directionals, when it should be more with the U of I system. We are now able to sell bonds locally, and are having excellent success with the most recent athletics offering. Investors are anxious to work with us.

We have maintained enrollment right around 20k for about 4 decades, now. No big drops. no big gains. It has been the number several presidents and Board of Trustees have found to be right in our wheelhouse, for the physical footprint we have. I think it is a credit to the strong and stable goals we have had. To be able to keep a handle on the enrollment and financial stability is something many U's admire. Especially with the terrible base our state government has provided. Regarding the engineering major, stay tuned....

Back to the conversation that lead to this, ISU has had, and still does have the financial resources to go FBS if that was the right thing to do. As I mentioned a couple of times, we came very close to this a couple of times. All the financial ducks were in order for this to happen. Should we have done it? Per the point I made earlier in this convo, I am thinking more and more it would have been a waste of $$$ and resources, watching how everything has shaken out the last number of years.
Yes investors "lining up" for a low investment grade or near junk bond interest rate. If you factually think ISU should be rated like U of I debt then why is it not rated that way? Big state impact on ISU debt indeed but also ISU own metrics come into play. Just telling it like it is.

bb fan
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Mon Nov 12, 2018 9:29 pm

I dunno, but the bonds for the Redbird arena improvements are bidding compeitively rate wise. Local investors seem to have a lot of confidence. Just telling it like it is. I have no concerns about the financial viability of our university. We will have no issues servicing these bonds. Perhaps It's because of the decisions like FCS / FBS football are the reason.

ChiRedbirdfan
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Mon Nov 12, 2018 9:59 pm

bb fan wrote:
Mon Nov 12, 2018 9:29 pm
I dunno, but the bonds for the Redbird arena improvements are bidding compeitively rate wise. Local investors seem to have a lot of confidence. Just telling it like it is. I have no concerns about the financial viability of our university. We will have no issues servicing these bonds. Perhaps It's because of the decisions like FCS / FBS football are the reason.
What rate was assigned to the new bonds?

MadBird
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Mon Nov 12, 2018 10:10 pm

Ratings went up, or at least the negative watches were removed, when the legislature finally made a bi-partisan effort to move past Rauner's failed scheme and pass a budget last summer. Now that Rauner's out to pasture, we can probably expect the financial picture to improve for the state universities.

Last year, U of I and ISU were both A-, not sure where things are right now. Hardly junk bond status.

ChiRedbirdfan
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Tue Nov 13, 2018 7:37 am

MadBird wrote:
Mon Nov 12, 2018 10:10 pm
Ratings went up, or at least the negative watches were removed, when the legislature finally made a bi-partisan effort to move past Rauner's failed scheme and pass a budget last summer. Now that Rauner's out to pasture, we can probably expect the financial picture to improve for the state universities.

Last year, U of I and ISU were both A-, not sure where things are right now. Hardly junk bond status.
Last year ISU was rated by Moody's ..... rated Baa2 (low investment grade) up from Baa3... 2 above junk (non-investment grade). Show me where ISU and Uof I were rated same last year. I hope that is true but I have not seen it. Not picking a fight with you Madbird but looking to be accurate. Some make factually oriented statements about ISU financials that are not backed up by facts....ISU is doing well in many ways but their debt ratings are weak.

Moody's assigns Baa2 to Illinois State University
https://www.moodys.com/.../Moodys-assig ... ity--PR_90...
Dec 19, 2017 - $186 million of pro forma rated debt outstanding ... Founded in 1857, Illinois State University is the oldest public university in the state and is ...

bb fan
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Tue Nov 13, 2018 8:49 am

I dunno what "rate" was assigned to the bonds, Chi. I do know we are paying a lower interest rate going local, and the local lenders have high confidence in their investment. And we have a solid plan and will have no issues servicing this debt.

I am reacting to your inference that ISU has not been capable, or is not currently capable of going FBS because the university is in some sort of financial stress. From what I know that is not at all the case. We could get it done, if it was considered something that clearly moved athletics and the university as a whole forward. The opinion has been is that it would not be a good investment, and I have come around to agree.

And Rauner winning or losing has, or will have very little to do with state funding. I will tell you that there will be little, if any increase in state funding for higher ed. I think the state is unfortunately on the verge of very serious financial issues. The operating budget is already 6 billion in the red. Most of the pension funds are quickly running out of reserves as the state has not contributed their share in years. Because our state government has not be willing to make the harder choices to fix it, and the state employee unions refuse to play any part in the solution. it is all coming to the brink. I think much of this is about to hit the fan. The solution Madigan will put into action will be a whole new set of taxes, that will just drive more out of the state. Which will not help the U's or anything else.
Last edited by bb fan on Tue Nov 13, 2018 3:23 pm, edited 2 times in total.

MadBird
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Tue Nov 13, 2018 9:48 am

That was my interpretation of the 5th slide:

https://www.spratings.com/documents/201 ... 8fa4b54a69
University of Illinois
A- / Watch Negative
Illinois State University
A- / Watch Negative
Southern Illinois University
BB / Watch Negative
Governors State University
BB / Watch Negative
Western Illinois University
BB- / Watch Negative
Eastern Illinois University
B / Watch Negative
Northeastern Illinois University
B / Watch Negative
My understanding is the ratings change due to all kinds of circumstances, some ISU controls, some they don't, the type of project that is being borrowed for, which ratings agency is doing the rating, etc. etc. I don't think ISU is in some kind of financial "crisis".

ChiRedbirdfan
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Tue Nov 13, 2018 12:50 pm

MadBird wrote:
Tue Nov 13, 2018 9:48 am
That was my interpretation of the 5th slide:

https://www.spratings.com/documents/201 ... 8fa4b54a69
University of Illinois
A- / Watch Negative
Illinois State University
A- / Watch Negative
Southern Illinois University
BB / Watch Negative
Governors State University
BB / Watch Negative
Western Illinois University
BB- / Watch Negative
Eastern Illinois University
B / Watch Negative
Northeastern Illinois University
B / Watch Negative
My understanding is the ratings change due to all kinds of circumstances, some ISU controls, some they don't, the type of project that is being borrowed for, which ratings agency is doing the rating, etc. etc. I don't think ISU is in some kind of financial "crisis".
Agree with your comments. ISU is not at all in a financial crisis but the statement that ISU finances are great/good is too strong.

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Virginia Redbird
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Tue Nov 13, 2018 12:51 pm

I guess I am responsible for this Financial State of ISU discussion, even if it was without any intent on my part. I did a little searching on-line myself and found this article from Forbes to be interesting. The financial woes of the State Universities in Illinois appear not only to be from the lack of funding from the state legislature but also some out of control salaries and resultant pension payouts by the universities themselves. This is not my area of expertise but reading that Illinois politicians and high level government workers have mismanaged public funds and awarded themselves exorbitant salaries and benefits...who would have believed that, huh?

https://www.forbes.com/sites/adamandrze ... e4c4aa1018

Getting back to football...I have stated that I like FCS football (maybe just me) and I don't have any desire for ISU to jump to FBS. I don't think the indoor facility is going to happen any time soon if ever. The bubble option makes sense to me and would be something to fill the gap until (if) the indoor facility is ever built. I don't think ISU is interested in entering a facilities race with other programs. While several Illinois state universities have struggled with enrollment and finances, ISU looks to have fared a little better. Maybe due to the conservative approach that some have referred to on this board.
“When you have great players, playing great, well that’s great football!”
John Madden

JHBird
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Tue Nov 13, 2018 12:59 pm

Virginia Redbird wrote:
Tue Nov 13, 2018 12:51 pm
I guess I am responsible for this Financial State of ISU discussion, even if it was without any intent on my part. I did a little searching on-line myself and found this article from Forbes to be interesting. The financial woes of the State Universities in Illinois appear not only to be from the lack of funding from the state legislature but also some out of control salaries and resultant pension payouts by the universities themselves. This is not my area of expertise but reading that Illinois politicians and high level government workers have mismanaged public funds and awarded themselves exorbitant salaries and benefits...who would have believed that, huh?

https://www.forbes.com/sites/adamandrze ... e4c4aa1018

Getting back to football...I have stated that I like FCS football (maybe just me) and I don't have any desire for ISU to jump to FBS. I don't think the indoor facility is going to happen any time soon if ever. The bubble option makes sense to me and would be something to fill the gap until (if) the indoor facility is ever built. I don't think ISU is interested in entering a facilities race with other programs. While several Illinois state universities have struggled with enrollment and finances, ISU looks to have fared a little better. Maybe due to the conservative approach that some have referred to on this board.
That 'pension abuse' is real. Fortunately the state has closed down a lot of that over generous pension stuff. People hired in the last 7 years don't have anywhere near the benefit the older employees have.

bb fan
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Tue Nov 13, 2018 1:29 pm

Some of the pension abuse has been shut down, JHBird, but the lions share of the mess is still there, and getting worse. The real killer is the automatic 3% COLA increases. This issue is about to consume every nook and cranny of state government. Local munis are starting to struggle big time. This is a time bomb that started ticking 30 years ago with the infamous Edgar/Madigan "ramp". An awful, never sustainable plan that the state has not paid into anywhere remotely close to the plan. It was all to get $$$ special interest from the state employee unions. No amount of tax increases can fix it. 6 years ago some decent, bipartisan legislation was passed by the legislature, signed by the governor that would have cut COLA increases in half. A great first step. AFSCME and other state unions fought it and won. Keeping state funding for higher ed and other stuff will be near impossible as a higher and higher % goes to employee costs and pensions. Quinnie, if this is going off topic, I understand. But if we are talking about state funding for ISU, this is a gigantic issue.

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isuquinndog
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Tue Nov 13, 2018 3:08 pm

I'm fine with the topic. Just keep "it's the dems fault" or "it's the repubs fault" out of it.
LET'S WIN THIS GAME!

MadBird
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Tue Nov 13, 2018 5:21 pm

isuquinndog wrote:
Tue Nov 13, 2018 3:08 pm
I'm fine with the topic. Just keep "it's the dems fault" or "it's the repubs fault" out of it.
I apologize for my reference to the soon to be former governor, but most of the ratings analyses reference the failure to get a budget as a reason for the downgrade to university ratings, and then when the legislature passed a budget over the governor's "objection", the ratings went back up. Not trying to pick one party over the other, just picking on the person.

So, I'm done with it anyway. :shhh:

Birdswin
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Tue Nov 13, 2018 10:47 pm

I can easily say - most, not all, financial institutions specifically quantify the investments in any entity related to or that receives either all or a part of their funding - direct or indirect, from the State of Illinois. Based on the levels, whether it may be a concern. Thus, most institutions have been shrinking their exposure to any type of bonds that have the "Stench of Illinois" attached to them.

The math does not work on Teachers and other State of Illinois pensions. For example, the pension is based on the "High Three" - well that person and the State were not paying into the Pension Fund for 30+ years based on that High Three. That teacher was only paying in based on their current salary - which is not reflective of what will be taken out. Several fixes need implementation - First, use the Federal system as an example - it is much more of a 401K based system, the pension is close to the same as SSI, except SSI uses 30-35 years, instead of 3. Second, lower the 80 percent down to 30 percent for payout. Third, only payout the revenue taken in and allow the earnings to reinvest until the fund is brought up to where it needs to be - and that may not be enough. Yes, retirees will scream, but that is the financial mess that is Illinois.

bb fan
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Wed Nov 14, 2018 6:01 am

All good ideas, Birdswin. Problem is, the state employee unions own Madigan, and now Pritzker and the super majority that runs the state. Yep, if there is any chance this thing can be fixed, the unions have to participate.in ways you suggest. Every tax in the world will not be enough, and citizens will continue to move out of state. If they don't get involved, they could very well be looking at pennies on the dollar in the not too distant future.

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Virginia Redbird
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Wed Nov 14, 2018 7:44 am

Birdswin wrote:
Tue Nov 13, 2018 10:47 pm
Yes, retirees will scream, but that is the financial mess that is Illinois.
I don't disagree with you at all on the need to fix the finances of the state of Illinois. But I think we all know it will never happen until a situation similar to the city of Detroit occurs, if it does. I have quite a few friends that are retired and benefit from the Illinois pension system and they are all very concerned about what the future brings. Obviously, they are also totally against any reduction in their benefit. I spent 7 years in the Detroit, Michigan area and also have a bunch of friends that were Detroit city workers. When the city went bankrupt they were provided the option of getting essentially next to nothing or agreeing to a very substantial reduction in retirement benefit under the bankruptcy restructuring. They had no choice but to take significant reductions in their retirement and many had to go back to work to make up the difference from what they had planned for. These people paid their share and it was the city officials that through both corruption and inept management created the crisis. I see quite a few similarities to the situation in Illinois.

The article I posted showed that some people at the top, like Edgar, are raping the system. Edgar is triple dipping system, legally, but still triple dipping. But most of the retirees worked, paid their contributions and thought they had earned their retirement benefit. They are going to face a problem much like the city of Detroit retirees in the not so distant future I believe. Saying they will "scream", well who would not. The people that are the cause of the problem will not be affected in the least. That is the politicians, in both parties, that created this situation. Alas, the citizens of Illinois keep re-electing essentially the same folks so...they are the ones who really own it.

I retired after three decades with the Department of Defense (civilian not active duty). People ask me why my wife and I don't move back home to Illinois. Well honestly, the weather for one. I have no desire to experience -25 degree temps any more with snow up to my eyeballs. But the main reason we would not move back to be near family and friends is taxes, taxes, taxes, taxes, taxes, taxes, taxes, taxes and then...more taxes. I don't blame the people who are able to and are fleeing the Land of Lincoln. That the state financial mess impacts the state universities negatively would also be expected. While the few things I have read indicate that schools like NIU and SIU are having some significant problems it seems that ISU is not having those type of problems. ISU may not be in the best financial health, particularly if you begin comparing to schools outside of Illinois, but within the state it seems to be doing fairly well. I don't think comparing Illinois state schools to schools in other states is a valid comparison. Other states have problems of course but not all have financial problems that rise to the level of those in Illinois.

I joke with people when they find out I am from Illinois that political corruption is the norm in Illinois. It is tradition that former Illinois Governors go to federal prison at some point. Illinois does not let death keep you from voting...at least in Cook County it does not keep you from voting. Probably only Louisiana has a more robust tradition of political corruption than Illinois...but I think we are catching up!

My last post on the financial concerns...except for how they impact the football program.
“When you have great players, playing great, well that’s great football!”
John Madden

Humdinger
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Wed Nov 14, 2018 10:04 am

I like your post Virginia - because you've been there! Edgar is considered a savior of sorts these days in the GOP because he negotiated and managed what appeared to be a balanced budget.

It really wasn't 'balanced' because Edgar certainly contributed to the underfunding of pensions (read: backloaded pension funding which didn't work as planned) which is now leading to either bankrupting our state, reducing pension benefits drastically, rasing taxes significantly...or all of the above. People forget Edgar came within a sliver of being indicted in the MSI scandal. With that said I do like the guy.

But man, the state made promises to it's workers. People worked all those years with the expectation the state would keep its promises.

And preach it brother regarding taxes. I'm looking at moving to TN once my youngest high schooler is completed and one of the main reasons is because of that.
Last edited by Humdinger on Wed Nov 14, 2018 10:40 am, edited 1 time in total.

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