OREANDA-NEWS. S&P Global Ratings lowered its underlying rating three notches to 'BB+' from 'BBB+' on Governors State University Board of Trustees, Ill.'s series 2007 and 2012 university facilities system (UFS) revenue bonds and series 2008 and 2009 certificates of participation (COPs), issued on behalf of Governors State University (GSU or the university). The outlook is negative.

"The downgrade and negative outlook reflect our view of Illinois' ongoing severe challenges due to its weak financial position, and the resultant impact on GSU's financial position which, in our opinion, creates significant liquidity risk for the university and without correction or intervention, could result in a negative cash balance by August 2017," said S&P Global Ratings credit analyst Jessica Wood. Additionally, the university's operations have been deficit on a full-accrual basis for the past couple of years, and this is expected to continue given the state pressures.

Throughout fiscal 2016, the state's public universities, including GSU, received only a small fraction of historical operating appropriations, placing significant liquidity stress on these institutions given their dependence on these funds to support operations. Furthermore, given the length of the fiscal 2016 budget impasse and the absence of a substantial agreement among elected leaders, it is our opinion that state appropriation outcomes will remain uncertain through at least fiscal 2017.