State Debt Policies and the Credit Ratings of Public Universities

Abstract

As public institutions have come to rely more heavily on borrowing, they have adopted many policies to govern debt issuance in an effort to bolster their credit rating and thus reduce the costs of borrowing. In many states, the implemented debt polices are applied not only to direct state agencies but also to the public entities such as universities that operate with some autonomy. The question of how these state policies affect various actors remains unanswered. Given that some states' debt policies with respect to public universities are more restrictive than others, how are these differences perceived in credit markets? This article looks at the impact of certain state policies and procedures on public university credit ratings.