Weekly Market Update

STATE BUDGETARY PROBLEMS THREATEN CRITICAL NONPROFITS

Thursday, August 17, 2017

Many nonprofits around the country are threatened by continuing state budgetary problems. During times when state governments are unable to compromise on a budget, nonprofits risk losing state appropriations that are necessary to provide their services. Many of the nonprofits that provide human health services to the poor, mentally ill, and those leaving prison are the first to have appropriations slashed. In Connecticut, after a budget was not passed, cuts to the department of Mental Health and Addiction Services resulted in programs being cut and positions being frozen. After two years of budgetary conflict in Illinois, many nonprofits have decided to shut their doors, even as a budget has finally been approved. For CJE Senior Life, a senior living assistance nonprofit, the cost of rebuilding programs and training new employees is too much, especially with a lack of confidence in state appropriations going forward.

In Other News

  • Despite a strong labor market, inflation has remained below-target levels for three consecutive months. Thus, the federal funds futures market is doubting the probability of another Fed rate hike, down to 36% from 54% a month ago.
  • The once profitable Academic Medical Center business model is undergoing a reformation, led by Banner UMC Phoenix. The current model is considered too expensive and complex, and so Banner is attempting to simplify and specialize to improve patient access and experience.
  • Education Realty Trust (EDR) has completed a $450 million University of Kentucky housing development project that began in 2011. The project has helped bolster the university's on-campus life, leading to greater student success.
  • Bill Gates gave an additional $4.6 billion in Microsoft stock to the Bill & Melinda Gates Foundation. The Foundation has over $40.3 billion in its endowment, not including Gates's latest contribution.
  • Last Wednesday, Education Secretary Betsy DeVos was interviewed by the Associated Press and discussed topics including consumer rules, affirmative action, historically black colleges, and sexual assault.
  • Large institutional investors are worried that the bond market has reached a peak. The market has been stressed with record supply; however, yields on junk bonds have compressed to close to post-crisis lows.
  • Universities have taken up varying strategies to combat lower enrollment due to "Summer Melt" -- when incoming students decide over the summer to not attend in the fall. Primary methods involve staying in touch with students through events, chatbots, calls, and even home visits.

Rating Agency Update

  • Moody's affirmed Iona College's Baa2 rating. The outlook is stable.
  • Moody's affirmed Colgate University's Aa3 rating. The outlook is stable.
  • Moody's assigned A2 to Eastern Michigan University's Series 2017A Revenue Refunding Bonds. The outlook is stable.
  • Moody's assigned Aa2 to University of Georgia's Series 2017 Revenue Refunding Bonds. The outlook is stable.
  • Moody's assigned A2 to University of Central Arkansas' Series 2017 Bonds. The outlook is stable.
  • Moody's assigned Aa2 to University of Arkansas' Series 2017 Bonds. The outlook is stable.
  • Moody's downgraded West Virginia State University's Bonds to B1 from Baa2. The rating is under review for further downgrade.
  • Moody's affirmed California Academy of Sciences' A2 rating. The outlook is stable.
  • S&P affirmed The Catholic University of America's A rating. The outlook is stable.
  • S&P affirmed Lesley University's A- rating. The outlook is stable.
  • S&P affirmed Millersville University's BBB- rating. The outlook is stable.
  • S&P affirmed Simmons College's BBB+ rating. The outlook is stable.
  • S&P affirmed Stetson University's A- rating. The outlook is stable.
  • S&P affirmed West Virginia University's A rating. The outlook is stable.
  • S&P affirmed Willamette University's A rating. The outlook is stable.
  • S&P affirmed University of Portland's A- rating. The outlook is stable.
  • S&P affirmed Nebraska State College's A rating. The outlook is stable.
  • S&P affirmed University of the South's A+ rating. The outlook is stable.
  • S&P affirmed Baylor University's A+ rating. The outlook is stable.