Weekly Market Update

TRUMP'S CUTS MAY HURT UNIVERSITY RESEARCH

Thursday, April 6, 2017

The Trump administration proposed a cut of nearly 20% from the National Institute of Health's funding, the largest backer of university-based research. In response to GOP members' concerns about hindering important developments in cancer and epidemiology science, Health and Human Services Secretary, Tom Price, argued that the cut will not hurt research as it applies only to overhead reimbursements to colleges and universities. On the other hand, universities argued that indirect costs are essential to cover laboratory and administrative fees. Further, since colleges and universities are increasingly efficient in managing these indirect research costs, the cut will likely create additional funding burdens for the schools. If Congress accepts the proposal, state institutions may be the first to suffer without outside resources to cover lab costs.

In Other News

  • The Securities and Exchange Commission may increase fines under new, bi-partisan legislation. If the bill passes, the maximum penalty amount for individuals and financial firms would increase by approximately 450% and 1000%, respectively.
  • A bill that would give Kentucky school districts more autonomy in reforming struggling schools has been approved by the House. If the Senate signs off, it will go to Kentucky Governor, Matt Bevin. In the meantime, the Kentucky Department of Education is working on the development of a new accountability system for schools and districts.
  • White House economic adviser, Gary Cohn, supports the separation of commercial and investment banking. While his idea is consistent with the Trump administration's goal of simplifying the banking system, Wall Street argues that such a law is unnecessary given increased regulation since the 2008 financial crisis.
  • U.S. factory activity cooled slightly as U.S. manufacturing activity dropped from a two-and-a-half year high in March. Despite the decline in activity, manufacturing industries have reported growth as construction spending and factory employment remains strong.
  • Despite its promises to borrowers, student loan provider Navient filed court documents recanting those promises. In the recent past, Navient appeared dedicated to helping Americans pay their student loan debt. In a recent lawsuit with the U.S Department of Education, Navient states that it may not act in the interest of debtors, and that its main job is to get debtors to repay creditors.
  • The Connecticut State College and University system (CSCU) is facing cuts and consolidations. CSCU President, Mark E. Ojakian, is laying the groundwork for systemwide consolidation of various components. Ojakian is recommending merging the system's 12 community colleges. Similarly, financial deficits and less-than-positive demographic projections have forced other states into the same position of considering consolidations.

Rating Agency Update

  • Moody's assigned Aa1 to University of Southern California's Series 2017 Taxable Bonds. The outlook is stable.
  • Moody's assigned Aa3 to Denison University's $65M Series A&B. The outlook is stable.
  • Moody's assigned an A3 to Clarkson University's proposed Series 2017 Bonds. The outlook is negative.
  • S&P assigned AA to University of Southern California's Series 2017 Taxable Bonds. The outlook is stable.
  • S&P downgraded St. John's College's Series 2016 Revenue Bonds and Series 2007 Economic Development Revenue and Refunding Bonds to BBB. The outlook is stable.
  • S&P downgraded Western State Colorado University's Series 2010A, 2010B, 2010C, 2011A, and 2011B Institutional Enterprise Revenue Bonds to BBB. The outlook is stable.
  • S&P assigned AAA to Stanford University's Series 2017 Taxable Bonds. The outlook is stable.