In addition, both credit rating agencies have assigned favorable ratings to a $75 million bond obtained earlier this month to subsidize new academic buildings, housing units, and other facilities enhancements at Penn State over the next two years.

“We are pleased that Moody’s and Standard & Poor’s each recognize Penn State’s continuing commitment to fiscal responsibility and efficiency,” said Gary Schultz, senior vice president for finance and treasurer of the University. “These upgraded assessments will certainly help the University continue to provide the highest-caliber educational opportunities and facilities in support of Penn State’s teaching, research, and service missions.”

According to the Moody’s report, the stable outlook for the University’s creditworthiness reflects the firm’s “expectation of a continued healthy student demand, steady political support, and manageable debt levels relative to a strong financial resource base.”

Moody’s bond rating for the University was elevated from Aa3 to Aa2 with a stable outlook, while a recent bond obtained by the University was assigned an Aa2/VMIG1 rating. Among public universities nationwide surveyed by Moody’s, just Michigan, Texas, Texas A&M, and Virginia hold higher bond ratings, and only Michigan and Northwestern have a higher rating among Big Ten institutions.

Standard & Poor’s applied similarly strong ratings, giving an AA- rating to the University’s long-term debt status and upgrading its outlook from stable to positive. Like Moody’s, S&P attributed the rating to “a continuation of strong demand, favorable state support, healthy annual operating performance, and strengthening liquidity.”

Several additional factors supported the upgrade in credit status, including favorable fundraising, solid trends in research and patient care, and manageable existing debt.

Both reports cited the restructuring of Penn State’s 24 campus locations as playing a key role in bolstering University-wide demand and overall enrollment growth. The reports also cited the University’s increased selectivity over several years that has resulted in consistently raised student quality benchmarks. These accomplishments are even more impressive given a self-imposed cap of approximately 40,000 students at the University Park campus and a protracted 36 percent decline in Pennsylvania high school graduates between 1976 and 1995.

Rapidly growing financial resources at Penn State also were recognized in the ratings reports. Total financial resources have grown to more than $1.6 billion, driven mostly by investment yields and fundraising campaigns. The University enjoys a 20 percent alumni fundraising participation rate which indicates potential for future endowment growth, and is currently nearing the $1 billion goal in its capital campaign, A Grand Destiny: The Campaign for Penn State.

Another factor in Penn State’s fiscal strength has been the positive performance of the newly formed Milton S. Hershey Medical Center. According to calculations, the medical center is credited with providing 19 percent of University revenues. Furthermore, Penn State has implemented initiatives to reduce deficits at its College of Medicine and to solidify the institution’s financial viability since its July 2000 de-merger with Geisinger Health System. The medical center reported a healthy surplus through the first eight months of fiscal 2001 and is close to its break-even point after factoring in support for the medical school.

Moody’s Investors Service is a global credit rating, research, and risk analysis firm that publishes credit opinions, research, and ratings on fixed-income securities, issuers of securities, and other credit obligations. Penn State received its prior upgrade to Aa3 by the firm in July, 1997.

Standard & Poor’s provides independent financial information and analytical services. A division of The McGraw-Hill Companies, Standard & Poor’s has provided objective information and analysis to financial markets for 140 years.

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Contact: Tysen Kendig, Department of Public Information, (814) 865-7517 or tysen@psu.edu.