Wayne State’s financial problems prompt Moody’s to change outlook to ‘negative’

Old Main at Wayne State University
Old Main at Wayne State University. Photo by Steve Neavling.

As Wayne State University continues to struggle with declining enrollment, school officials are spending cash reserves at an alarming rate.

As a result, Moody’s Investors Services has assigned a negative outlook for Wayne State. 

“The revision of the outlook to negative reflects the incremental weakening of Wayne State University’s fundamental credit through the spend down of financial reserves and multi-year decline in enrollment,” the report states. “The outlook also incorporates our expectation that the university’s ambitious strategic plan will place additional pressure on operations and financial reserves.”

In late 2014, Standard and Poor’s also downgraded its outlook for Wayne State to negative.

Rendering of the Mike Ilitch School of Business.
Rendering of the Mike Ilitch School of Business.

Despite the downgrade, the university continued to spend money and create more debt. The university, for example, plans to chip in about $24 million to what was supposed to be a gift – the $59 million Mike Ilitch School of Business, according to an exclusive interview with William Decatur, vice president of finance and business operations, treasurer and CFO. About $14 million likely will come from bonds, which could cost more in interest rates because of the outlooks of the two leading bond-rating companies.

Wayne State may be on the line for even more money, but university officials have declined to release the gift agreement between the school and Ilitch. Motor City Muckraker has filed a Freedom of Information Act request for the records.

In June, the university approved an average 4.1% tuition increase for students.

The university administration has not informed the Board of Governors that Moody’s changed the school’s outlook, according to University of Michigan law professor Dana Thompson, a member of the Board of Governor.

“Wayne State University President Roy Wilson and his administration did not inform the Board of Governors that Moody’s credit outlook for the University was revised from stable to negative in June 2016,” Thompson wrote to Motor City Muckraker. “I am concerned that the Administration did not inform the Board of this development because a negative credit outlook means the University’s credit rating could be lowered in the future and a lower credit rating could cause the University to pay higher interest rates on future debt.”

Thompson added: “This could have negative consequences on our future borrowing. We all are working to ensure that Wayne State succeeds but the administration needs to inform the Board on these serious matters.”

WSU President Roy Wilson
WSU President Roy Wilson

When Wayne State dropped math from graduation requirements in June, the Board of Governors learned about it from the media.

In the past five years, Wayne State’s enrollment has fallen more than 10%, from 30,510 in 2009 to 27,222 in 2015.

Decatur, who came on board in April 2015, said he expects enrollment numbers to begin increasing this fall.   

“We believe we are turning around,” Decatur said. “Historically Wayne State has drawn its students from the metro area. We are starting to expand that search. We are trying to reach students throughout Michigan and outside of the state.”

Another concern of Moody’s is the Wayne State University School of Medicine, which faces accreditation problems because of numerous violations, including a drop in minority enrollment. The medical school’s deficit also reached $30 million this year.

“We expect the School of Medicine to lose money this year, but we expect it to be back on track next year,” Decatur said.

Decatur acknowledged there is “no silver bullet,” but he said the university must reign in spending and increase student enrollment.

“We are working on these challenges,” he said. 

Steve Neavling

Steve Neavling lives and works in Detroit as an investigative journalist. His stories have uncovered corruption, led to arrests and reforms and prompted FBI investigations.

  • dirtydog1776

    Interesting to note that even lowering admission standards has not increased minority admissions. Even they know a bad deal when they see it.

  • dirtydog1776

    Interesting to note that even lowering admission standards has not increased minority admissions. Even they know a bad deal when they see it.

  • dirtydog1776

    Be nice now. Dumbing down the curriculum, eliminating math requirements and mandating diversity training……that all costs a lot off money.

  • dirtydog1776

    Be nice now. Dumbing down the curriculum, eliminating math requirements and mandating diversity training……that all costs a lot off money.

  • Third World Detroit

    Why has enrollment declined?

    • muckraker_steve

      One of the reasons is, they are admitting fewer minorities. The university is trying to attract students from outside of metro Detroit, but to little success.

      • Cristobal Mendoza

        This is misleading Steve. As a former WSU faculty member I can tell you that there are just simply less people enrolling in the University, and the insinuation that WSU, which has very low admission standards, would be accepting “fewer minorities”, is just nonsense. This enrollment problem is not unique to WSU: many low to mid tier schools are finding themselves in the same situation, and the competition to get into top-flight schools has dropped. The truth is that there are simply less people applying for college. Now, the problem has been WSU’s “solutions” to this predicament: increasing tuition, letting facilities languish, severely cutting operational budgets of all kinds of departments, and having a woeful relationship with professors. At this point you can either compete with price or with quality; WSU is making sure that they don’t do either.

        • Third World Detroit

          The article reports enrollment has declined 10% since 2009. Do you know when enrollment numbers first started to drop?

          • Cristobal Mendoza

            I don’t know exactly, but it coincided with the end of the recession, so 2009 might have been it. From 2011 onwards it was a constant issue in faculty meetings of my department.

          • Third World Detroit

            The neighborhoods have emptied out significantly since 2009, although the process started in 2006, when the police abruptly vanished. At this point, at least 50% of the properties in our neighborhood are permanently out of commission. The unpoliced decade brought overwhelming destruction and violence down on neighborhood residents’ heads, and it’s not over.

            The dopeman and his minions continue to actively fight us from slumlords’ blighted, tax delinquent rental shacks for control of the streets. The criminals want decent residents out of the way, so they can do as they please without interference. Police response remains sketchy. If the DPD doesn’t get cracking, expect more abandonment and a continued decline in local customers for WSU.

          • http://disq.us/p/1anelyv

            Enrollment revenues aren’t falling

          • Third World Detroit

            The number of students is falling. Detroit’s captive audience has left the building. There aren’t enough bodies left to fill the seats locally. It’s a problem that won’t resolve itself soon.

          • Honestly, we’re watching the market roll over for college. Why would you go to school for four years and go tens of thousands of dollars in debt to earn $35k? Especially, when you can go to a community college for six months and become a welder and make $100k. Seriously, if I was large scale industrial employer I would be accosting Detroit school kids at high school graduation to pay them to be a welder trainee.

          • Third World Detroit

            I come from a long line of people who worked with their hands… metal smiths, builders, etc. Although they were intelligent, skilled, and creative, they suffered significant limitations in life and work from the absence of a well-rounded education. They weren’t readers or deep thinkers. They were hardcore doers. An education would have made them better men and better doers. You wouldn’t prefer the life of a welder at any rate of pay. If nothing else, it would reduce your social status and pool of interested females. It’s rough on the eyes and lungs, too.

          • Some days I strongly contemplate it. Millwrights, electricians, plumbers, iron workers, and many other tradespeople, make very healthy and honest livings. Anyone who looks down on someone else because they “work with their hands” is someone I don’t care to associate with, and I think you know me well enough to know, I don’t keep my opinions secret. The most common profession in my family is soldier, but there have been many more; scientist, farmer, brick maker, executive, police/fire officer. Some, like my grandfather had more degrees (honorary and earned) than a thermometer. My father was lucky to get one, but he out-earned my grandfather many times over. On the other side of my family, there wasn’t a single college degree to be had for at least a few generations. I think everyone can benefit from education, but there’s a couple paradigms that I believe hold this country, and its people, back.

            The first is that learning a trade isn’t essential to life. I don’t just mean learning a profession of some sort, but a real trade. If you can’t build or fix something, what makes you human? Our species is defined by our ability to shape our environment to our will. Everyone should know a trade, or at least be reasonably proficient in one.

            Secondly, doing a hard job no one else seems to want to do for good pay is somehow of “less worth” than working with your “mind.” F-that noise. Some of the wealthiest people I know – just think what that means for a bit – got there because they took a job no one else wanted and did it better than anyone else did.

            Finally, the worst one of all, is that education stops at some point. I am not talking about some esoteric-hippy-feel-good-learn-from-life-BS. I am talking about formal education and accreditation. If people spent just a fraction of the time they spend watching TV and a fraction of the income they spend on other pursuits on educating themselves, they and our country, would be better for it.

            Learn a trade. Go to college. Get another job, if you want. Then, keep racking up the education and accreditation. It amazes me why people don’t do this. They’d rather sit on their fat asses and watch “Dancing With the Stars” or something. You only get one shot at life, make it count.

          • Some days I strongly contemplate it. Millwrights, electricians, plumbers, iron workers, and many other tradespeople, make very healthy and honest livings. Anyone who looks down on someone else because they “work with their hands” is someone I don’t care to associate with, and I think you know me well enough to know, I don’t keep my opinions secret. The most common profession in my family is soldier, but there have been many more; scientist, farmer, brick maker, executive, police/fire officer. Some, like my grandfather had more degrees (honorary and earned) than a thermometer. My father was lucky to get one, but he out-earned my grandfather many times over. On the other side of my family, there wasn’t a single college degree to be had for at least a few generations. I think everyone can benefit from education, but there’s a couple paradigms that I believe hold this country, and its people, back.

            The first is that learning a trade isn’t essential to life. I don’t just mean learning a profession of some sort, but a real trade. If you can’t build or fix something, what makes you human? Our species is defined by our ability to shape our environment to our will. Everyone should know a trade, or at least be reasonably proficient in one.

            Secondly, doing a hard job no one else seems to want to do for good pay is somehow of “less worth” than working with your “mind.” F-that noise. Some of the wealthiest people I know – just think what that means for a bit – got there because they took a job no one else wanted and did it better than anyone else did.

            Finally, the worst one of all, is that education stops at some point. I am not talking about some esoteric-hippy-feel-good-learn-from-life-BS. I am talking about formal education and accreditation. If people spent just a fraction of the time they spend watching TV and a fraction of the income they spend on other pursuits on educating themselves, they and our country, would be better for it.

            Learn a trade. Go to college. Get another job, if you want. Then, keep racking up the education and accreditation. It amazes me why people don’t do this. They’d rather sit on their fat asses and watch “Dancing With the Stars” or something. You only get one shot at life, make it count.

          • drbpor

            I have a skilled trafe & have lived comfortably. No way could I sit on my ass all day clicking a mouse. And yes, the sense of pride & accomplishment when building something or repairing something is immeasurable. The only debt I had was gratitude towards the man that trained me for 2 years

          • drbpor

            I have a skilled trafe & have lived comfortably. No way could I sit on my ass all day clicking a mouse. And yes, the sense of pride & accomplishment when building something or repairing something is immeasurable. The only debt I had was gratitude towards the man that trained me for 2 years

          • Third World Detroit

            Good points there, GP. You are young. At some point, you will probably form a family. Life will then get very complicated. Anything might happen. It will happen. You’re laying a strong foundation to assist in handling the best and worst that lie ahead. The preparation won’t resolve all the challenges you will face, but it will push some of them out of the foreground. Remember: Paige Stalker.

          • Third World Detroit

            Good points there, GP. You are young. At some point, you will probably form a family. Life will then get very complicated. Anything might happen. It will happen. You’re laying a strong foundation to assist in handling the best and worst that lie ahead. The preparation won’t resolve all the challenges you will face, but it will push some of them out of the foreground. Remember: Paige Stalker.

        • As a product of WSU’s economics and finance programs, I can tell you they need to increase their value proposition. While my tuition was and is quite reasonable, the value of my degree was crap. The value of my education, amazing. We don’t live in a society that values education, we live in a society that values accreditation.

          Right now, it’s a poor economic decision to go to college for most consumers. The cost is too great, and they payoff, too poor.

          Colleges need to cut costs internally, and to their customers. Tuition has been grossly inflated over the past 40 years.

          Blue line is college tuition and fees. Green line is the CPI.
          http://i.imgur.com/QqYQ2AQ.jpg

          Student debt stands at $1.26 trillion.
          http://i.imgur.com/608KUbp.jpg

          • Cristobal Mendoza

            No question that college education has gotten more expensive for students, but you should also plot state contributions to public universities, which have continuously decreased since the recession. At this point plenty of public universities might as well be considered poorly funded private schools.

            As far as cutting costs, I can tell you that my experience at WSU was one of continuous budget cuts, to the point that the quality of education that we could give was suffering, so if you want to find cost savings in university expenditures it is not going to be on the education-facing part of the operation.

            “We don’t live in a society that values education, we live in a society that values accreditation.”

            Yes, you are right, you proved it by saying:

            “[business students don’t need sociology, diversity, art classes] because the people who teach those classes can’t get real jobs, so they make the classes mandatory so they always have something to do.”

            It is that kind of anti-intellectualism that keeps driving the quality of public education to the ground.

          • “No question that college education has gotten more expensive for students, but you should also plot state contributions to public universities, which have continuously decreased since the recession.”

            I am saying that college tuition rose at twice-to-thrice the rate of inflation for about 40 years. You’re telling me that your subsidies were cut over the last, call it, 10 years. The problem isn’t a subsidy problem, it’s a cost structure problem.

            What you don’t seem to understand is that the 4-year college education is a bubble. A big, debt-fueled, bubble. When people stopped tapping their home equity to send their kid to college, the kids started taking on large unsecured loans to go to college, about $1.28 trillion of them.

            Kids are starting to figure out that taking on $20k in debt to go make $35k a year starting salaries isn’t a great investment. That’s a problem for your business model.

            4-year degrees are bloated with things that kids don’t need. Frankly, if I had to sit through another sociology/anthropology or whatever pseudo-science BS class and hear about the evil white man, I would put a gun in my mouth and blow my teeth into the ceiling. You say I am anti-intellectual, but I showed data and graphs that supported my view. You told me to look up your supporting data for you. I have a coherent and logical narrative to explain my point of view. You have insults.

            Which one us is anti-intellectual, again? I’d be careful insulting the value of a public education, especially when you’re trying to make your value case to potential customers. I find it funny that I am basically a walking endorsement of how well public education can work in this country. While, you’re feebly debating me and calling me names, and producing the very good you’re deriding.

            Do you not see the irony in all this?

          • Cristobal Mendoza

            First off, I do agree with you that there is an education loan bubble, which has enabled university administrators to make crappy choices that get PR but no ROI (the latest one for WSU, that “gift” to build the Illitch business school), and has allowed ALL universities to raise tuition. It is EXACTLY the same logic that drove us into the Great Recession.

            Second, public universities were not originally intended to operate like a corporation. Sure, you would need to balance your budget, but the idea that a university is supposed to generate profits runs counter to its mission, since it is supposed to be a public good (by generating ideas/research that the private sector would not otherwise engage in and by providing educational opportunities to students that cannot afford a private education). So the idea of the “business case” of the university is absurd, unless, of course, you subscribe to the libertarian theory that everything should be private. There we are absolutely going to disagree.

            Third, in terms of debt vs. starting salaries, that is a much greater discussion that doesn’t just involve the cost of education. Yes, as you pointed out, tuition has been outstripping inflation for a while, and we’ve talked about some of the reasons as to why that has been the case. That said, the costs for any institution don’t rise in accordance to inflation either. Facility maintenance costs are non-linear; facilities themselves need to be replaced, usually at much higher costs; labor costs (salaries and benefits) also increase with time. As for student starting salaries, well, that is simply beyond the scope of this discussion.

            Fourth, I don’t have insults,nor did I call you names. I said you made an anti-intellectual statement, which is not an insult, and here you make another:
            “4-year degrees are bloated with things that kids don’t need. Frankly, if I had to sit through another sociology/anthropology or whatever pseudo-science BS class and hear about the evil white man, I would put a gun in my mouth and blow my teeth into the ceiling”
            The idea of a university education is that you are exposed to many ideas, peoples and subjects, and you are free to agree or disagree as long as you make reasoned arguments. If you want a more focused education there are plenty of vocational schools that will take your money and teach you a trade, but good luck when said trade is automated. And to claim that “kids don’t need it” because you didn’t like your social sciences class is egotistical. I am sure a lot of kids feel the same thing about math and science, but they would be wrong, just like I think that removing social sciences, or humanities, or art, from a curriculum would be wrong. Universities are about exploration and discovery as much as for learning specific trade skills.

            Finally, I never had “customers” when I was a professor, and if I ever teach again they will never be “customers”. Education is not a transaction, and in my opinion it is that corporate mindset that is destroying education in this country. I am going to guess that you and I disagree fundamentally on this point. If so, rest assured: if the current trends continue, the public university as we know it will end, and what will remain will be a private institution with the word “State” in its name.

          • “…It is EXACTLY the same logic that drove us into the Great Recession.”

            Agreed. Same reasoning, different extents.

            “Second, public universities were not originally intended to operate like a corporation.”

            Correct. Corporations, with exceptions for certain types, exist to make a profit, not just break even.

            “I said you made an anti-intellectual statement, which is not an insult, and here you make another:…”

            First off, there’s nothing intellectual about critical theory social science. Also, I did find the first two or three of the classes interesting, but after about the sixth one – which all covers the same “curriculum” points – I got very tired of it. However, I will say, I did enjoy debating some professors. Most seemed to thoroughly enjoy the participation and even admitted that their points were pseudo science garbage. However, the true believers were absolutely insane. The most petulant and anti-intellectual people I’ve ever seen. They tolerate no dissent.

            Also, on a totally personal but related note, the most life-changing class I had at Wayne was a film class. So, I understand the value of layering in arts in every education. However, that majority of a four-year degree is outside the degree specialty.

            “Finally, I never had “customers” when I was a professor, and if I ever teach again they will never be “customers”. Education is not a transaction, and in my opinion it is that corporate mindset that is destroying education in this country. ”

            Didn’t you say I was egotistical? Everyone has customers, if you have something of value to provide. Churches have customers. Charities have customers. Everyone has customers.

            “Universities are about exploration and discovery as much as for learning specific trade skills.”

            Yeah, your product mix is wrong for the future.

          • Also, I just looked at Wayne’s financials and from 2006 to 2015, “grant and contract” revenue has fallen 9% over the time period while “tuition and fee revenue” has grown by over 64%.

            You’re welcome for doing the research for you.

            http://i.imgur.com/rXPCT6f.jpg

          • javierjuanmanuel

            You do not need classes to be an intellectual. You are not an intellectual if you think intro sociology is real brainy stuff.

            You cannot stop real intellectuals from learning. You do not groom them by making them attend classes in stuff they dislike with disinterested peers, and an unenthusiastic professor.

          • javierjuanmanuel

            You do not need classes to be an intellectual. You are not an intellectual if you think intro sociology is real brainy stuff.

            You cannot stop real intellectuals from learning. You do not groom them by making them attend classes in stuff they dislike with disinterested peers, and an unenthusiastic professor.

          • javierjuanmanuel

            Technology the last 40 years should have made school cheaper. Instead it increased 2-3 times inflation.

            They should be cutting professors, pipeing in education on the net and video, managing what they have better.

            Instead they are drunk on federal money and loans, and they build campuses like its the 1890s!

          • javierjuanmanuel

            Technology the last 40 years should have made school cheaper. Instead it increased 2-3 times inflation.

            They should be cutting professors, pipeing in education on the net and video, managing what they have better.

            Instead they are drunk on federal money and loans, and they build campuses like its the 1890s!

        • Jessica Lau

          There is no difference between WSU and Wayne County Community College – they admit the same students

        • Jessica Lau

          There is no difference between WSU and Wayne County Community College – they admit the same students

      • Jessica Lau

        They got rid of math because most of their students were stupid.

        • Ryan Herberholz

          I actually read some well researched and thoroughly thought out points in the discourse above and then I get to this comment.

      • Jessica Lau

        They got rid of math because most of their students were stupid.

  • nolimitdetroiter

    First I heard of this.
    Time to raise tuition…….again.

  • javierjuanmanuel

    The no math is a real steaming pile on every grads degree.

    Why would business students need sociology, diversity, art classes, but every student would not need trig, geometry and at least algebra III.

    most can skip calc if you are in the arts.

    Just explain this. Its insane.

    • Third World Detroit

      WSU may have eased its requirements after stories revealed many students weren’t graduating, just accumulating debt.

    • “Why would business students need sociology, diversity, art classes,..”

      Because the people who teach those classes can’t get real jobs, so they make the classes mandatory so they always have something to do.