Excerpt from Bond Buyer
The end to a 20-day faculty strike is credit positive for Ohio's Wright State University, according to Moody's Investors Service.
The end of the strike eliminates near-term operational risks for the university and reputational risks that would have intensified if the strike had continued, according to Moody's, which rates the university Baa2 with a negative outlook.
The strike ended following negotiations about working terms and conditions for its bargaining unit faculty members that provide staffing continuity for the length of the new contract, which runs until June 30, 2023.
The rating agency said the agreement eliminates near-term operational risks such as hiring a temporary pool of qualified replacement faculty and modifying course scheduling.
“The terms of the agreement give WSU flexibility to achieve long-term savings, although the university made some concessions from its original proposal,” Moody’s said in a report Thursday. “The terms of the agreement do not materially impede WSU’s ability to achieve its financial objectives of sustaining sound operations and gradually rebuilding liquidity.”
Under the five-year agreement, there will be no salary increases through June 30, 2021, a 2.5% increase in fiscal 2022, and a 2.5% increase in fiscal 2023. Other key provisions in the agreement require unionized faculty to join the university's healthcare plan, maintain flexibility to impose one furlough day per semester, and allow for implementation of a retirement incentive plan.
At the start of the year, the school's Board of Trustees implemented new working terms and conditions for its bargaining unit faculty members. The terms included no pay raises and allow faculty to be furloughed as part of “cost savings" days.
In response a majority of the union representing more than 500 faculty members went on strike Jan. 22. In its strike notice the union took issue with the furlough policy, changes to health care, new provisions for promotions and tenure appointment, workload policies and a merit pay system.
The school, which is already grappling with falling enrollment and a budget crisis, has had to address a $30 million structural budget deficit.
In fiscal 2018, WSU generated an operating cash flow margin of nearly 8%, significantly improved from the negative cash flow margins of the prior four years. Its 52 monthly days cash on hand nearly doubled from fiscal 2017, though is still well below the 178 monthly days in fiscal 2011.
“Sustaining its fiscal improvement will be a challenge for WSU due to expectations of revenue declines stemming from weakening enrollment and net tuition revenue," Moody's said. "As a result, expense containment will continue to be key to sustaining its fiscal stability.”
The rating agency warned that universities with a similar profile to Wright’s, which has weak demographics in their core market, pressured state funding and high collective bargaining exposure, could also be at risk of faculty strikes.
“Challenging conditions in the higher education sector will make collective bargaining more contentious and potentially drive an increase in the number of strikes in higher education,” the rating agency wrote.
