December 7, 2014

HIGHER EDUCATION BUBBLE UPDATE: SMU plans layoffs, other changes to cut $35 million.

Southern Methodist University is expected to cut up to $35 million in annual operating expenses through layoffs and administrative changes in an effort to curb rising costs, even as the school continues its billion-dollar capital campaign.

The decision to rein in finances, which came as a surprise to many, follows a series of high-dollar expenditures in fiscal 2013 that included the opening of the George W. Bush Presidential Library, a change in the school’s athletic conference, consulting fees for a branding study to boost the school’s national reputation and 3 percent salary increases, according to a recent ratings update from Moody’s Investors Service.

Moody’s notes that the university has reached its debt capacity under its current rating and has “very thin liquidity” compared with similar universities, but it gives it a stable outlook. SMU has an Aa3 rating from Moody’s, the fourth-highest credit rating, and lags behind similar universities such as Vanderbilt, Emory and Notre Dame.


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