Rensselaer Polytechnic Institute, a private research university in Troy, N.Y., has a bone to pick with the Education Department. School officials are taking issue with the government’s characterization of the university’s financial management, which was highlighted in a recent Washington Post article.
The Post reported that Rensselaer is one of 450 colleges the department has required to post a letter of credit assuring the availability of cash in exchange for access to federal financial aid. Colleges are asked for this form of collateral when the government grows concerned about the way their finances are being managed.
A majority of the colleges asked to post these letters, including Rensselaer, failed a federal review of their income, debt and assets, known as a financial responsibility test. The Education Department asked Rensselaer to provide a letter of credit pledging $4 million out of concern about the school’s debt and pension liabilities, some of the same reasons that Moody’s Investor Services held a negative outlook on the college from 2009 through late 2015.
The credit ratings agency revised its outlook to stable in November, citing expectations of continued improvement in Rensselaer’s operating performance and increases in revenue and enrollment. Still, Moody’s remains concerned about the school’s “very high financial leverage, weak expendable financial resources depressed by a relatively large pension liability and thin unrestricted liquidity, including use of operating lines of credit.”
Officials at Rensselaer did not answer questions posed by The Post but issued a statement on Sunday disagreeing with the Education Department’s judgement. See below:
Rensselaer takes exception to the U.S. Department of Education financial responsibility test calculations, which have been recently reported by a handful of media outlets. We disagree specifically with the Department regarding their treatment of pension liabilities and accumulated endowment gains. This is a view shared by the National Association of Independent Colleges and Universities (NAICU) and the National Association of College and University Business Officers (NACUBO), each of whom have expressed issues with the Financial Responsibility Standards.
Rensselaer is fortunate to have a fairly large endowment as a result of the generosity of its donors over the years. However, during the past 16 years, Rensselaer has contributed significantly to a long-standing legacy pension plan to meet the targeted funding required by the U.S. Department of Labor. The President, with the support of the Board of Trustees, has chosen to honor and recognize Rensselaer’s commitment to its retired faculty and staff and funded the legacy pension plan to the required funding target level.
Rensselaer has communicated extensively with the U.S. Department of Education and continues to work constructively with the Department to address this issue. Furthermore, Rensselaer has applied the remedy sought by the Department of Education — namely, posting a letter of credit, which puts us in good financial standing with the Department. We did this despite raising our exception, because we value our relationship with the U.S Department of Education and the importance of our participation in the Title IV programs, which are critically important to our students and their ability to obtain a post-secondary education.
The financial state of Rensselaer Polytechnic Institute is strong. We are proud of the strategic investments we have made in our faculty, students, and campus facilities. We intend to continue to focus expenditures on creating programs and research capabilities that will benefit not only the campus community and our vast alumni base, but the world at large. By realizing our vision of The New Polytechnic, we will advance the science and technology in areas critical to global health and well-being, and will deliver a transformational educational experience to the world’s future innovators, problem-solvers and leaders.