Standard & Poor's, a respected leader among credit rating agencies, published a warning earlier this month that the trend toward privatization among public universities could affect not only access to and quality of higher education, but financial stability as well.

As institutions receive less and less funding from strapped state budgets, they are winning more and more of the autonomy common to private schools. Witness Virginia universities, which recently took on more managerial and financial freedom from their legislature; Colorado, where operating grants go directly to students, rather than institutions; and Massachusetts, where legislation to expand autonomy in higher ed is currently being considered.

But by definition, S&P points out, "public" universities and community colleges benefit from state financial support for three purposes: to create affordable access to higher education, to develop an educated workforce, and to spur economic development. Public education supporters worry about corporate influence and access in the privatization debate. Others point out a possible sea change: "Part of the benefits of higher education derive to the state, and part to the citizens," explains Mary McKeown-Moak, an expert in state higher education financing and a partner at MGT of America. "One could look at the change in the share of the cost of a higher education that's born by the student and their families as a shifting of the benefits of higher education."

Specifically, S&P notes that capital facilities are particularly vulnerable to fund loss; traditionally, bricks and mortar have been funded by the state. "Typically, only the largest flagship public universities have significant private fundraising capacity," writes S&P. "In addition, many public institutions have a backlog of deferred maintenance, which has been exacerbated by slower capital funding in recent years as state budgets have struggled."

No figures were published to show the anticipated dip in credit ratings, but a comparison of private and public institutions shows 21 percent of privates with the favorable AA rating, compared to 33 percent of the publics as of April 20, 2005; 32 percent of privates have an A rating, and 59 percent have that "A" among publics.

Watch and you may see a significant change. [Barbara McKenna]

May12, 2005