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Now that state lawmakers have passed the fiscal year 2011 budget, with its massive cuts in government spending and reductions in direct aid to New Jersey’s public universities, the credit-rating agency Moody’s reports that financial trouble may be brewing for the institutions, although the firm says it remains confident the schools will make the proper cuts and it is not downgrading the universities’ credit ratings.

“The greatest source of credit pressure for these universities will be from price resistance to continuing tuition and fee increases that are necessary to replace lost state funding and to pay future debt service,” Moody’s analyst Leah Ploussiou Chatzigiannis writes in a report released Monday. “Additional pressure could come from unexpected cash flow delays if the state delays payment of approved funding, although there is no indication of this yet.”

The report notes that as state funding for higher education has been continually cut in the last few administrations, universities have turned to tuition money as an answer. To lure in more students, many schools have undertaken massive expansion and modernization plans, which they took on debt to complete.

This, in part, is what has led New Jersey’s universities to be “among the most highly leveraged public universities in the U.S.,” according to Moody’s. The median debt-to-revenue ratio for New Jersey public universities is 1.4x, nearly three times the national median of 0.5x.

While New Jersey City University (NJCU) carries the least overall debt of the 11 schools Moody’s examines, at $118 million, because it enrolls fewer students and is a relatively low-cost institution, it still has a debt-to-revenue ratio (0.9x) nearly twice as much as the national median (0.5x).

Not surprisingly, the state’s largest university, Rutgers, carries the most overall debt, at $864 million. But the highest debt-to-revenue ratio goes to the Ramapo College, at 1.9x.

The report finds that the 4 percent tuition increase cap set by Gov. Christie “may limit the ability of institutions to generate future revenue growth” despite continued strong demand from students. (As we reported in May, the tuition increase cap may force NJCU to lay off teachers and staff.) Without strong revenue growth, Moody’s says, the higher education institutions may have a difficult time paying off their debts. It’s a tricky credit situation that, if not monitored closely, could spiral out of control, as it has in the case of the beleaguered Transportation Trust Fund.

But Moody’s thinks New Jersey’s public universities will make the proper cuts to avoid the spiral of debt.

“We believe that the elevated leverage positions, escalating debt service schedules, and each institution’s ability to respond to further state funding cuts will continue to pressure credit profiles over time,” Chatzigiannis writes. “However, as public universities in other states have done, we expect most will find expense reductions and other operating efficiencies to reach near-term equilibrium.”