Ratings agency dings small university for spending big after a new president took over. As focus shifts to a budget deficit, question becomes whether Drew can cut spending while growing enrollment. MaryAnn Baenninger inherited a budget deficit when she came to Drew University in the summer of 2014. The next year, the small private university’s deficit grew. And that was by choice. Drew spent more as Baenninger sought to put money into the university’s campus, students and employees. The university issued its first raises in about five years. It hired a respected enrollment guru and increased its financial aid spending. It renovated the dining hall. The spending was a change for Drew, a pricey university to the west of New York City in Madison, N.J., which had been preparing for budget cuts following several years of dropping enrollment before Baenninger arrived. But, according to Baenninger and members of her administration, the spending helped to keep talented staff and faculty members from leaving, improve student retention and increase applications from prospective students. “We were losing kids on the food, for God’s sake,” Baenninger said. “Our salaries were going downhill. Now they’re going up.” Recently, however, the spotlight has shifted to Drew’s deteriorating financial situation. Moody’s Investors Service drove home that point this month by downgrading Drew’s bonds for the second time in 15 months. Moody’s dropped one series of bonds from Ba3 to B2 and two others from Ba3 to B3, sinking them farther into junk territory and signifying that they are highly speculative. Moody’s pointed to operating deficits that are expected to last longer than previously projected, along with a competitive student market constraining possibilities for short-term revenue growth. It said Drew has no more unrestricted liquidity left and would have to rely on loans and distributions from temporarily restricted endowment assets for working capital. Moody’s also assigned a negative rating outlook. “The negative outlook reflect