Moody’s: Financial stresses cause districts, including York City, to see bond rating downgrades

A report from a credit rating agency outlines troubles faced by school districts around Pennsylvania, noting that York City is among those to have its bond rating downgraded in recent months.

Here’s a look at what’s happened.

‘Unlikely to recovery soon’: A July report from Moody’s says a small group of “troubled” Pennsylvania schools are dealing with severe financial stress and are unlikely to recovery soon.

The reasons? A “fiscal cocktail” of rising pension obligations, delayed construction reimbursement from the state, charter school pressures and a failure to raise property taxes, the report says. It notes that four school districts in the state are now “speculative grade,” which means there is a substantial amount of credit risk, according to a Moody’s spokesperson.

The report also notes that Gov. Tom Wolf’s proposed budget would be favorable to districts, but that growing pension and charter costs are competing with debt for state funding.

York City downgraded: The report notes that in June, York City School District’s credit rating was downgraded from Baa2 negative to Baa3 negative.

The report for that downgrade lists what we already know about the district as reasons: it has high debt burden, a stagnant tax base, high poverty levels and low wealth. The report does note that the district’s condition has improved in recent years, but says one-time revenues helped achieve positive operating results in 2012-13 and 2013-14.

York City’s rating is still investment grade, according to Moody’s.  It could be improved if it continues balanced operations and increases reserves and cash on hand, if its tax base improves, its debt decreases or tax collections improve, Moody’s says.

See that report below.

Auditor general weighs in:  Auditor General Eugene DePasquale said the report shows the need for reform of Pennsylvania’s education system.

“This is troubling news for school districts and for residents because when bond ratings are downgraded it drives up the costs when schools need to borrow money or repair or upgrade their facilities,” he said in a news release. “Simply increasing funding is not enough. We need to stem the hemorrhaging of school district finances and look for long-term, systemic changes.”



About Angie Mason

I'm the education reporter at the York Daily Record/Sunday News. I want to know what's happening inside York County classrooms. Email me at amason@ydr.com or follow me on Twitter: @angiemason1
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