Increasing number of school districts facing credit rating downgrades

The proliferation of charter schools throughout Michigan has left many school districts in serious financial trouble, according to a new report from Wall Street, leaving thousands of children without critical classroom resources.

Moody’s Investor Services released a report this week showing that the number of districts that have had their credit rating downgraded in 2013 has increased by 64 percent over the previous year. In total, Moody’s downgraded the credit ratings of 53 Michigan school districts this year — about one-quarter of all the districts it rates, MLive reported.

Lower credit ratings result in increased borrowing fees for school districts, forcing them to spend more on interest payments and less in the classrooms.

The number of charter schools operating in Michigan has skyrocketed in recent years, with enrollment increasing about 60 percent between 2004 and 2012. This has led to a decline in enrollment at traditional neighborhood schools.

 “The combined result of negative demographic trends, enrollment declines, and a growing charter school presence has resulted in many more schools competing to serve a shrinking student population,” Moody’s analyst Matthew Butler said.

Not helping matters is the sharp cut in school funding from the Snyder administration. In his first year in office, Gov. Rick Snyder cut $1 billion from K-12 schools to help bankroll a $1.8 billion tax break for corporate special interests.

Thanks to expanding charters and state funding cuts, at least 55 school districts in Michigan face budget deficits. As a result, students, teachers and education support professionals have to contend with ballooning class sizes and deep program cuts.