A District in Distress

The Texas Education Agency last week appointed a new superintendent and board of managers to run the financially distressed North Forest Independent School District for the 2008-2009 school year.

Education Commissioner Robert Scott said the decision, which needs final clearance from the U.S. Justice Department, was due to “the district’s extensive history of deficiencies, its recent significant problems, and its current failure to consistently work cooperatively with the assigned management team.”

Standard & Poor’s lowered North Forest’s underlying credit two notches to the speculative-grade rating of BB from BBB-minus in February, citing “severe fiscal distress.” The district has about $68 million of outstanding debt.

When North Forest ISD sold $60 million of refunding bonds in March 2006, officials listed enrollment at 10,000. Standard & Poor’s analysts said earlier this year that the district has probably lost about 20% of its population over the past five to seven years, with a corresponding drop in enrollment.

Scott said the district won’t be able to sustain itself financially at its current taxing rate. It is expected to begin the new school year with a budget deficit of $11.8 million.

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