BRADENTON, Fla. — Credit pressures are on the rise for some of Florida’s 67 school districts as effects of the recession linger, according to a report by Fitch Ratings.
“Fitch believes rating pressure on Florida school districts will grow in the near term given the termination of federal stimulus funding, reductions in state funding levels, more limited expenditure flexibility, and expectation for continued economic and tax base instability,” analyst Michael Rinaldi said Tuesday.
State funding through the Florida Education Finance Program has declined over several years as the Legislature closed budget gaps.
In the current fiscal year, the state budget allocated $16.64 billion for public education, a reduction of $1.58 billion or 9.5% from the year prior.
In addition, tax-roll values for schools fell more than 26% between fiscal 2008 and 2011, with the current tax roll declining an additional 4.1%. Housing prices also continue to decline and foreclosures remain high.
Pensions are “generally manageable,” Rinaldi said.
School employees participate in the state retirement plan and this year, for the first time, must contribute 3% of their wages.
The contribution is being contested in a Florida Education Association suit.
“Fitch will continue to monitor the status of the legal proceedings as pension savings have been incorporated in school districts fiscal 2012 budget plans,” the analyst said.
Some school districts also face budget pressures due to a decline in revenue from a sales tax levied for capital outlay purposes leveraged with bonds.
“Fitch anticipates continued pressure on sales tax performance in the near term based on the high rate of unemployment that persists throughout the state and the low consumer confidence indexes,” Rinaldi said.
Districts also must deal with a reduction in capital outlay millage rate that the Legislature lowered to 1.5 mills from 2.0 mills. Many schools leveraged that revenue source with certificates of participation.
“Fitch’s focus on the capital and debt profile of Florida school districts will continue to center on future needs and the ability to fund debt service from the capital outlay millage or sales tax,” Rinaldi said.
