Alabama, Louisiana get credit for increased education funding

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Alabama and Louisiana joined other states this year that focused on increasing funds for elementary and secondary schools and giving teachers raises.

Lawmakers in Alabama passed a record $7.1 billion budget for K-12 public education, a 7.4% increase over fiscal 2019, which includes a 4% raise for teachers. They also approved a one-time supplemental appropriation of $198.7 million.

Gov. Kay Ivey, a former high school teacher, signed both appropriations bills into law during the first week of June. The state has 138 public school districts serving nearly 750,000 students.

The largest K-12 budget in state history is credit positive for school districts, even though the supplemental funds can’t be used to pay debt service or back bonds, said Moody's Investors Service.

“The state's multifaceted financial commitment to local school districts in recent years is a credit positive for the sector,” Moody’s analyst Gregory Max Sobel said Thursday. “The supplemental appropriation from the state Education Trust Fund Advancement and Technology Fund will benefit every district across the state.”

The fiscal 2020 education budget represents a cumulative increase of nearly 11% over three years, he added. Moody’s assigns an Aa1 rating and stable outlook to Alabama’s senior general obligation bonds.

Ivey, a Republican, also signed education reform measures on June 10 including one bill that allows voters statewide to decide if the current elected education board should be changed to a governor-appointed commission, and another that requires the governor to consult with minority caucuses in the Legislature when appointing minority members to the new commission.

“Since taking office, I’ve made improving education a top priority,” Ivey said at the June 10 bill signing. “Through my ‘Take the Lead, Alabama’ initiative, we will shake up [as to] how we do things in our state to improve educational outcomes for students in every region.”

On Wednesday, Moody’s said that the Louisiana Legislature’s recent approval of the largest increase in state school funding in a decade is a credit positive for the Pelican State.

The 3.9% increase in the minimum funding formula is part of an effort to address teacher shortages related to below-average salaries, according to analyst Sarah Jensen.

The $3.85 billion K-12 budget includes a $1,000 raise for teachers and certified personnel, a $500 raise for noncertified support workers such as bus drivers and janitors, and a 1.375% increase in per-pupil funding to school districts in fiscal 2020.

“While the increased funding is credit positive, the mandated raises would translate into increased pension contributions that the districts must make, which are already high at more than 30% of payroll,” Jensen said.

Louisiana has 80 school districts, which serve 711,000 students.

While Gov. John Bel Edwards, a Democrat, hasn’t signed the appropriations bill, he supported increased funding for schools and salaries.

Moody’s rates Louisiana’s GOs Aa3 with a stable outlook.

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Public school funding School bonds Kay Ivey John Bel Edwards State of Alabama State of Louisiana Alabama Louisiana
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