Fitch believes votes in Georgia and Washington indicate growing public support for the charter school movement and that the number of charter schools will increase, but credit fundamentals for the sector remain weak.

Georgian voters approved a constitutional amendment by a wide margin and established a statewide entity to authorize charter schools. In Washington, supporters of a ballot measure to authorize the state's first charter schools declared victory this past weekend, but votes are still being counted and a legal challenge has risen.

Georgia's ballot decision, which allows the state to directly authorize charter schools through a state commission, will provide existing and prospective charter schools with an alternative authorizer to the local school board and is considered a credit positive by Fitch.

However, the ballot measure does not fundamentally change primary credit factors such as charter renewal risk and the limited financial flexibility. A lawsuit against the legality of the ballot measure was filed just before the election and is pending.

In Washington, the secretary of state count continues to count the votes. The latest official report shows the measure to authorize charter schools has a slim lead. Supporters of the measure declared victory on Saturday, Nov. 10. If the margin holds, Washington will become the 42nd state to authorize charter schools. Three prior voter initiatives to establish charter schools in the state failed.

The measure would allow up to 40 charter schools to be founded in the state over the next five years. They would be authorized by either a state commission or local school board.

As in Georgia, the establishment of multiple authorizers provides a more favorable statutory environment. But the ballot measure also explicitly limits charter schools to initial five-year contracts and appears to limit charter schools' ability to pledge state per-pupil revenues for capital financing. The state's superintendent of instruction, who opposed the measure, is reportedly considering litigation to block it.

Last week's publication of a national study provides a baseline of data that could give investors and other market participants further clarity into this growing sector. "Charter School Bond Issuance: A Complete History, Volume 2," by Local Initiatives Support Corporation (LISC), provides an important and comprehensive snapshot of the charter school financing marketplace.

Fitch's view of charter schools generally remains negative. Following a recent major revision of its rating criteria, all of charter school ratings were placed on Rating Watch Negative, and new ratings are expected to be announced within the next several months.

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