Although credit pressures on Illinois school districts persist, the passage and signing of Senate Bill 1947 (SB1947) — compromise legislation introduced after the governor's amendatory veto of SB1 — alleviates the uncertainty created by the multiyear state budget stalemate and recent veto, Standard & Poor’s said.
The state's fiscal woes have hit school districts hard as evidenced by downgrades outpacing upgrades by over 4.5x between 2015 and 2017, according to the rating agency.
The successful enactment of the new school funding formula will potentially slow the trend of Illinois school district downgrades as districts will begin to see state payments as early as next week, S&P said. However, most budgets assumed the full state revenue and this legislation, in the agency’s view, only provides marginal budget stability, with any upward rating movement likely limited.
There will be disparate effects on districts and some will adjust more easily than others.
The sector is pressured despite the enactment of the new funding formula, S&P said. Credit pressures persist due to the cumulative effects of persistent state underfunding pursuant to the prior statutory formula and years of delayed payments. Additionally, SB1947 provides some clear wins for Chicago Public Schools (CPS), although most of the added revenue was already assumed in CPS' adopted fiscal 2018 budget.