DALLAS – Fitch Ratings’ recent downgrade of 23 charter schools, including the KIPP Academy in Houston, comes as the Texas Legislature to ease funding pressures for the schools.
KIPP Houston, which issued nearly $65 million for school facilities in 2009 through the LaVernia Higher Education Finance Corp., saw its Fitch Rating fall to junk-level BB-plus from BBB after the downgrade of 23 of 28 Fitch-rated charter schools on Friday. The outlook returned to stable.
“A modest financial cushion, substantial reliance on enrollment-driven per pupil funding, and charter renewal risk are credit concerns common among all charter school transactions that, if pressured, could negatively impact the rating over time,” Fitch analysts wrote.
KIPP still has an investment grade BBB rating from Standard & Poor’s with a stable outlook.
KIPP also has $34 million outstanding from a 2006 issue through the Texas Public Finance Authority Charter School Finance Corp.
In Austin, lawmakers are considering Senate Bill 2 by Sen. Dan Patrick, R-Houston, that would expand charter schools and provide a slight increase in funding for facilities. While charter schools get state funding for curriculum, they have to borrow money to build their own schools or share buildings.
SB 2 would create a new state board to authorize charter schools and raise the cap on the number of schools allowed in the state. Current law sets a limit at 215 charter schools. Those are regulated by the State Board of Education and the Texas Education Agency.
Allowing a financial allotment to the charter schools would address a lawsuit pending against the state. Critics say the bill would reduce the quality of charter schools and create an unnecessary bureaucracy.
Texas charter school officials have urged the legislature to restore funding to all schools that was cut in the 2011 Legislature that prompted a major lawsuit recently decided in favor of local school districts.
“For the past two years, district and charter schools alike have struggled to provide a high level of instruction on a very thin shoestring,” charter school executives, including KIPP founder Mike Feinberg, wrote in an opinion piece for the Houston Chronicle. “Restoring our lost funding would go a long way towards getting Texas schools and students on track to excellence.”