Moody's Ratings and Fitch Ratings downgraded Los Angeles Unified School District's bond ratings Tuesday, several days after the school district received a "lack of going concern" designation from the Los Angeles County Office of Education.
Moody's downgraded the district's issuer rating to A1 from Aa3. It also downgraded the district's general obligation unlimited tax rating to Aa3 from Aa2, the rating on outstanding judgment obligation bonds to A1 from Aa3, and the rating on outstanding certificates of participation to A2 from A1.
The district has about $11 billion in long-term debt, Moody's said.
The downgrade "reflects the expectation that reserves will decline materially beginning in fiscal 2026 and continue weakening absent meaningful expenditure reductions or additional recurring revenue," Moody's said.
Fitch downgraded its issuer default rating to A from AA-minus, but assigned a triple-A rating to its $443 million 2026 GO refunding bonds, classifying the dedicated property tax revenues as pledged special revenues. Fitch also affirmed the district's outstanding GO bonds at AAA, downgraded its outstanding judgment obligation bonds to A from AA-minus and its certificates of participation to A-minus from A-plus.
Both rating agencies maintained negative outlooks, originally assigned in April. S&P Global Ratings also assigned a negative outlook in April, affirming its AA-minus long-term rating.
LAUSD officials revealed July 8 they had received a
As part of the process, LACOE has assigned a fiscal expert to work alongside the district and outlined additional steps to support implementation of the district's fiscal stabilization plan.
"This determination does not change our commitment to students, families or employees," Superintendent Andrés E. Chait said in a statement. "Our schools will continue to operate as normal while we work closely with LACOE to strengthen our long-term financial outlook. We welcome the opportunity to collaborate and remain focused on making thoughtful, responsible decisions that protect classroom instruction and student success."
Like many school districts across California, Los Angeles Unified continues to navigate significant fiscal challenges driven by declining enrollment, the expiration of pandemic funding, rising operating costs and increasing long-term obligations, according to the school district.
The district has made no secret of its ongoing fiscal challenges, outlining them in public meetings and developed a
The downgrades reflect significantly weaker fiscal projections, Fitch said, with the district's unrestricted general fund balance expected to fall below the level consistent with aa financial resilience.
"The district's 2027 Fiscal Stabilization Plan identifies about $3.6 billion in budgetary solutions through fiscal 2029, but lacks implementation detail," Fitch analysts said. "The negative outlook reflects execution risk and potential further fiscal deterioration."
For Moody's governance is a "key rating driver, reflecting delays in reducing expenditures in response to declining enrollment and collective bargaining agreements that will drive significant cost growth," Moody's said. "With no discernible additional revenue to support these compounding costs, imbalanced operations will persist and further pressure operating reserves."
The district reached agreements with its employee unions in June "that recognize the critical role educators and staff play in student success while continuing the work of implementing long-term structural budget solutions," according to the school district.
District leaders said they plan to "work collaboratively" with the county, as required by state law.
