A Feb. 19 decision by Pennsylvania's School Reform Commission to only approve five out of 39 charter school applications in Philadelphia is a credit positive for the city's struggling district, according to Moody's Investors Service.

Moody's analyst Dan Seymour said in a Feb. 23 report that the rejection of most charter school applications by the state-controlled board will help prevent more students from leaving the district while also containing escalating charter school tuition costs. The five new charter schools will still hurt Philadelphia public schools in terms of enrollment and charter school costs but to a much more "limited extent", according to Seymour. The district's bonds are rated Ba3 negative by Moody's and BB-plus by Fitch Ratings.

The five charter schools approved by the Pennsylvania SRC will total around 2,684 students and are slated to open in 2016. This totals roughly the number of students affected when two charter schools in Philadelphia were recently closed, resulting in district enrollment staying relatively flat, according to Seymour. The SRC had gone seven years without approving charter schools in Philadelphia with the freeze helping stabilize enrollment and leaving the district's waiting list at 4,800 students.

Despite securing more than $200 million in new revenues this year, the Philadelphia School District is still struggling to stabilize its operations carrying a negative 4% fund balance and its five-year plan underfunded by at least $374 million, according to Moody's. Each Philadelphia School District student attending a charter school costs the district about $8,000 in tuition and $23,000 for special education students. District officials have estimated that each charter school student costs around $7,000 with the five new schools equaling around $19 million, a small number compared to the $767 million already paid for these purposes out of a $2.4 billion budget, Seymour said.

"Although this struggle will continue, the modest number of new charters approved will not pose undue additional pressure on the district," said Seymour. "The Philadelphia School District's financial position is precarious enough that it cannot even afford a modest jump in costs."

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