LOS ANGELES — Charter school giant KIPP School's announcement that it would more than double its Los Angeles enrollment by 2020 is a credit negative for Los Angeles Unified School District, according to Moody's Investors Service.
KIPP Schools, the nation's largest network of charter schools, said it plans to double enrollment within LAUSD's boundaries from 4,000 to 9,000 within the next six years, according to Moody's Weekly Credit Outlook for Public Finance released Oct. 30.
Moody's analysts said they deemed the announcement a credit negative, because it will exacerbate the public school district's trend of declining enrollment harming its revenues.
LAUSD has experienced a 20% decline in enrollment over the last 10 years and more than 40% of that figure was lost to charter schools, Moody's said.
The projected increase in enrollment for KIPP and resultant loss for LAUSD represents a $35 million decrease in ongoing revenues for the school district, according to the report. Under California's revenue allocation formula, for every 1% decrease in enrollment, the district's revenues also fall roughly 1%.
"While this financial impact would be manageable in isolation at less than 1% of general fund revenues, the expansion of a large and well-regarded charter school operator such as KIPP marks a continuation of the rapid proliferation of charter schools within the district," Moody's analysts said. "As a result, the viability of these schools as competitive alternatives for district students is further solidified."
Enrollment declines could pose a particular challenge for the school district as they would coincide with escalating pension and healthcare costs and the scheduled sunset of Proposition 30 funding, according to analysts. General fund contributions to the California Teachers Retirement System and the California Public Employees' Retirement System are expected to grow by more than $200 million over the next four years, Moody's said.