The San Francisco Unified School District received a rating outlook boost from two rating agencies ahead of plans to issue debt.
Both Moody's Ratings and Fitch Ratings raised their rating outlooks to positive from stable.
Moody's, in a report Monday, cited the expectation that the school district will maintain a sound financial position given its prudent fiscal management. Moody's affirmed its A2 issuer and A1 general obligation unlimited tax ahead of plans to sell about $470 million of GO bonds.
Fitch pointed to the school district's improving fiscal position and the expectation it could exit
If the district maintains unrestricted reserves above 5% of spending and improves internal controls, processes, and maintains fiscal stability after its planned exit from state oversight, Fitch could take positive rating action, analysts said in Thursday's report.
Fitch maintained AAA ratings on the district's GO and GO refunding bonds and an A-plus issuer default rating.
The school district hasn't announced a sale date for the bonds.
The upward outlook revisions come as other large California school districts like
Credit pressures on
SFUSD, which has projected enrollment of 48,267 for fiscal 2027, operates 122 schools for students from transitional kindergarten to 12th grade, Moody's said.
Like many California districts, Moody's said SFUSD "has experienced a general trend of enrollment declines, although the rate of decline has slowed down largely due to increased enrollment in transitional kindergarten."
The rating takes into account in district's sound financial position supported by solid reserves and liquidity, Moody's said. The district's long-term liabilities ratio and fixed costs will remain above-average given ongoing debt plans, it said.
Moody's said its A2 issuer rating "incorporates the district's strong property wealth as evident in an exceptional assessed value per capita at about $427,000 and resident income at 151% of the US."
Moody's A1 rating on the district's GOULT bonds is one notch higher than the district's issuer rating. The one notch distinction reflects California school district GO bond security features that include the physical separation through a "lockbox" for pledged property tax collections and a security interest created by statute, according to Moody's.
The positive outlook reflects Moody's expectation that the district will maintain a solid financial position largely due to management's recent fiscal operational improvements and commitment to maintaining reserves closer to 10%, it said.
Factors that could lead to an upgrade include sustained improvements in available general fund balance closer to 10%, successful incorporation of rising health care benefit and special education costs while maintaining budgetary balance and sustained trend of stabilization in enrollment, Moody's said.
Factors that could lead to a downgrade of the ratings include weakened financial performance with available general fund balance below 5% and a material increase in the district's long-term liabilities ratio to above 500%, Moody's said.
S&P Global Ratings most recently affirmed its AA-minus rating and negative outlook in April 2025.
