Approval to reopen schools marks a credit-positive step in the economic recovery for New York City, New York State and the Metropolitan Transportation Authority, Moody’s Investors Service said.
Gov. Andrew Cuomo on Aug. 7 allowed schools to reopen as long as the positive test rate for COVID-19 remains below 5% statewide.
“The announcement, coupled with the state's low overall 1% infection rate, is credit positive for New York City and the state because it would allow more parents to return to work rather than stay at home to care for children, helping tax revenue recover,” Moody’s said in a statement Wednesday.
It also benefits the MTA because children returning to school and their parents returning to work would lead to more transit ridership.
“Improved sales tax revenue resulting from a successful school reopening would also be a positive for local governments, particularly school districts reliant on state aid funded in part with sales tax and counties, some of which derive nearly half their revenue from sales tax,” Moody’s said.
Moody’s rates the state and city Aa1 with negative outlooks for each. It rates the MTA A2, also with a negative outlook.
The upside is even greater for the state-run MTA, according to Moody’s. Last week subway ridership was down 76% compared with 2019 averages. The MTA operates the city’s subways and buses, Long Island and Metro-North commuter railroads, and several interborough bridges and tunnels.
State and city unemployment rates in June were 15.7% and 20.4%, respectively.
Moody’s acknowledged, however, that school reopenings per se won’t guarantee the large-scale return of office workers.
It also warned that potential growth could only be temporary if infection rates increase again. In addition to Cuomo’s 5% benchmark, New York Mayor Bill de Blasio has said schools would close if the infection rate rises above 3%.
“There is also no certainty that school reopenings will sync with significant numbers of parents returning to the office and as much as 26% of New York City public school students have chosen a virtual option for the school year starting next month,” Moody’s said.
The state closed schools statewide on March 18 as coronavirus cases spiked, notably in the city. A statewide stay-at-home order was issued four days later and remained in place for nearly two months.
"We are constantly in contact with parents and we will be throughout there's a whole month ago until school begins, and if there are specific adjustments or improvements, we'll make them, that's not a problem," New York Mayor Bill de Blasio told reporters on Tuesday. "We're constantly adding health and safety features to this plan. So, you know, we're full speed ahead."
While New York State was the epicenter of the U.S. pandemic through the spring, it has reduced new infections with a statewide daily average positive test rate of just 1.1% for more than two months. The city itself had the nation’s highest infection rates through the spring, but through July had the lowest average daily new infections per 100,000 residents of the 22 largest American cities.
Whether to reopen schools has mushroomed as a hot-button issue nationwide.
