DALLAS -- Despite large debt burdens and high tax base concentration levels, Texas school districts have shown financial flexibility, balanced operations and low pension burdens after emerging from recession, according to a report from Moody’s Investors Service Tuesday.
“These positive factors contribute to the credit quality of the districts, which we believe will remain stable or improve going forward,” analysts Kristin Button and Toby Cook wrote. “The median rating for Texas school districts is A1, which is lower than the national average, owing to the high debt burdens and tax base concentration.”
The energy and housing sectors are driving population and employment growth, rising property values and student enrollment growth across much of the state, according to the report. However, tax base and employment concentrations could be a risk for some districts, with 22% having tax base concentration in one industry and others having a high number of federal employment at large military installations.
State support for pensions and oversight by the Texas Education Agency adds a layer of security for most districts, the report found.
“The state provides strong oversight for weaker school districts, which benefits bondholders by forcing weak districts to improve or be annexed into another stronger district,” analysts said.