The three most recent reports are linked below, along with key passages. The district and School Board hope to have a recovery plan in hand that they can approve on Thursday. State Commissioner of Education Richard Corcoran has given Hillsborough the May 12 deadline, warning that if there is no resolution by then, the district might be placed in a financial receivership. That means the state would order a forensic audit and appoint a financial advisory board to oversee spending. Fitch: a ‘structural budget imbalance’
All three reports acknowledge the challenges posed by COVID-19. But they also express uncertainty about the district’s ability to lower its spending long-term. The writers noted that, for the first time, the district took out a short-term bridge loan of $75 million this past year to ensure it could make payroll as it waited for property tax payments from the state. Ratings have been lowered for “certificates of participation,” instruments that serve collectively as a giant mortgage on the district’s newer schools.
That bridge loan was repaid. But the action troubled the analysts anyway, and Standard & Poor’s considered it “a negative credit factor.” In addition to the threat of a financial takeover by the state, Hillsborough could find itself at a disadvantage when it needs to borrow money. Already, the three firms — Moody’s, Fitch and Standard & Poor’s — have lowered ratings on the district’s outstanding debt. That means the bonds investors buy as a way of lending the district money are no longer as attractive, which raises borrowing costs.
Without policy action, “Fitch expects the natural pace of spending to exceed revenues,” which will prolong the crisis and lead to more downgrades. Standard and Poor’s: a history of overspending While $400 million in federal COVID-19 relief aid could solve an immediate problem, “these moneys are non-recurring and Fitch does not believe they should be relied upon to eradicate existing structural budget gaps.”
The removal of the negative rating watch “is dependent on the presentation of a board-approved financial plan for at least the current and following fiscal year that outlines expenditure saving measures as well as potential recurring new revenue sources that, in aggregate, Fitch considers credible to ensure maintenance of at least a 3 percent general fund balance,” meaning the reserve. “The negative rating watch reflects Fitch’s concern with the progress of the formulation of a financial recovery plan to correct the current and future years’ structural budget imbalance,” the authors wrote on April 29.
The News Highlights
- Analysts gave alarms months ago about Hillsborough school finances
- Check the latest News news updates and information about business, finance and more.
For Latest News Follow us on Google News
- Show all
- Trending News
- Popular By week