Moody’s calls charter school rejection ‘credit positive’
Moody’s Investors Service said Massachusetts voters’ decision to reject Governor Charlie Baker’s charter school expansion plan is “credit positive” for the state’s urban governments, freeing them from potential financial pressures had the proposal been approved.
In an announcement this week, the bond rating agency said the history of charter schools shows they drain money from city governments’ education budgets, citing Boston, Fall River, Lawrence, and Springfield in particular.
“A city that begins to lose students to a charter school can be forced to weaken educational programs because funding is tighter, which then begins to encourage more students to leave which then results in additional losses,’’ the Moody’s report said.
Charter school advocates, who backed Question 2 on the Nov. 8 ballot, firmly rejected Moody’s assessment, citing two studies by nonpartisan groups that came to an opposite conclusion, namely that urban school districts do not suffer financially by the exodus of students to charter schools.
“The overwhelming evidence is to the contrary, as documented by the Massachusetts Taxpayers Foundation and the Boston Municipal Research Bureau,” said Marc Kenen, executive director of the Massachusetts Charter Public School Association.
The release of the report, a week after the election, followed an e-mail sent by Moody’s to the mayors of the four cities in the final week of the campaign. The e-mail warned that passage of the ballot question would be “credit negative” and its defeat “credit positive” but gave no further details. It said Moody’s would not publish its final report until after the election.
The analysis from Moody’s is important because the agency rates municipalities’ credit worthiness. A downgrade from Moody’s or other credit-rating agencies can make it more difficult for cities and towns to borrow money at good rates.
A Globe story reporting the content of the e-mails drew harsh criticism from Question 2 backers who balked at Moody’s timing and lack of specificity.
Days later, voters soundly rejected the Baker-backed charter school initiative, despite supporters having spent a record $24 million to promote it. Teachers’ unions spent over $14.5 million to defeat the measure.
The Moody’s report, released Tuesday, said that because of increased enrollments in recent years, charter school spending grew by 83 percent. “In comparison, total municipal education expenditures increased by about 15% from 2011 to 2016,” Moody’s said.
The bond rating agency said charter schools “tend to proliferate in urban areas where school districts already reflect a degree of underlying economic and fiscal stress that can detract from a city’s ability to deliver competitive services and can prompt students to move to charter schools; this growing competition can sometimes create a ‘downward spiral’.”
“While reports have shown that per-pupil spending pre- and post-charter school enrollment remains favorable to the city school districts, the ability to redirect spending, institute program changes and reduce full-time positions is difficult,’’ Moody’s said. “In Boston, school department employees increased by 2.8% from 2002 to 2016 during which time no other department increased its staff.”