Moody’s Investor Service calls GA Supreme Court charters school ruling a ‘credit negative’ for APS


Moody’s Investor Service issued a report by Michael D’Arcy that characterized the GA Supreme Court charter school ruling as a ‘credit negative’. In its ruling, the GA Supreme Court upheld a lower court ruling that APS has improperly withheld approximately $2.8 million from the district’s charter schools for APS’ decade old unfunded pension liability. However, the ‘credit negative’ characterization did not result in the District’s bond rating being changed from its previous level. In the report, D’Arcy said,

The $2.8 million of revenue that [Atlanta Independent] will return to the charter schools as a result of the ruling is not a large amount for the school system, but the dispute underscores the larger issue of charter school funding in Georgia and the negative implications for public school districts …

As D’Arcy notes, the $2.8 million is a small portion of the total spent by APS and represents less than 1% of the total District’s budget.

Louis Erste, director of the state Charter Schools Division for the Georgia Department of Education, said

Given this APS-only scenario, it is therefore an overreaching and overly cautious statement by Moody’s that, ‘the ruling is a credit negative for…other K-12 public school districts in the state with an increasing charter school presence, because it bars districts from offloading a portion of their legacy costs onto charter schools,…

Only APS made an ill-considered decision in 2012 to suddenly deviate from the law on how to fund charter schools when it began to ‘offload… a portion of their legacy costs onto charter schools’ by illegally subtracting funds from their charter schools’ base funding to cover APS’s pension funding mistakes of the past, Erste said.

Administration officials indicated that they are looking at other alternatives to deal with the over $550 million unfunded pension liability that was incurred prior to 1982.

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