This article from Bond Buyer is behind a paywall. The gist of it is in the headline and summary. The expansion of charters “is a credit negative” and causes districts to pay a higher rate for their bonds, thus leaving the district less money to support public schools. If anyone has a subscription, please send the rest of the article.
http://www.bondbuyer.com/news/regionalnews/moodys-charter-school-expansion-credit-negative-for-lausd-1067623-1.html
Moody’s: Charter School Expansion Credit Negative for LAUSD
BY KEELEY WEBSTER
NOV 3, 2014 10:05pm
Charter school giant KIPP School’s announcement that it would more than double its Los Angeles enrolment by 2020 is a credit negative for Los Angeles Unified School District, according to Moody’s Investors Service.
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Philadelphia was warned about its bond rating by Moody’s.
With San Antonio ISD anticipating school closures, Austin ISD enrollment down, how soon will Moody’s downrate their bond ratings?
Aside from directly sapping funds from public education, now we see another cost of charter schools to taxpayers.
Diane Ravitch's blog 
But Moody’s itself is so shady, I hardly know what to make of it all. Moody’s and the other rating companies were instrumental in the crash of 2008 because they gave the highest possible ratings to mortgage securities that they knew to be basically junk. And now they want to downgrade governmental units such as cities? It has very little to do with real value, but everything to do with privatizing all public assets.
Incidentally, does anyone know what Moody’s ratings are for the charter companies themselves?
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And I think that’s because they relied on data, with any common sense balance.
I guess we’re heading for an education crash.
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The ratings agencies including Moody’s and Standard and Poor’s should have been prosecuted for the frauds that they perpetrated when giving the bundled deravites top ratings. it was only after the fact the world learned that these agencies are not independent, but rather are paid by the very firms on which they report. The stock market is rigged in so many ways to fool the small investors.
However, this new info re charter schools should be a wake up call to cities on the verge of bankruptcy.
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Moody’s: Charter School Expansion Credit Negative for LAUSD Webster, Keeley. Bond Buyer [New York, N.Y] 05 Nov 2014. Turn on hit highlighting for speaking browsers by selecting the Enter button Abstract (summary) TranslateAbstract
KIPP Schools, the nation’s largest network of charter schools, said it plans to double enrollment within LAUSD’s boundaries from 4,000 to 9,000 within the next six years, according to Moody’s Weekly Credit Outlook for Public Finance released Oct. 30.
Full Text TranslateFull text LOS ANGELES — Charter school giant KIPP School’s announcement that it would more than double its Los Angeles enrollment by 2020 is a credit negative for Los Angeles Unified School District, according to Moody’s Investors Service.
KIPP Schools, the nation’s largest network of charter schools, said it plans to double enrollment within LAUSD’s boundaries from 4,000 to 9,000 within the next six years, according to Moody’s Weekly Credit Outlook for Public Finance released Oct. 30.
Moody’s analysts said they deemed the announcement a credit negative, because it will exacerbate the public school district’s trend of declining enrollment harming its revenues.
LAUSD has experienced a 20% decline in enrollment over the last 10 years and more than 40% of that figure was lost to charter schools, Moody’s said.
The projected increase in enrollment for KIPP and resultant loss for LAUSD represents a $35 million decrease in ongoing revenues for the school district, according to the report. Under California’s revenue allocation formula, for every 1% decrease in enrollment, the district’s revenues also fall roughly 1%.
“While this financial impact would be manageable in isolation at less than 1% of general fund revenues, the expansion of a large and well-regarded charter school operator such as KIPP marks a continuation of the rapid proliferation of charter schools within the district,” Moody’s analysts said. “As a result, the viability of these schools as competitive alternatives for district students is further solidified.”
Enrollment declines could pose a particular challenge for the school district as they would coincide with escalating pension and healthcare costs and the scheduled sunset of Proposition 30 funding, according to analysts. General fund contributions to the California Teachers Retirement System and the California Public Employees’ Retirement System are expected to grow by more than $200 million over the next four years, Moody’s said.
Credit: By Keeley Webster
Word count: 305 (Copyright c 2014 SourceMedia, Inc. All Rights Reserved.)
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Thanks Joanne for retrieving the entire article.
$35M is a drop in the bucket loss for LAUSD. The unindicted Deasy left LAUSD closer to $647M in the hole with his wasted iPad and MiSiS deals. California taxpayers will be suffering for his mismanagement for decades while under law, repaying with big interest, the Wall Street bond issues.
When we factor in Prop. 30 cash, however temporary, and Construction Bonds being used for general funding of technology, and other bond issues, all of this funding comes for the public’s pockets. We the People are indebted for many decades, as the billionaires find new ways to pauperize us.
Kipp seems to have a sure thing/source of income, as do all charters, from the public purse.
If this in not corporate socialism, what is?
They, the charter privatizers, use our money, open schools with little to no oversight, appoint their own CEO and Board which votes how much to pay him/her, hire teachers who are mainly lowest pay TFA kids, then their schools become embedded in free public sites, and they demand equal facilities been given to them, under Ca. law.
Sounds like a Kurt Vonnegut horror novel. Who could have thought this up?
Will all public utilities, water, electricy, heating, transportation, etc., soon go this same route, whereby our payments go straight to the pockets of Eli Broad, the Waltons, et al?
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‘…all of this funding comes from the public’s pockets…’ With a public school all taxes go 100% to support it – Is this true of a charter school ? good question…also refer back to blog on TFA costing a district more money than an ed grad…government waste…I thought the conservative camp was against that.
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Caligirl…the money follows the student as with ADA, Average Daily Attendance. That is the crux of the problem. When a charter skims the top students from a real public school, they leave the ELL, Special Ed, and hard to teach students behind with minimal funding to run an adequate program. It creates a class of students who will never be able to catch up, and probably will be dependent ad infinitum.
Yes, charters are funded by the tax money we all pay. But their CEOs can assign their own Board, can even be their family, and pay themselves off the top, a huge salary. This CEO is rarely an educator. Then he/she hires cheap untrained TFA kids to keep the costs low. In many, not all, cases, these charter school students get a sub standard education.
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Charters: Destroying schools, communities, and your locales credit. Pretty darn impressive.
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Oh, who cares, Diane. Traditional public schools are unfashionable.
BORING.
Let’s talk about the tennis star and his innovative ideas for using public per pupil funding to develop privately-owned tangible assets. Public-private partnerships, where the public is a junior partner with no equity interest. That’s the ticket.
Schools are just service providers anyway.
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Love the comment Chiara. Strange. At one time conversion of public assets for private gain was illegal. But now we call it public-private partnership and the public assumes all the risk. We are definitely off the rails.
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Do you want fries with that polynomial?
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Even more egregious Chiara, is the hip hop singer Pitbull who makes millions off his Florida charters which focuses on hip hop (kill da cops, beat da hos). What will their grads do as adult citizens?
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Counterintuitive as it may seem, this is good news for the so-called reformers.
Accelerated charter expansion, agreed to by virtually all political and financial elites, leads to a credit downgrade, which leads to further austerity and disintegration for the public sector, which the so-called reformers will then point to as justification of further privatization.
A toxic feedback loop…
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You wonder if there’s ANY concern for the 90% of kids who are in traditional public schools right now?
Is it just a situation where they gotta break a few eggs to make the privatization omelet? This “transitional” group of public school students just get completely screwed by lawmakers as they unwind the old system and replace it with their preferred model?
It’s the most irresponsible thing I have ever witnessed in this country. There is just NO consideration or thought given to existing public schools. It’s as if they’re already gone.
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Is there any concern for the 90% of the kids still in public schools?
No, none whatsoever, except insofar as their data sets can be monetized, and rents extracted from their vulnerability and misery.
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Also leads to a higher cost for LAUSD to borrow money. Kick to the taxpayer’s pocketbook. All part of a grand plan.
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In Ca., only last week the case pitting CalPERS against the bankrupt city of Stockton, largest public bankruptcy in the nation, was resolved by the good lawyering representing PERS in saving public employees pensions, including teachers/professors, police, nurses, etc.
In Detroit the billionaires gobbled up the assets. It was only with huge public effort that they could not rape the Art Museum of it’s finest works.
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Is jerry brown doing so much to help charters to wipe out his plus points for challenging the court tenure decision?
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This Moody’s announcement is about LAUSD, not Los Angeles.
Michael F’s comment above is pretty much on the mark. Huge operating deficits increase pressure to cut operating costs. Outsourcing is the traditional way to do that. See, e.g., Michigan.
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Flerp…in the face of the budgetary mishaps at LAUSD, the KIPP bond rating would probably be low enough not to entice any buyers. Who would buy a B, BB,or BBB, or even C rated bond if they think the district could go under? When Arnie became Guv, he had promised NO new bonds, and them immediately went to Wall Street to negotiate for about $300 B new bonds for Ca…at least that is the figure I recall. It sent Ca. into an economic talispin that Jerry Brown has cleaned up. The cleanup also included over 40,000 lost teaching and staff jobs.
As to LAUSD, when Deasy used, or tried to use before Ratliff and the public caught on, $1.3 B for obselete iPads, he swiped that money, with the support of the BoE, from dedicated School Construction Bonds, and he further used the theory that he did this as a civil rights measure. Pure horse pucky.
As far as I am concerned, after the 2007-8 collapse of the world’s economies mainly based on Moody’s rating the bundled credit default swaps derivatives (sold by mortgage brokers and unindicted banksters to shnooks all over the world), and Moody’s lied to the world about their value, I no longer give a damn about what Moody’s nor the other two rating agencies say. If their analyses are paid for by the very firms they analyze, how can they be relied upon????
So I only take their info as one piece of a tangled puzzle.
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