NEW YORK (S&P Global Ratings) April 22, 2020--S&P Global Ratings revised its outlook to stable from positive on certain long-term and underlying ratings on charter schools due to the heightened risk of state funding cuts caused by the COVID-19 pandemic and the related recession (see list below).
In our view, the previous upward momentum will likely be stunted by the challenges facing charter schools due to the COVID-19 pandemic and the recession. Although we no longer think a higher rating is likely during the outlook period, we consider these charter school ratings stable at this time. Although we have made these broad-based outlook revisions, we intend to review all ratings individually to assess underlying financial performance as well as the degree to which each is affected by COVID-19-related events including the recession.
These outlook revisions correspond with the action we took on April 1, 2020, when we revised our outlook on the charter school sector to negative from stable. For more information, see "All U.S. Public Finance Sector Outlooks Are Now Negative," published April 1, 2020 on Ratings Direct.
As described in "An Already Historic U.S. Downturn Now Looks Even Worse," published April 16, 2020, the recession's trajectory is much deeper and faster than previously anticipated. S&P Global Economics now projects that U.S. GDP will contract by 5.3% in 2020. Although we expect the economy will begin to recover in the second half of 2020, we anticipate that the recovery will be gradual and will be constrained by some form of continued social distancing as fears persist over the continued spread of COVID-19. Given this rapid and severe economic shock, we believe upward rating movement is unlikely over the intermediate term.
Many states are facing a structural gap in fiscal 2020, although we believe the risk of state funding cuts and delays is greater for charter schools in fiscal 2021. Specifically, cuts to state funding, or per-pupil funding could have a significant impact on liquidity and debt service coverage for certain charter schools.
The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act appropriates $150 billion across all state and local governments to offset costs related to the COVID-19 pandemic and alleviate liquidity pressures. Specifically, the Elementary And Secondary School Emergency Relief Fund (ESSER) and the Governor's Emergency Education Relief Fund (Governor's) combined will provide about $16 billion to K-12 education, charter schools and, to some extent, higher education. We view this federal government relief as a mitigating factor helping to limit the near-term credit and liquidity pressures for many charter schools. However, uncertainty remains regarding the timing and sufficiency of these measures and whether there will be any additional state or federal support for charter schools.
We view the COVID-19 pandemic, and particularly downward credit pressure introduced by social distancing measures and persistent fears of the spread of the virus, as a credit risk for all U.S. public finance ratings. We classify this credit risk as a health and safety social risk under our environmental, social, and governance (ESG) factors.
|Select Charter School Ratings List|
|The outlook on all ratings is stable.|
Evolution Academy Charter School
Excel Academy Charter School
Green Dot Public Schools
Legacy Preparatory Academy
Paterson Charter School for Science & Technology
Rocky Mountain Academy of Evergreen
Santa Rosa Academy Inc.
Texas Leadership Charter Academy
Victory Charter School
Wasatch Peak Academy
- An Already Historic U.S. Downturn Now Looks Even Worse, April 16, 2020
- The COVID-19 Outbreak Weakens U.S. State And Local Government Credit Conditions, April 2, 2020
- Credit FAQ: The Ratings Process And The COVID-19 Pandemic, April 2, 2020
- Through The ESG Lens 2.0: A Deeper Dive Into U.S. Public Finance Credit Factors, Feb. 27, 2020
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
|Primary Credit Analysts:||Peter V Murphy, New York (1) 212-438-2065;|
|Jessica L Wood, Chicago (1) 312-233-7004;|
|Secondary Contacts:||Avani K Parikh, New York (1) 212-438-1133;|
|Beatriz Peguero, New York (1) 212-438-2164;|
|Shivani Singh, New York (1) 212-438-3120;|
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: firstname.lastname@example.org.