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Outlook Revised To Stable From Positive On Certain Charter School Ratings On Deep Economic Contraction

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.
Obligor State Current Rating

Cornerstone Schools

Florida BBB-

Evolution Academy Charter School

Texas B

Excel Academy Charter School

Colorado BBB-

Green Dot Public Schools

California BBB-

Legacy Preparatory Academy

Utah BBB-

Paterson Charter School for Science & Technology

New Jersey BB-

Rocky Mountain Academy of Evergreen

Colorado B+

Santa Rosa Academy Inc.

California BB+

Texas Leadership Charter Academy

Texas BB-

Victory Charter School

Idaho BBB-

Voyageur Academy

Michigan B-

Wasatch Peak Academy

Utah BB+


  • 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 for further information. Complete ratings information is available to subscribers of RatingsDirect at All ratings affected by this rating action can be found on S&P Global Ratings' public website at 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;

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