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Missouri School Districts' Liquidity And Reserves Should Provide Near-Term Cushion Against Funding Cuts

Missouri's year-end budget cuts will likely mean weaker operating performance for state school districts, but S&P Global Ratings believes that most districts should avoid major cash flow issues on the strength of their reserves and liquidity.

On June 1, 2020, the state announced $209.8 million in expenditure restrictions for fiscal 2020, approximately $132.7 million of which fell on the state's Department of Elementary and Secondary Education, with $123.4 million coming from reductions to the foundation formula by means of lowering the adequacy target to $6,311 from $6,375 per pupil. Although the cuts amount to only 3.5% of the budgeted allocation for the foundation formula, they come in the last month of the fiscal year for Missouri school districts and could equate to as much as 40% of the districts' anticipated state aid payment for June.

Given the timing, we do not believe that Missouri school districts will be able to make commensurate adjustments to their expenditures to fully offset the reduction in the foundation formula. We further expect that Classroom Trust Fund and Proposition C revenue, which consist of gaming revenue and sales taxes, respectively, will decline and further pressure Missouri school districts' operations. The state did not make its May 2020 payment to the Classroom Trust Fund given restricted economic activity and the temporary closure of gaming operations. As a result, fiscal 2020 results will likely reflect weaker-than-anticipated budgetary performance for many Missouri school districts. However, the majority of Missouri school districts that we rate maintain very strong reserves and liquidity, which we believe will allow them to finish the year without significant cash flow challenges. Median available reserves are above 15% (which we consider strong on a modified cash basis of accounting, which is common among Missouri school districts) regardless of rating category.

Missouri's enacted fiscal 2021 budget features full funding of the foundation formula for school districts (with the foundation target set at $6,375) but assumes a $2.3 billion increase in federal stimulus and emergency relief funding related to COVID-19. We believe that the recession could weaken the state's revenue collections in fiscal 2021, and that lower-than-anticipated federal funding or spending restrictions placed on any future funds could pressure the state's operations, resulting in further cuts to school funding. Given that the governor has broad authority to make rescissions and restrict appropriations to ensure state budgetary balance, school districts may again face intrayear withholdings of state aid that could pressure their operations. We will monitor how the state manages the fiscal 2021 budget and the impact that any state-level adjustments could have on school districts' operations and credit quality. Given these pressures, we anticipate more downward than upward rating movements in 2020 and 2021. The rating impact on individual districts will likely vary and depend significantly on each district's management and ability to adjust operations as challenges arise.

Table 1

Missouri School District Medians
Rating
AAA AA+ AA AA- A+ A BBB+ or lower
Household EBI (%) 163 136 118 94 83 74 65
Market value per capita ($) 223,668 122,281 99,926 69,174 58,955 51,916 22,091
Available general fund (%) 18.9 52.2 28.4 27.4 30.6 23.2 17.7
Debt per capita ($) 3,400 2,420 2,824 1,609 1,459 991 1,121
Debt as % market value 1.5 2.0 3.2 2.3 2.5 1.8 5.1
Pension ARC + OPEB as % expense 7.1 8.1 6.7 6.7 7.0 6.9 6.9
ARC--Annual required contribution. EBI--Effective buying income. OPEB--Other postemployment benefits.

Table 2

Missouri School District Reserves And State Aid Reliance
School district Rating Outlook Lien Total available balance ($000s) Available reserves as % of operating expenditures % of operating revenue from state aid Operating revenue from state aid ($000s)
Adair County School District R-III Kirksville A+ Stable GO 9,904 37.2 43.0 11,467
Andrew County R-III School District (Savannah) A+ Stable GO 4,407 20.8 46.8 9,998
Arcadia Valley School District No. R-II A+ Stable GO 4,701 43.1 48.7 5,192
Atchison County R-I School District (Tarkio) A+ Stable GO 2,697 48.6 34.2 2,018
Audrain County School District No. 59 A+ Stable GO 9,386 40.2 36.2 9,145
Barry County R-I School District (Monett) A+ Stable GO 11,163 44.2 51.4 7,000
Barry County R-IV School District (Cassville) A+ Stable GO 5,636 32.0 39.6 7,000
Barton County School District R-I (Lamar) A+ Stable GO 4,446 35.0 37.0 4,972
Bates County R-III School District (Adrian) A+ Stable GO 2,602 37.6 42.7 2,992
Bates County R-V School District (Butler) A Stable GO 2,832 29.4 42.9 4,370
Bayless Consolidated School District AA- Stable GO 5,460 29.7 38.6 7,124
Benton County R-IX School District (Warsaw) A Stable GO 1,406 10.9 37.0 4,573
Boone County R-IV School District (Hallsville) A+ Stable GO 4,051 33.1 52.1 6,806
Boone County R-VI School District (Centralia) AA- Stable GO 2,897 22.9 43.0 5,601
Bowling Green R-I School District A+ Stable GO 3,309 25.1 39.4 5,215
Branson Reorganized School District No. 4 A+ Stable GO 17,677 39.2 28.1 13,482
Brentwood School District AA Stable GO 10,314 64.3 2.8 429
Butler County R-I School District (Poplar Bluff) A+ Stable GO 21,556 44.5 43.8 22,676
Cabool R-IV School District A Stable GO 1,699 22.6 45.0 3,532
Caldwell County R-II School District (Hamilton) A+ Stable GO 2,448 34.8 42.9 3,056
Callaway County Public School District No. 58 (Fulton) A+ Stable GO 8,304 35.9 40.8 10,057
Camden County R-3 School District (Camdenton) AA- Stable GO 15,950 32.7 14.3 7,023
Camden County R-4 School District (Climax Springs) A+ Stable GO 1,695 53.6 11.6 408
Cape Girardeau County R-II School District (Jackson) A+ Stable GO 11,882 23.6 42.9 21,595
Cape Girardeau School District No. 63 A+ Stable GO 9,540 19.9 24.2 12,030
Carroll County R-VII School District Carrollton A+ Stable GO 4,974 49.3 29.8 3,004
Cass County R-II School District (Raymore-Peculiar) AA- Stable GO 13,923 21.6 41.8 29,731
Cass County R-IX School District (Harrisonville) AA- Stable GO 5,989 23.2 38.5 9,824
Cass County R-V School District (Archie) A+ Stable GO 1,499 28.5 46.8 2,492
Cass County R-VIII School District Sherwood Cass A Stable GO 1,065 14.0 47.0 3,523
Cass County School District No. 124 (Belton) A+ Stable GO 12,313 23.7 45.9 24,034
Center School District No. 58 of Jackson County A- Stable Appropriation 7,282 18.5 15.8 6,377
Chariton County R-IV School District (Salisbury) A+ Stable GO 2,817 49.8 16.8 1,024
Christian County Reorganized School District No. R-III Sparta A+ Stable GO 1,687 23.8 55.9 4,226
Christian County Reorganized School District R-VI (Ozark) A+ Stable GO 15,103 27.5 49.6 28,720
Christian County R-V School District (Clever) A Stable Appropriation 3,527 32.9 52.3 6,056
Christian County School District R-II (Nixa) A+ Stable GO 18,017 29.7 50.6 31,433
Clark County R-I School Dist A+ Stable GO 1,970 18.6 43.8 4,576
Clay County Public School District No. 53 Liberty AA Stable GO 39,801 28.4 43.1 64,999
Clay County R-II School District (Smithville) AA- Stable GO 4,755 17.0 45.3 12,399
Clay County School District No. 40 Excelsior Springs A+ Stable GO 8,533 29.0 39.4 11,846
Clay County School District No. 74 (North Kansas City) AA Stable GO 41,823 17.3 30.9 77,306
Clayton School District AAA Stable GO 4,520 8.9 3.7 1,742
Clinton County R-I School District (Cameron) A+ Stable GO 6,046 35.2 50.4 8,769
Clinton County R-II School District (Lathrop) A+ Stable GO 3,015 31.4 47.1 4,829
Clinton County R-III School District (Plattsburg) A+ Stable GO 2,478 33.3 36.6 2,882
Cole County R-II School District Blair Oaks AA- Stable GO 2,118 19.5 48.6 5,572
Columbia School District AA Stable GO 71,031 33.0 31.9 74,349
Cooper County R-I School District (Boonville) A Stable Appropriation 3,293 20.2 37.4 5,943
Crawford County R-I School District (Bourbon) A+ Stable GO 3,064 34.9 47.0 4,218
Crawford County School District R-II A+ Stable GO 5,035 36.4 45.4 6,277
Crawford County School District R-III Steelville A+ Stable GO 3,152 34.5 46.9 4,510
Dallas County R-I School District A- Stable Appropriation 3,177 19.1 46.6 7,733
Daviess County School District R-VI (Winston) A+ Stable GO 1,033 48.2 40.7 972
DeKalb County School District R-I (Maysville) A Stable GO 561 9.1 35.5 1,948
Douglas County R-1 School District (Ava) A Stable GO 2,526 20.4 43.0 5,589
East Buchanan County C-1 School District AA- Stable GO 3,345 44.1 43.4 3,437
Franklin County R-XIII School District (St. Clair) A+ Stable GO 4,515 19.4 46.5 11,083
Franklin County School District R-XI (Union) A+ Stable GO 10,275 33.6 42.9 13,453
Gasconade County R-I School District (Hermann) A+ Stable GO 2,799 29.9 29.1 2,781
Gasconade County R-II School District Owensville A+ Stable GO 4,278 25.5 39.9 6,994
Gentry County School District R-I (King City) A+ Stable GO 1,683 37.9 35.8 1,588
Gentry County School District R-II (Stanberry) A+ Stable GO 1,630 41.3 44.3 1,803
Gentry County School District R-III (Albany) A Stable GO 1,467 31.1 33.5 1,610
Greene County R-12 School District (Springfield) AA Stable GO 48,426 18.1 27.9 79,077
Greene County Reorganized School District R-III Republic AA- Stable GO 10,748 22.9 49.9 24,337
Greene County R-VIII School District (Logan -Rogersville) AA- Stable GO 4,400 20.2 40.2 8,899
Greene County School District R-II (Willard) A+ Stable GO 11,747 27.0 47.9 21,889
Greene County School District R-IV (Ash Grove) A+ Stable GO 3,789 58.7 41.5 2,739
Greene County School District R-X (Fair Grove) A+ Stable GO 2,197 23.1 51.4 5,182
Grundy County School District R-IX (Trenton) A+ Stable GO 3,211 27.6 43.1 4,943
Hancock Place School Dist A Stable GO 6,923 38.4 38.8 7,098
Hazelwood School District A+ Stable GO 47,836 25.0 34.2 67,234
Henry County School District No. 124 (Clinton) A+ Stable GO 3,559 19.7 33.3 6,135
Hickory County R-1 School District (Skyline) A+ Stable GO 2,683 37.7 49.9 3,386
Holt County R-II School District (Mound City) A+ Stable GO 2,979 79.9 23.5 923
Howell County R-III School District (Mountain View-Birch Tree) A Stable GO 3,437 32.6 49.6 5,686
Howell County R-IV School District (Willow Springs) A Stable GO 2,788 22.3 54.9 7,068
Independence School District AA- Stable GO 27,072 16.3 45.5 78,487
Jackson County Consolidated School District No. C-4 (Grandview) A+ Stable GO 8,715 16.3 31.8 16,887
Jackson County Consolidated School District No. 2 (Raytown) AA- Stable GO 19,807 18.0 41.7 44,943
Jackson County Reorganized School District No. 7 (Lee's Summit) AA+ Stable GO 60,627 27.9 34.0 76,011
Jackson County Reorganized School District No. 4 (Blue Springs) AA- Stable GO 33,926 21.2 34.3 58,271
Jackson County School District C-1 (Hickman Mills) A Negative GO 5,745 7.5 46.1 36,023
Jackson County School District C-6 (Lone Jack) A+ Stable GO 1,324 19.0 38.4 2,696
Jackson County School District R-1 (Fort Osage) A+ Stable GO 10,646 19.1 47.1 27,454
Jackson County School District R-V (Grain Valley) AA Stable GO 11,855 26.3 53.0 24,752
Jasper County R-I School District (Carl Junction) A Stable GO 2,719 9.9 46.5 13,444
Jasper County R-IX School District (Carthage) A+ Stable GO 14,341 29.7 54.9 29,465
Jasper County R-VII School District (Webb City) A+ Stable GO 5,976 15.1 56.2 22,040
Jasper County R-VIII School District (Joplin) A+ Stable GO 24,835 36.1 36.2 27,224
Jefferson City School District AA- Stable GO 25,711 26.8 23.1 22,578
Jefferson County School District No. 73 (DeSoto) A+ Stable GO 7,333 25.4 49.5 14,364
Jefferson County School District C-1 (Windsor) A+ Stable GO 5,294 18.0 48.0 13,767
Jefferson County School District C-6 (Fox) A+ Stable GO 15,641 13.4 46.5 56,871
Jefferson County School District R-1 (Northwest) AA- Stable GO 15,890 24.5 42.5 28,017
Jefferson County School District R-III (Hillsboro) A+ Stable GO 5,050 15.2 49.1 16,050
Jefferson County School District R-V (Dunklin) A+ Stable GO 3,915 21.4 43.4 8,111
Jefferson County School District R-VI (Festus) A+ Stable Appropriation 8,510 30.1 46.9 13,954
Johnson County School District R-VI (Warrensburg) A+ Stable GO 5,484 15.0 38.3 14,576
Johnson County School District R-VIII (Knob Noster) A+ Stable GO 6,023 34.9 40.2 7,047
Kansas City School District A+ Stable GO 53,071 22.7 4.4 10,356
Laclede County R-3 School District (Lebanon) A Stable GO 5,039 12.0 46.7 20,510
Lafayette County C-I School District (Higginsville) A+ Stable GO 2,974 27.6 42.1 4,402
Lafayette County R-V School District (Lexington) A+ Stable GO 2,589 21.5 40.5 4,827
Lafayette County R-VII School District (Odessa) A+ Stable GO 8,315 40.1 43.0 8,917
Lawrence County R-IX School District (Marionville ) A+ Stable GO 1,400 20.7 54.1 3,905
Lawrence County R-VII School District (Verona) A+ Stable GO 1,703 40.1 51.8 2,194
Lawrence County R-VIII School District (Aurora) A+ Stable GO 5,011 27.4 53.8 10,284
Lesterville R-IV School District A- Stable Appropriation 2,308 48.3 26.3 1,253
Lewis County C-1 School District A+ Stable GO 2,856 32.3 39.4 3,554
Lincoln County R-III School District (Troy) A+ Stable GO 19,662 31.1 48.0 32,228
Lincoln County R-IV School District A+ Stable GO 5,123 34.4 51.4 7,793
Livingston County R-II School District (Chillicothe) A Stable GO 2,512 12.3 38.7 7,661
Macon County R-I School District A+ Stable GO 4,620 35.4 39.1 5,259
Madison County School District R-I (Fredericktown) A+ Stable GO 4,223 23.5 50.1 9,421
Maries County R-II School District A Stable GO 1,189 15.7 39.1 3,045
Marion and Ralls Counties School District No. 60 (Hannibal) A Stable GO 9,540 26.9 41.7 15,701
McDonald County R-I School District A+ Stable GO 13,611 38.4 55.7 21,245
Meramec Valley R-III School District AA- Stable GO 16,610 47.8 38.1 13,975
Milan C-2 School District of Sullivan County M A Stable GO 3,131 44.2 49.8 3,895
Miller County School of Osage AA- Stable GO 8,913 43.1 10.5 2,219
Moniteau County C-1 School District A Stable GO 419 17.1 43.9 1,015
Montgomery County R-I School District (Wellsville Middletown) A+ Stable GO 1,805 42.8 38.7 1,674
Montgomery County R-II School District (Montgomery City) A+ Stable GO 2,414 18.9 29.1 3,820
Morgan County R-II School District AA- Stable GO 5,494 39.7 15.1 2,120
New Madrid County R-I School District A Stable GO 5,993 34.0 18.8 3,232
Newton County R-IV School District (Diamond) A+ Stable GO 2,949 38.7 44.1 3,524
Newton County R-V School District (Neosho) A+ Stable GO 7,203 17.3 53.3 23,029
Newton County School District R-VII (Seneca) A Stable GO 1,873 13.7 56.9 7,726
Nodaway County School District R-VII (Nodaway-Holt) A+ Stable GO 900 33.4 34.8 949
North Callaway County R-I School District AA- Stable GO 2,635 22.6 36.3 4,578
North Harrison R-III School District A Stable GO 675 26.6 39.4 1,071
North St. Francois County R-1 School District A Stable GO 2,144 7.1 48.3 13,800
Osage County R-II School District (Linn) A+ Stable GO 2,601 43.9 38.0 2,256
Osage County R-III School District AA- Stable GO 3,215 39.2 32.1 2,747
Osceola School District A Stable GO 1,180 24.9 43.9 2,196
Perry County School District No. 32 A+ Stable GO 6,595 29.7 27.4 6,280
Phelps County R-I School District (St. James) A+ Stable GO 5,361 26.5 53.4 11,120
Phelps County School District No. 31 (Rolla) AA- Stable GO 13,986 32.8 39.8 17,416
Pike County R-II School District (Louisiana) A Stable GO 2,109 28.0 38.8 2,901
Platte County R-II School District (West Platte) A+ Stable Appropriation 10,974 109.1 16.0 1,528
Platte County R-III School District AA Stable GO 7,990 18.1 35.0 16,346
Platte County School District (Park Hill) AA Stable GO 35,908 23.7 25.7 41,392
Polk County R-VI School District (Pleasant Hope) A+ Stable GO 1,737 22.3 55.9 3,986
Polk County School District R-I (Bolivar) A Stable GO 5,847 22.7 51.4 13,247
Pulaski County R-II School District (Crocker) A Stable GO 633 11.6 51.4 2,786
Pulaski County School District R-VI (Waynesville) A+ Stable GO 15,464 22.8 52.1 35,357
Ralls County R-II School District A+ Stable GO 3,496 52.3 34.2 2,392
Randolph County R-V School District (Renick) A+ Stable GO 1,844 93.8 49.7 1,077
Randolph County School District No. 81 (Moberly) A+ Stable GO 9,401 39.0 40.8 10,147
Ray County R-XIV School District (Lawson) A+ Stable GO 4,444 42.4 49.3 5,223
Ray County R-XVI School District (Richmond) A+ Stable GO 3,829 26.9 39.5 5,738
Riverview Gardens School District BBB Stable GO 10,283 17.7 56.9 33,068
Saline County School District R-VII (Sweet Springs) AA- Stable GO 3,553 84.8 36.9 1,555
Schuyler County R-I School District A+ Stable GO 1,448 24.2 42.3 2,569
Scotland County R-I School District A+ Stable GO 1,951 30.9 33.9 2,380
Scott County R-IV School District (Benton) A+ Stable GO 3,272 39.0 47.4 4,299
Sedalia School District No. 200 AA- Stable GO 26,955 56.6 48.0 24,454
Shelby County R-IV School District A Stable GO 4,257 56.9 31.3 2,516
Sikeston R-6 School District A+ Stable GO 10,000 30.4 41.6 14,252
South Harrison County School District R-II (Bethany) A Stable GO 3,193 35.2 40.4 3,784
South Pemiscot County R-V School District A Stable GO 1,501 23.7 56.4 3,406
Southern Boone County R-I School District AA- Stable GO 2,857 16.8 48.9 8,285
St. Charles County R-III School District (Francis Howell) AA Stable GO 40,348 19.4 26.5 55,133
St. Charles County R-V School District (Orchard Farm) AA Stable GO 8,715 31.5 28.6 7,991
St. Charles School District (St. Charles County R-VI) AA- Stable GO 21,616 27.9 16.6 12,550
St. Francois County School District R-7 (Farmington) A+ Stable GO 2,516 7.2 40.7 14,700
St. Francois County School District R-III (Central) A+ Stable GO 6,424 30.1 56.2 11,949
St. Joseph School District A+ Stable GO 23,307 21.0 41.8 50,918
St. Louis County R-III School District (Pattonville) AA Stable GO 38,381 42.2 10.6 10,017
St. Louis County School District No. 101 (Affton) A+ Stable GO 14,738 50.0 14.8 4,649
St. Louis County School District (Ladue) AAA Stable GO 35,305 57.3 4.3 2,715
St. Louis County School District (Maplewood-Richmond Heights) AA- Stable GO 7,622 39.8 8.6 1,787
St. Louis County School District C-2 (Parkway) AAA Stable GO 41,372 17.5 4.9 11,883
St. Louis County School District R-9 (Mehlville) AA Stable GO 32,593 31.1 18.9 20,371
St. Louis County School District R-II (Ferguson) A+ Stable GO 20,723 16.3 31.3 41,241
St. Louis County Special School District AA+ Stable GO 288,331 67.4 21.6 97,123
St. Louis County R-6 School District (Rockwood) AAA Stable GO 51,567 20.4 15.9 40,546
St. Louis County School District (Jennings) A Stable GO 7,388 25.2 52.8 15,472
St. Louis County School District (Ritenour) AA- Stable GO 21,247 32.2 37.6 26,699
Ste. Genevieve County R-II School District A+ Stable GO 4,948 20.5 14.9 3,679
Stoddard County R-VIII School District (Puxico) A Stable GO 1,329 18.4 52.9 3,903
Stoddard County R-XI School District (Dexter) A+ Stable GO 8,528 46.5 42.9 8,136
Stone County R-III School District (Crane) A- Stable Appropriation 1,575 29.3 55.9 3,051
Stone County R-IV School District (Reeds Spring) A+ Stable GO 3,217 15.1 16.1 3,350
Stone County R-V School District (Blue Eye) A+ Stable Appropriation 6,617 76.0 24.1 2,269
Sullivan School District A+ Stable GO 6,857 32.6 44.0 9,401
Taney County R-III School District (Forsyth) A+ Stable GO 5,094 43.8 44.2 5,243
Taney County School District R-V (Hollister) A+ Stable GO 3,628 22.9 32.3 5,438
Twin Rivers R-X School District (Butler County) A Stable GO 1,570 16.2 49.7 4,529
University City School District AA- Stable GO 4,533 10.7 17.8 7,480
Valley Park School District A+ Stable GO 2,140 17.4 6.8 815
Warren County R-II School District (Wright City) A+ Stable GO 6,486 34.1 43.3 8,418
Warren County R-III School District A+ Stable GO 5,999 17.2 45.9 15,286
Washington County R-III School District (Potosi) A+ Stable GO 9,502 42.5 58.0 12,976
Washington School District AA Stable GO 17,600 37.2 16.7 8,262
Webster & Dallas Cnties School District R-I (Marshfield) A+ Stable GO 6,968 24.8 49.6 14,372
Webster Groves School Dist AA+ Stable GO 29,893 52.2 14.7 9,069
West Plains R-VII School District A+ Stable GO 5,978 22.0 36.8 10,422
West St. Francois County R-IV School District A Stable GO 3,925 37.6 53.3 5,540
Woodland R-IV School District A+ Stable GO 3,964 47.9 46.9 3,885
Wright County R -III School District A+ Stable GO 7,445 54.8 46.7 6,564
Note: Financial data as of June 30, 2019; ratings as of June 18, 2020.

Chart 3

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