The Florida school portfolio generally exhibits stable reserves and comparatively low debt burdens. Over the past decade, the Florida economy grew steadily and showed resiliency during the COVID-19 pandemic. Public schools, however, face some unique challenges including increasing competition for students from charter and private schools due to school choice expansions. In addition, a portion of the portfolio is exposed to chronic and acute risks from weather-related events that could introduce longer-term credit pressures.
We maintain issuer credit ratings on 22 Florida school districts. The number of schools within the portfolio has declined by two since 2019 due to retirement of those entities' debt obligations. Overall, credit quality has remained relatively stable for the Florida school district portfolio. S&P Global Ratings took a rating action on only one district (Hillsborough County School District), which was a two-notch downgrade with a negative outlook, due to a material decline in that district's available reserves, difficulty achieving recurring budgetary balance, and potential for reserves to decline further. In addition, S&P Global Ratings revised the outlook on one school district to negative from stable (Indian River County School District) due to a reduction in reserves over a multiyear period that, if reduced further, could result in a downgrade.
- Steady market value growth with maintenance of good-to-strong reserve levels across the portfolio
- Very low overall net debt as a percent of market value and on a per capita basis
- Relatively low pension and other postemployment benefit carrying charges, coupled with a comparatively well-funded pension plan, with all districts participating in the Florida Retirement System, which had a funded ratio of 82% as of July 1, 2020
- Outsized pressure regarding chronic and acute physical risks stemming from extreme weather- and climate-related changes, requiring adequate disaster recovery-related reserves and planning, including mitigation and adaptation planning
- Recent expansion of school of choice program eligibility requirements and growing presence of charter schools in the state, which could result in school district enrollment declines and funding pressures, leading to potential budgetary issues and capital and maintenance investment challenges
What We are Keeping Eye On In 2021 And Beyond
The State of Florida (AAA/Stable), did not reduce its funding to public education during 2021. The state's fiscal 2022 budget was adopted with a slight increase in per-pupil funding to $8,019 (or an increase of $233 per pupil). However, the total funding allocation for the Florida Education Finance Program declined by $100 million to $22.8 billion whereas enrollment count has decreased by 1.5% based on the 2021 spring enrollment. We have observed a similar enrollment trend across the U.S., which we view as likely temporary and due to the COVID-19 pandemic. A portion of the state's education budget is dedicated to increasing starting salaries for teachers, providing $1,000 bonus payments to all kindergarten to grade 12 teachers and principals, school safety investments, and mental health initiatives. Florida amended the eligibility requirements for various scholarship programs offered in the school of choice programs that might lead to a higher diversion of state funding to non-public schools from public schools. For more background on Florida public and charter school funding allocation changes in recent years see our article "Florida Shines A Light on Education Funding Trends And Credit," published Dec. 10, 2019, on RatingsDirect. Ultimately, we anticipate enrollment trends will recover in the next few years as the economy continues to recover and begins to normalize. We believe that public school's ability to budget state aid could introduce challenges for those schools that depend on a higher proportion of state aid once stimulus funds run dry in 2024. Florida school districts received more than $693 million from the Coronavirus Aid Relief and Economic Security Act and over $2.8 billion from the Coronavirus Response and Relief Supplemental Appropriations Act, which we believe will provide sufficient budget flexibility as enrollment and economic trends recover from the recent effects of the pandemic.
Spotlight On Environment, Social, Governance Factors
The Florida school district portfolio is susceptible to elevated chronic and acute environmental risks for those entities within proximity of the coast and that are susceptible to sea-level rise and major weather event risks (such as hurricanes). Hurricane season generally occurs between June and November; however, no hurricanes made landfall in Florida during 2020. Tropical Storm Eta, however, delivered very strong winds, storm surges, and material flooding to the Florida Keys before making a second landfall at Cedar Keys, just north of Tampa in 2020. This compares favorably with 2019 in which there were 18 named storms, six of which were hurricanes, with Hurricane Dorian the largest that affected Florida local governments. School districts typically coordinate hardening infrastructure, hazard mitigation planning, and emergency response efforts with their overlapping governments.
With the ongoing population and enrollment growth experienced across the state, we believe the portfolio's demographic trends will remain a social opportunity. Historically, Florida has remained one of the top three leading states for growth due in part to in-migration from Latin America, which we believe might rise at a slower rate than in previous years because of the pandemic. In addition, demographic shifts since the start of the pandemic, with in-migration from other U.S. states, has led to enrollment growth but it's unclear whether these patterns are temporary or permanent and therefore could increase uncertainty about the future growth rate for schools.
Florida School Districts Data
|Florida School Districts: Medians|
|Household EBI (%)||93.0||106.0||84.0||90.0||85.0|
|Market value per capita ($)||147,213||160,861||110,892||93,495||78,793|
|Available general fund (%)||16.7||11.7||8.1||6.1||10.8|
|Debt per capita ($)||1,393.0||801.0||1,393.0||712.0||440.0|
|Debt as % market value||1.0||0.6||0.9||0.6||0.7|
|Pension ARC + OPEB as % expense||3.5||4.0||3.9||3.8||4.3|
|ARC--Annual required contribution. EBI--Effective buying income. OPEB--Other postemployment benefits.|
|Florida School Districts: Rating List|
|As of May 24, 2021.|
|This list was prepared by individuals on behalf of the USPF Group of S&P Global Ratings and is current as of May 24, 2021. For the most up to date, accurate, and complete information on any credit ratings referenced in this list, please visit www.standardandpoors.com.|
|Organization||General obligation rating||Outlook||Ratings linked to obligor creditworthiness rating||Outlook|
|Indian River County||N/A||N/A||AA-||Negative|
|Miami Dade County||AA-||Stable||A+||Stable|
|Palm Beach County||AA||Stable||AA-||Stable|
|Santa Rosa County||A+||Stable||A||Stable|
|St Johns County||N/A||N/A||AA-||Stable|
|St Lucie County||N/A||N/A||A||Stable|
This report does not constitute a rating action.
|Primary Credit Analyst:||Jennifer K Garza (Mann), Farmers Branch + 1 (214) 871 1422;|
|Secondary Contact:||Kimberly Barrett, Centennial + 1 (303) 721 4446;|
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