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Some Missouri School Districts Could Face Long-Term Financial Pressure From Mask Mandate Lawsuits, Others Could Face Higher Capital Costs


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Some Missouri School Districts Could Face Long-Term Financial Pressure From Mask Mandate Lawsuits, Others Could Face Higher Capital Costs

The Missouri attorney general has sued 45 Missouri school districts for enforcing mask mandates, alleging--along with some state officials--that the districts lack the authority to enact those mandates. At the same time, the Missouri Treasurer's Office has disallowed school districts that enforce a mask mandate from participating in the Missouri enhancement program, effectively preventing those districts from accessing the state-created financing mechanism providing a lower cost of capital to complete projects. While S&P Global Ratings does not anticipate that these actions will have a major influence on the districts' credit quality in the short-term, a significant judgment against them could pressure their finances or operations and consequently credit quality. We will monitor the situation as it develops and take any necessary rating action on a case-by-case basis.

Implications from the lawsuits

The Missouri attorney general has filed lawsuits against 45 school districts (listed below) due to their decision to enforce mask mandates. Further lawsuits may arise should other districts be found mandating students to wear masks. The lawsuits resulted from a November 2021 court ruling, which stated that public health orders passed by unelected officials were a violation of Missouri's separation of powers laws and were consequently unconstitutional. As such, the lawsuits assert that the defendant districts did not have the authority to impose public health orders. Several of the defendant districts have contended that there are provisions under state statutes granting them such powers and that their boards are effectively comprised of elected officials, making their public health mandates exempt from the court ruling.

We view the outcome of these cases as highly uncertain. However, despite the uncertainty, we do not anticipate that the lawsuits will materially pressure the districts' underlying credit quality in the near term because most of the defendant school districts carry strong reserves and liquidity that we believe would help them navigate the short-term pressures from court costs and legal fees.

In the long term, we will evaluate the lawsuits' impact on credit quality, such as material monetary judgements against the districts or findings that would significantly pressure the districts' operations. The situation would be exacerbated if affected districts did not carry sufficient insurance to cover or mitigate such a judgment.

Districts with mask requirements prohibited from participating in Direct Deposit State Aid Program

The State Treasurer's Office has also issued a requirement that districts who want to participate in the Direct Deposit of State Aid bond program abide by the November court ruling. This requirement only applies to new issuances, so we do not anticipate any pressure on previously issued ratings.

Bonds that do not participate in the program do not qualify for S&P Global Ratings' AA+/Stable enhanced rating and would be rated solely to the issuer's creditworthiness, which is based on the underlying pledge to repay the bonds. We do not view a lack of participation in the program as having a material impact on general credit worthiness; however, districts who pass on program participation may pay more in debt service over the life of the bonds (assuming certain market conditions and that the district's rating is lower than that of the program). For many districts, the cost differential would likely be inconsequential to financial operations, but for others it could result in an additional source of financial stress, which can translate to credit quality pressure.

Ratings List

Districts Being Sued By The Missouri Attorney General: Key Metrics
District Rating Nominal reserves ($000s) Reserves as % of operating expenditures Available cash ($) Cash as % of total governmental expenditures

St. Louis County School District No. 101 (Affton)

A+/Stable (GO) 14,221 50.0 22,174 61.8

Bayless Consolidated School District

AA-/Stable (GO) 5,149 27.7 13,947 57.1

Brentwood School District

AA/Stable (GO) 10,996 69.1 16,946 50.8

Jackson County School District No. 58 (Center)

A-/Stable (Appropriation) 7,821 19.8 50,710 76.0

Columbia School District

AA/Stable (GO) 84,203 36.1 184,328 57.9

Clayton School District

AAA/Stable (GO) 11,357 22.1 37,652 57.3

Jefferson County School District R-V (Dunklin)

A+/Stable (GO) 4,579 25.6 8,182 33.2

St. Louis County R-II School District (Ferguson)

A+/Stable (GO) 15,182 11.8 40,667 27.9

St. Charles County R-II (Fort Zumwalt)

Program only rating

Jefferson County School District C-6 (Fox)

A+/Stable (GO) 15,334 13.5 16,463 12.7

St. Charles County R-III (Francis Howell)

AA/Stable (GO) 30,528 14.3 51,435 19.9

Jackson County Consolidated School District No. Co-4 (Grandview)

A+/Stable (GO) 8,368 15.3 20,974 33.5

Hancock Place School District

A/Stable (GO) 8,738 47.0 7,881 27.2

St. Louis County School District (Hazelwood)

A+/Stable (GO) 40,348 20.2 61,654 21.6

Jackson County School District C-1 (Hickman Mills)

A-/Negative 31,099 48.6 31,127 37.2

Johnson County R-III School District (Holden)

Program only rating 0.0 0.0

Independence School District

AA-/Stable (GO) 27,398 16.4 50,563 20.9

Jefferson City

AA-/Stable (GO) 27,467 27.6 65,261 37.9

St. Louis County School District (Jennings)

A/Stable (GO) 8,349 30.9 11,937 42.0

Kansas City Public Schools

A+/Stable (GO) 62,103 26.1 122,411 46.8

Johnson County R-I School District (Kingsville)

Program only rating

St. Louis County School District R-VII (Kirkwood)

AA+/Stable (GO) 35,351 48.6 47,275 54.5

St. Louis County School District (Ladue)

AAA/Stable (GO) 36,665 58.2 160,830 192.5

Jackson County R-VII School District (Lee's Summit)

AA+/Stable (GO) 63,040 28.5 77,086 29.3

Lafayette County R-V School District (Lexington)

A+/Stable (GO) 2,836 22.1 2,836 18.0

Clay County Public School District #53 (Liberty)

AA/Stable (GO) 41,706 28.4 62,913 34.7

St. Louis County School District R-VIII (Lindbergh)

AA/Stable (GO) 21,725 28.5 25,138 20.8

St. Louis County School District (Maplewood- Richmond Heights)

AA-/Stable (GO) 9,692 50.0 13,147 52.8

St. Louis County School District R-9 (Mehlville)

AA/Stable (GO) 38,208 36.7 38,208 31.4

Meramec Valley R-III School District

AA-/ Stable (GO) 16,574 46.5 19,087 36.2

Clay County School District No. 74 (North Kansas City)

AA/Stable (GO) 58,286 23.1 216,153 58.8

Park Hill School District (Platte County)

AA/Stable (GO) 32,756 20.3 5,885 2.6

St. Louis County Parkway School District C-2

AAA/Stable (GO) 49,491 21.6 119,176 42.5

St. Louis County R-III School District (Pattonville)

AA/Stable (GO) 38,381 42.2 58,066 46.3

Jackson County Consolidated School District No. 2 (Raytown)

AA-/Stable (GO) 29,298 27.7 35,536 27.6

Ritenour School District

AA-/Stable (GO) 30,109 45.9 36,334 49.6

St. Louis County R-6 School District (Rockwood)

AAA/ Stable (GO) 63,096 25.1 104,190 34.0

St. Louis County Special School District

AA+/Stable (GO) 329,919 74.3 355,873 77.5

St. Charles School District

AA-/Stable (GO) 20,690 26.5 20,690 22.3
St. Louis Public School District Not rated

University City School District

AA-/Stable (GO) 7,224 16.5 22,112 43.3

Valley Park School District

A+/Stable (GO) 2,812 23.5 4,725 33.3

Johnson County School District R-VI Warrensburg

A+/Stable (GO) 7,300 19.6 $15, 529 28.3

Pulaski County R-VI School District (Waynesville)

A+/Stable (GO) 20,059 28.7 53,352 64.7

Webster Groves School District

AA+/Stable (GO) 35,876 61.8 36,341 44.8

This report does not constitute a rating action.

Primary Credit Analyst:Katelyn A Kerley, Centennial + 1 (303) 721 4683;
Secondary Contacts:Thomas J Zemetis, New York + 1 (212) 4381172;
Coral Schoonejans, Centennial + 1 (303) 721-4948;
Jane H Ridley, Centennial + 1 (303) 721 4487;

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