articles Ratings /ratings/en/research/articles/230316-bulletin-houston-independent-school-district-tx-takeover-by-texas-education-agency-does-not-affect-rating-12672289 content esgSubNav
In This List

Bulletin: Houston Independent School District, TX Takeover By Texas Education Agency Does Not Affect Rating


Russia-Ukraine Military Conflict: Key Takeaways From Our Articles


U.S. Mortgage Revenue Bond Program Rating Actions In Line With Expectations After Application Of Updated Criteria


Cyber Risk Insights: Ongoing Preparedness Is Key To U.S. Power Utilities Keeping Attackers In The Dark


Not-For-Profit Acute Health Care State Snapshot: Maryland

Bulletin: Houston Independent School District, TX Takeover By Texas Education Agency Does Not Affect Rating

NEW YORK (S&P Global Ratings) March 16, 2023--On March 15, 2023, the Texas Education Agency (TEA) announced it would be appointing a Board of Managers to the Houston Independent School District (ISD; AA+/Stable), Texas' largest district, following a ruling on Jan. 13, 2023, and made enforceable on March 1, 2023. S&P Global Ratings last reviewed Houston ISD on Feb. 8, 2023, and we were aware of the potential takeover at that time (please see that new sale report here, our summary analysis on Houston Independent School District, published Feb. 8, 2023, on RatingsDirect.

TEA describes two reasons for this takeover:

  • First, Wheatley High School had seven consecutive unacceptable academic ratings from fiscal years 2011 through 2019; and
  • Houston ISD had a conservator assigned for more than two consecutive school years, with one being in place since fiscal 2017.

In our view, although a state takeover for governance reasons usually means challenges in academic performance or internal processes, it does not necessarily indicate a weakening of overall creditworthiness. State takeovers can occur for various reasons, and when financial issues cause a state takeover of a school district or charter school, a rating action is more likely than when governance causes the action.

Although a board-level takeover is undoubtedly serious, the fundamental credit factors, in our view, are unchanged. We will continue to monitor the situation for any implications to the rating.

However, at this time, S&P Global Ratings believes that the rating will be unchanged because:

  • Houston's enormous local economy's strength is generally independent of school district governance issues and can be a source of stability;
  • The majority of revenue (85%) is derived from property taxes, which we view as relatively stable and although enrollment has been declining due to affordability issues and considering any effects of this ruling, state aid revenue at 11% of revenue likely won't cause budgetary pressure;
  • The district has historically maintained very strong reserves and financial operations are carried out by a financial staff that is guided by established financial practices and policies, and day-to-day operations can continue uninterrupted despite governance challenges;
  • Our financial management assessment is based on a district's financial practices and policies and if these are adhered to, credit quality can remain stable;
  • Typically, debt and debt metrics are not negatively affected.

This report does not constitute a rating action.

Primary Credit Analyst:Katy Vazquez, New York (1) 212-438-1047;
Secondary Contact:Joshua Travis, Dallas + 1 (972) 367 3340;

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 acknowledgement 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 nonpublic 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, (free of charge), and (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

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back