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Citing improved liquidity, Moody’s upgrades CPS a tick

Tuesday, Nov 26, 2019 - Posted by Rich Miller

* FYI, “B” ratings are still junk territory. But the trend is heading the right direction, at least with Moody’s…

Moody’s Investors Service (Moody’s) has upgraded to B1 from B2 the rating on the Chicago Board of Education, IL’s (Chicago Public Schools, CPS) general obligation unlimited tax (GOULT) debt and non-contingent lease revenue bonds backed by the district’s GOULT pledge. The outlook had been revised to positive from stable at the B1 rating. The rating applies to $3 billion in debt.

RATINGS RATIONALE

The upgrade to B1 on the GOULT debt is based on the district’s improved liquidity, which reflects a significant infusion of new state and local revenue that will stave off material cash flow pressures for at least the next two to three years. In fiscal 2018 the district began receiving increased property tax authority for its pension contributions and support for pension normal costs from the State of Illinois (Baa3 stable). The upgrade to B1 also incorporates the district’s large and diverse tax base that serves as a regional economic center for the Midwest and tight governance connections with the City of Chicago (Ba1 stable), where the mayor appoints the members of the board.

Although revenue and cash have improved, the district’s credit profile remains constrained by several factors. The district will face growing costs associated with long-term liabilities and the recent five-year contract with the Chicago Teachers Union (CTU) that will likely keep reserves thin compared to revenues. The B1 rating also considers very high direct and overlapping leverage from bonded debt and post-retirement liabilities.

The B1 rating on the lease revenue bonds is the same as the rating on the GOULT debt due to the district’s GOULT pledge to make lease payments, a pledge which is not subject to appropriation.

RATING OUTLOOK

The positive outlook reflects the possibility of continued revenue growth and expenditure adjustments that will enable the district to absorb increasing costs associated with pension contributions, debt service, and the recently-ratified union contracts. It also incorporates the expectation that the district will not materially increase its reliance on short-term borrowing or other sources of non-recurring revenue.

FACTORS THAT COULD LEAD TO AN UPGRADE

    - Continued and sustained growth in operating liquidity
    - Ongoing expenditure adjustments and continued growth in revenue from state and local sources, including continuation of the state to meet its funding targets under the new evidence based formula

FACTORS THAT COULD LEAD TO A DOWNGRADE (or revision of the outlook to stable or negative)

    - Declines in operating liquidity or increased reliance on short-term cash flow borrowing or other sources of non-recurring revenue
    - Stagnant revenue trends that are outpaced by the district’s growing costs

* Earlier this month…

* S&P dings CPS contract deal with teachers: The agency’s junk rating on Chicago Public Schools debt is unchanged, but it warns the $1.5 billion deal “will widen a structure gap” in school finances that already were weak.

       

26 Comments
  1. - Quibbler - Tuesday, Nov 26, 19 @ 11:59 am:

    The ratings agencies were lucky to escape any kind of accountability after the Great Recession. We need to break their stranglehold on any kind of non-austerity policymaking.


  2. - Blue Dog Dem - Tuesday, Nov 26, 19 @ 12:41 pm:

    Thank goodness for Trump economy.


  3. - AnotherAnon - Tuesday, Nov 26, 19 @ 12:57 pm:

    CPS with it’s plummeting enrollment should be able to cut both staffing and facilities to save funds further strengthening its finances.


  4. - Oswego Willy - Tuesday, Nov 26, 19 @ 12:59 pm:

    === and facilities===

    Please cite the real amount savings that were found in the short and long term of closing the 50 schools by Rahm.

    Thanks.


  5. - AnotherAnon - Tuesday, Nov 26, 19 @ 1:52 pm:

    Less buildings reduces costs. Less maintenance needed, less electric needed, less gas needed.


  6. - Oswego Willy - Tuesday, Nov 26, 19 @ 1:53 pm:

    === Less buildings reduces costs. Less maintenance needed, less electric needed, less gas needed.===

    Really? Last chance. Cite please?


  7. - City Zen - Tuesday, Nov 26, 19 @ 2:12 pm:

    ==cut both staffing and facilities==

    The problem is a shuttered Chicago school is an albatross. Structures with lead paint and pipes located in the least desirable areas of the city.

    If I were CPS, I’d partner with some govt entity or NFP and convert a school into a teacher dormitory. CTU wanted affordable housing, didn’t they?


  8. - Oswego Willy - Tuesday, Nov 26, 19 @ 2:15 pm:

    === I’d partner with some govt entity or NFP and convert a school into a teacher dormitory.===

    Your disrespect for educators has no limit.

    === CTU wanted affordable housing, didn’t they?===

    You going to house families too?

    See, your snark, really comes off as total disrespect for the profession, and teachers as a lower class… than you.

    Prolly not how you wanted it to sound, but, you have a habit of things backfiring.


  9. - City Zen - Tuesday, Nov 26, 19 @ 3:59 pm:

    OW - Schools are being converted into all sorts of affordable housing all across the country. There is even a similar proposal in Humboldt Park with a set-aside for teachers. There’s even a teacher-focused housing development in Newark. Yes, Newark.

    Your elevation of certain professions above other working families has no limits as well. Maybe you’re right and we should leave these 21 century housing options to the less desirables. You may not realize it within this bubble, but that’s how you sound.


  10. - Oswego Willy - Tuesday, Nov 26, 19 @ 4:17 pm:

    === Schools are being converted into all sorts of affordable housing all across the country.===

    Yeah, your mocking of educators was making them dormatories.

    Please stop digging. If your not digging but are still classless, then i was right the first time.

    === You may not realize it within this bubble, but that’s how you sound.===

    Read what you wrote;

    === If I were CPS, I’d partner with some govt entity or NFP and convert a school into a teacher dormitory. CTU wanted affordable housing, didn’t they?===

    Making it about me is truly priceless to how snide and classless you wanted your snark.

    Happy Thanksgiving.


  11. - AnotherAnon - Tuesday, Nov 26, 19 @ 7:41 pm:

    Are you claiming reducing staff and maintenance costs doesn’t reduce expenses?


  12. - Oswego Willy - Tuesday, Nov 26, 19 @ 7:48 pm:

    (Sigh)

    - AnotherAnon -

    ===The study is the first in-depth examination of the impact of the 50 school closings — the largest number closed at once in the United States. Some 11,000 students attended the closed schools, and another 13,000 students attended the schools that received them. All told, 95 schools buildings were packed up and moved.

    “Closing schools — even poorly performing ones — does not improve the outcome of displaced children, on average,” the study concludes. “Closing under-enrolled schools may seem like a viable solution to policymakers who seek to address fiscal deficits and declining enrollment, but our findings shows that closing schools caused large disruptions without clear benefits for students.”

    Emanuel did not comment on the findings. CPS had said that closing the 50 schools would save $43 million annually and $437 million over time by not having to fix or maintain the shuttered buildings. But the school district has never provided any detailed information on whether those savings were or will be realized.===

    Link?

    shorturl.at/hkLT6

    Ok, your turn.

    Cite your work, thanks.


  13. - Grandson of Man - Tuesday, Nov 26, 19 @ 8:01 pm:

    Today there is a sense of optimism in Chicago, after the budget passed and elimination of the huge deficit. Is it perfect? No but it got done without a big property tax hike. The minimum wage will be raised. There is room for improvement. Something hopefully can get done in the spring GA session and next year. Very nice today.


  14. - AnotherAnon - Tuesday, Nov 26, 19 @ 8:31 pm:

    CPS is so incompetent that when it closes schools reducing staff and maintenance expenses, it realizes no cost savings? That is terrible financial management if true.


  15. - AnotherAnon - Tuesday, Nov 26, 19 @ 8:33 pm:

    I hope Lightfoot can realize cost savings in the next round of school closings and redundancies as CPS continues to lose students at an alarming rate.


  16. - Oswego Willy - Tuesday, Nov 26, 19 @ 8:37 pm:

    === I hope Lightfoot can realize cost savings in the next round of school closings and redundancies as CPS continues to lose students at an alarming rate.===

    So… you didn’t read the cite… at all.

    If you did, you wouldn’t had made that statement.

    I’m glad you conceded the point.


  17. - AnotherAno - Tuesday, Nov 26, 19 @ 8:46 pm:

    Is the implication that reducig staff and maintenance costs does not lower operational expense? Or that Chicago Public Schools can not manage its finances.


  18. - Oswego Willy - Tuesday, Nov 26, 19 @ 8:53 pm:

    === Is the implication that reducig staff and maintenance costs does not lower operational expense? Or that Chicago Public Schools can not manage its finances.===

    Opinion statement.

    === Emanuel did not comment on the findings. CPS had said that closing the 50 schools would save $43 million annually and $437 million over time by not having to fix or maintain the shuttered buildings. But the school district has never provided any detailed information on whether those savings were or will be realized.===

    Statement based on fact.

    Unless you can figure out how to make your opinion a factual way of policy, and rebuff the findings in just one finding, a finding that the Emanuel Administration couldn’t find or report its own savings, you need yourself to help the Lightfoot Administration and fight off the facts in the article too.

    Otherwise, I’m done here. Thanks.


  19. - AnotherAnon - Tuesday, Nov 26, 19 @ 9:12 pm:

    Reducing costs through staff and operating reductions because less facilities are needed is not opinion. I think your point is that CPS has poor financial management, which is undeniable.


  20. - Oswego Willy - Tuesday, Nov 26, 19 @ 9:16 pm:

    === Reducing costs through staff and operating reductions because less facilities are needed is not opinion.===

    Yeah, it was.

    === Emanuel did not comment on the findings. CPS had said that closing the 50 schools would save $43 million annually and $437 million over time by not having to fix or maintain the shuttered buildings. But the school district has never provided any detailed information on whether those savings were or will be realized.===

    I’m done.

    If they woulda found the savings, they woulda reported it. Closing 50 schools is a big deal.

    If you want to show *real* math savings, something that CPS and the Emanuel Administration couldn’t, do so. Otherwise those who actually *did* it, couldn’t cite it, even in a PR type way.

    Show your work, show it to the Lightfoot Administration too. Until then, the WBEZ work and cites still… remain.


  21. - AnotherAnon - Tuesday, Nov 26, 19 @ 9:19 pm:

    We agree, CPS is not able to manage its finances effectively. I have never said otherwise.


  22. - Oswego Willy - Tuesday, Nov 26, 19 @ 9:23 pm:

    You think closing schools is a real answer.

    It hasn’t been.

    Good luck, happy thanksgiving.


  23. - AnotherAnon - Tuesday, Nov 26, 19 @ 9:24 pm:

    Reducing head count and facility operationing expenses saves in any rationally operated system. If CPS can’t or doesn’t want to explain the savings that is on them. Losing 5,000 to 10,000 students per year as CPS is doing and not reducing head count and schools is not sustainable.


  24. - Oswego Willy - Wednesday, Nov 27, 19 @ 8:34 am:

    === Reducing head count and facility operationing expenses saves in any rationally operated system. If CPS can’t or doesn’t want to explain the savings that is on them.===

    And yet, again, you didn’t read the cite, you just want what you want, because “you know”

    If you’re just going to be the angry person at the end of the bar that “knows”, bring numbers, facts, and knowledge.

    Thank you.


  25. - AnotherAnon - Wednesday, Nov 27, 19 @ 2:07 pm:

    Reducing head count and operating expenses saves money. Whether or not CPS is capable of efficiency is on them.

    Is your point that lowering expenses does not in fact reduce expenses?


  26. - Oswego Willy - Wednesday, Nov 27, 19 @ 2:10 pm:

    === Is your point that lowering expenses does not in fact reduce expenses?===

    (Sigh)

    Show. Your. Work.

    LOL

    Show your numbers… or tell the bartender to turn up the TV to yell at the news.


Sorry, comments for this post are now closed.


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