Key Takeaways
- The Missouri attorney general is suing 45 Missouri school districts for enforcing mask mandates.
- We do not anticipate any major pressure on the districts' credit quality in the short-term. However, a significant judgement against the districts could pressure finances or operations and consequently credit quality.
- We will consider any rating actions on a case-by-case basis.
- The treasurer's office has disallowed school districts who enforce a mask mandate from participating in the Missouri enhancement program.
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.
Missouri Direct Deposit of State Aid Program
The Missouri Direct Deposit of State Aid Program (currently rated AA+/Stable for participating districts with sufficient debt service coverage) provides credit enhancement for participating districts by intercepting state aid funds and depositing them with a trustee for debt service payment. Aside from some modest issuance costs covered by the program, the program does not increase a district's state funding. Additionally, although the program provides credit enhancement to participating issuances and thereby may lower interest rates, in general we do not view the savings as having a material influence on school districts' finances.
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; katelyn.Kerley@spglobal.com |
Secondary Contacts: | Thomas J Zemetis, New York + 1 (212) 4381172; thomas.zemetis@spglobal.com |
Coral Schoonejans, Centennial + 1 (303) 721-4948; coral.schoonejans@spglobal.com | |
Jane H Ridley, Centennial + 1 (303) 721 4487; jane.ridley@spglobal.com |
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