During the second quarter of 2022 (April 1 – June 30), S&P Global Ratings changed its rating or revised the outlook on 27 U.S. charter schools across the sector, while 72 ratings were maintained (in addition, five ratings were initially assigned). The 27 rating actions are broken out as follows:
These actions reflect a sector that is experiencing continued stability and flexibility resulting from growing demand and generous federal funding received during the COVID-19 pandemic. For many schools in our rated universe, there is still a material percentage of those funds to be spent during the 2023 and 2024 fiscal years. Enrollment remains stable to growing and, although the threat of new variants remains, school boards and management teams have had time and financial resources to focus on providing the highest quality in-person learning environment possible for their students.
In June, we published "U.S. Charter Schools Sector Fiscal 2021 Medians: Schools Get A Booster From Pandemic Relief," which highlighted a variety of factors that led to our median financial metrics for rated charter schools strengthening in fiscal 2021, along with what effect that may have in the charter schools sector for fiscal 2023 and beyond. Fiscal 2021 median improvement was anticipated as a result of sizable amounts of pandemic relief, specifically the third round of ESSER funding for public K-12 schools that extends through September 2024, as well as increased per-pupil funding trends in most states, as discussed in the report. While most of the factors mentioned have generally provided positive tailwinds to the sector, the report also discusses broader economic concerns such as inflationary pressures and recession risk that could influence charter schools going forward.
Year to date through the first half of 2022, S&P has upgraded nine charter school ratings versus only three ratings downgrades. This 3-to-1 upgrade-to-downgrade ratio is a continuation of a favorable trend that we first observed in 2021, where the number of upgrades outpaced downgrades for the first time in the previous ten years. This trend has also carried over into our outlook revisions, where year to date there have been 11 outlooks that have been revised to positive, versus only four outlooks that have been revised to either negative or CreditWatch negative.
Most of the positive rating actions in the second quarter of 2022, which included nine outlook revisions (three to stable from negative and six to positive from stable) and seven rating upgrades, were spurred by improvements in liquidity, sustained healthy financial operations, and demand. The three negative rating actions and three negative outlook revisions taken in the second quarter were in large part driven by sustained declines in enrollment that have pressured financial operations and weakened MADS coverage and liquidity levels.
Notably, in addition to our positive and negative actions, S&P added five new public charter school ratings in the second quarter. Three of these are in the investment-grade category. The issuers spanned the country, with ratings added in Florida, New York, Utah, and Washington, D.C. Year to date through the first half of 2022, we have added 16 new public charter school ratings.
The following tables summarize S&P Global Ratings' quarterly rating actions, outlook revisions, and maintained ratings for U.S. charter schools. The rating actions, outlook revisions, and maintained ratings are based on our "U.S. Public Finance Charter Schools: Methodology And Assumptions" criteria, published Jan. 3, 2017 on RatingsDirect.
Table 1
Second-Quarter 2022 U.S. Charter Schools Rating Actions | |||||||
---|---|---|---|---|---|---|---|
Institution | State | Rating To | Rating From | Outlook To | Outlook From | Rating Action | Description |
Academies of Math and Science | AZ | BB+ | BB | Stable | Stable | Rating Raised | Improved demand, operating results, coverage, and liquidity. |
Crossroads Charter Academy | MI | B+ | BB- | Stable | Negative | Rating Lowered | Precipitous enrollment declines over the past three years. |
Flagstaff Academy | AZ | BBB- | BBB | Stable | Negative | Rating Lowered | Enrollment declines pressuring operations and MADS coverage. |
Global Community Charter School | NY | BB+ | - | Stable | - | Rating Initially Assigned | New Rating |
Grand Concourse Academy Charter School | NY | BBB- | - | Stable | - | Rating Initially Assigned | New Rating |
Green Woods Charter School | PA | BB+ | BB | Stable | Stable | Rating Raised | Solid balance sheet metrics, recent five-year charter renewal, and steady enrollment and demand profile. |
HOPE Community Academy | MN | BB- | BB | Stable | Negative | Rating Lowered | Weakened financial profile stemming from initial enrollment challenges leading to weaker financial metrics. |
Inspired Teaching Demonstration Charter School | DC | BBB | - | Stable | - | Rating Initially Assigned | New Rating |
KIPP Nashville | TN | BBB | BBB- | Stable | Stable | Rating Raised | Sustained healthy financial performance, supporting growth in days' cash on hand and improved MADS coverage, that we expect will continue. |
Liberty Charter School, Nampa | ID | BBB+ | BBB | Stable | Stable | Rating Raised | Sustained healthy financial performance, supporting growth in days' cash on hand and improved MADS coverage. |
Manatee School for the Arts | FL | BBB- | - | Stable | - | Rating Initially Assigned | New Rating |
Parnassus Preparatory School | MN | BB+ | BB | Stable | Stable | Rating Raised | Improved financial performance, debt burden, and cash position all coupled with steady demand. |
PUC Schools | CA | BB+ | BB | Stable | Stable | Rating Raised | Substantial improvement in the organization's financial profile following a very healthy operating surplus in fiscal 2021. |
Voyageur Academy | MI | B+ | B | Positive | Stable | Rating Raised | Recent five-year charter renewal and a trend of improved financial performance over the past few audited years, which we expect to continue. |
Wallace Stegner Academy | UT | BB+ | - | Stable | - | Rating Initially Assigned | New Rating |
Footnote: MADS = maximum annual debt service |
Table 2
Second-Quarter 2022 U.S. Charter Schools Outlook Revisions | |||||
---|---|---|---|---|---|
Institution | State | Rating | Outlook to | Outlook from | Description |
Aspire Public Schools | CA | BBB | Stable | Negative | Improved financial performance, stabilzing enrollment, and strengthened liquidty position. |
Bronx Charter School for Excellence | NY | BBB- | Positive | Stable | Strengthening overall financial profile, including improved operational performance and a healthy cash position for the rating. |
Flint International Academy | MI | BB | Stable | CW Negative | Receipt of all requested information relevant to our review reflecting a consistent credit profile. |
Great Oaks Legacy Charter School | NJ | BB+ | Positive | Stable | Continued enrollment growth, solid demand, and improved financial metrics. |
Kaizen Education Foundation | AZ | BB | Stable | Negative | Lowered risk of charter revocation associated with one of its campuses. |
Littleton Preparatory Charter School | CO | BB+ | Positive | Stable | Improved financial metrics, with healthy margins, strengthening MADS, and solid days' cash on hand. |
MaST Community Charter School | PA | BBB- | Positive | Stable | Improved financial metrics with consistently healthy full-accrual operating margins, strengthened lease-adjusted MADS coverage, and solid days' cash. |
Math & Science Academy Building Company | MN | BBB- | Negative | Stable | Weakened MADS coverage and softer operating performance. |
Nova Academy | TX | BB | Negative | Stable | Weakened enterprise profile, with material enrollment declines in five of the past six years, from a high of 962 students to 674 students in fall 2021. |
Scuola Vita Nuova Charter School | MO | BB+ | Positive | Stable | Enrollment growth after expansion, supporting improved MADS and liquidity. |
Texas Leadership Charter Academy | TX | BB | Positive | Stable | Strengthening financial profile, including growth of unrestricted reserves and a sustained trend of positive operating performance, with projections of continued maintenance at similar levels through the outlook. |
West Philadelphia Achievement Charter Elementary School | PA | BB- | Negative | CW Negative | Continued uncertainty around charter renewal decision timeframe with the School District of Philadelphia. |
Table 3
Second-Quarter 2022 U.S. Charter Schools Maintained Ratings | |||
---|---|---|---|
Institution | State | Rating | Outlook |
Albany Leadership Academy | NY | BB | Stable |
American Leadership Academy | UT | BBB | Stable |
Arlington Classics Academy | TX | BBB- | Stable |
Aspen Ridge Preparatory School | CO | BB | Stable |
Austin Achieve Public Schools | TX | BBB- | Stable |
Austin Achieve Public Schools | TX | BBB- | Stable |
Avon Grove Charter School | PA | BBB- | Stable |
Avondale Meadows Academy | IN | BB | Stable |
Bay Haven Charter Academy | FL | BBB | Stable |
Berean Academy | AZ | BB | Stable |
Brookside Charter School | MO | BB | Stable |
Candeo Schools, Inc. | AZ | BBB- | Stable |
Carolina International School | NC | BB+ | Stable |
Chester Charter Scholars Academy Charter School | PA | BB+ | Stable |
Chicago Charter School Foundation | IL | BBB | Stable |
Choice Academies | AZ | BB | Stable |
Citizens of the World Charter School - Los Angeles | CA | BB- | Stable |
Classical Academy Charter School | CO | BBB | Stable |
Classical Academy, Inc. | CA | BBB- | Stable |
Community of Peace Charter School | MN | BBB- | Stable |
Compass Public Charter School | ID | BB | Stable |
Conner Creek Academy | MI | B | Stable |
Coral Academy of Science-Las Vegas | NV | BBB- | Stable |
Dr. Joseph F. Pollack Academic Center of Excellence | MI | BB | Stable |
Duluth Edison Charter Schools (Tischer Creek Duluth Building Co.) | MN | BB+ | Stable |
Eagle Advantage Schools | TX | BB+ | Stable |
Eagle Ridge Academy | CO | BBB- | Stable |
Excel Academy Charter School | CO | BBB- | Stable |
Fenton Charter Public Schools | CA | BB+ | Stable |
Foundation Academy Charter School | NJ | BBB- | Stable |
Freedom Academy | AZ | BB+ | Stable |
Frontier Academy | CO | BBB- | Stable |
George Washington Academy | UT | BBB- | Stable |
Hawthorn Academy | UT | BBB | Stable |
High School for Recording Arts | MN | B | Stable |
Hmong American Peace Academy | WI | BBB | Stable |
Hmong Education Reform Company | MN | BB+ | Negative |
Idea Public Schools | TX | A- | Negative |
Independence Academy | CO | BBB- | Stable |
John Adams Academies | CA | BB | Stable |
King Chavez Academies | CA | BB+ | Stable |
Lakeview Academy | UT | BBB- | Stable |
Literacy First Charter School | CA | BBB- | Stable |
Memphis Rise Academy | TN | BBB- | Stable |
Noah Webster Academy | UT | BBB- | Stable |
Noah Webster Basic Schools, Inc. | AZ | BB | Stable |
Noble Network of Charter Schools | IL | BBB | Stable |
North Star Academy Charter School of Newark - 18th St. Ave. LLC | NJ | BBB- | Stable |
North Star Academy Charter School of Newark - NSA 377 Washington St. LLC | NJ | BBB- | Stable |
Oakland International Academy | MI | BBB- | Stable |
Ogden Preparatory Academy | UT | BBB- | Stable |
Paramount School of Excellence | IN | BB+ | Stable |
Philadelphia Performing Arts Charter School | PA | BB+ | Stable |
Pinecrest Academy, Inc. | FL | BBB | Stable |
Propel Schools - Braddock Hills | PA | BB+ | Negative |
Responsive Education Foundation | TX | BBB | Positive |
River Springs Charter Schools | CA | BB | Positive |
Sarasota School of Arts and Sciences | FL | BBB- | Stable |
School Lane Charter School | PA | BBB- | Stable |
Sculptor Charter School | FL | BBB- | Stable |
Spectrum High School | MN | BB+ | Stable |
Star International Academy | MI | BBB | Stable |
The Charter School for Applied Technologies | NY | BBB | Stable |
The Palmdale Aerospace Academy | CA | BB | Stable |
Tipton Academy | MI | BB | Stable |
Trinity Basin Preparatory | TX | BBB | Stable |
Universal Academy | MI | BBB- | Stable |
Universal Learning Academy | MI | BB+ | Stable |
Villa Montessori | AZ | BBB- | Stable |
Wayside Schools | TX | BB | Stable |
Winfree Academy Charter Schools | TX | BB- | Stable |
Xavier Public Charter School | ID | BBB | Stable |
Related Research
- U.S. Charter Schools Sector Fiscal 2021 Medians: Schools Get A Booster From Pandemic Relief, June 14, 2022
- U.S. Charter Schools Rating Actions, First-Quarter 2022, April 11, 2022
This report does not constitute a rating action.
Primary Credit Analysts: | Jessica L Wood, Chicago + 1 (312) 233 7004; jessica.wood@spglobal.com |
Avani K Parikh, New York + 1 (212) 438 1133; avani.parikh@spglobal.com | |
Secondary Contacts: | Ryan Miller, Dallas +1 2148711408; ryan.miller@spglobal.com |
John Miceli, Dallas +1 2148711471; john.miceli@spglobal.com |
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