Big money

Indiana schools credit rating at risk: Move could cost districts millions

A national credit rating agency is threatening to downgrade Indiana school debt, in a move that could costs districts millions of dollars.

In a statement issued yesterday, the national credit rating agency Standard & Poor’s said that it has placed a 90-day watch on the rating for loans to all Indiana school districts. If the state does not resolve S&P’s concerns, the ratings for school corporations across Indiana could be lowered, forcing districts to pay higher interest rates on debt.

Wayne Township Superintendent Jeff Butts said the watch from the S&P could cost the district more than $1 million in additional interest on bonds it plans to issue in the coming months.

“Anytime you are talking about credit, it’s always very concerning,” Butts said. “Being able to take advantage of lower interest rates … is the only thing really that allows us right now, with our current (tax) cap, to maintain the facilities that our community has invested in.”

The warning was sparked by a new interpretation from S&P of a state statute designed to ensure creditors receive payments on loans to districts. The law allows the state to divert aid meant for schools to pay debt if the districts do not make their debt payments. By ensuring that creditors are paid, the law improves credit ratings for districts across the state.

It is unclear whether the state has recently changed how it handles intercepting state aid. S&P said in a statement that the watch was issued because analysts have new concerns about the process.

“As part of a routine portfolio review, we learned that the Office of the Treasurer of State would administer the intercept of state aid under IC 20-48-1-11 differently than we had understood,” S&P said in the statement. “There is a possibility that Indiana could revise current procedures resulting in an intercept of state aid that provides for timely payment of debt service in full. … In the event such revisions are made in a timely manner, the rating could be affirmed.”

The Indiana Office of Management and Budget Director Micah Vincent said in a statement that the state is working to ensure the watch is removed.

“We are looking at possible solutions to address S&P’s newfound concerns,” Vincent said. “It is our goal to ensure that S&P removes the Indiana State Aid Intercept rating from CreditWatch and affirms the intercept program’s excellent credit rating, which supports Indiana’s schools and taxpayers.”

the final countdown

State legislators are down to the wire to pass the budget. Here are the education items to watch

PHOTO: Kevin P. Coughlin/Office of Governor Andrew M. Cuomo
Governor Andrew Cuomo delivers his State of the State address.

By the end of the week, lawmakers (may) have a deal on the big education funding issues facing the state, including how much to spend on public schools and whether college will become tuition-free for some New Yorkers.

It’s still unclear how everything shake out, especially as the state faces the prospect of federal budget cuts.

“In general, the policy issues are not the problem,” Governor Andrew Cuomo said on Tuesday afternoon, including college affordability in the mix of nearly settled policy issues. “The problem is spending.” (The speaker of the Assembly, on the other hand, said it was premature to consider anything settled since policy and spending are interconnected.)

The final details will decide whether the “foundation aid” formula will survive in its current form, if the city’s charter school cap will be lifted, and what rules the legislature will apply to any prospective tuition-free college plan. It is also unclear if the budget will pass before the deadline this year, since it could be delayed by federal upheaval or by legislators’ feud with the governor.

As lawmakers haggle and race toward an end-of-the-month deadline, here are the education issues we are watching.

Will the federal government interfere with education spending?

Cuomo cast doubt on whether the state could shoulder big spending increases, since it’s unclear whether the Republican-controlled federal government will slash New York’s overall funding. If that happens, one large increase that could be on the chopping block is education spending, Cuomo said.

“My position is we can handle modest adjustments in the budget,” Cuomo said. “We cannot handle dramatic increases.” The “two main areas” of spending, he noted, are Medicaid and education.

The governor has also raised the prospect of an “extender budget,” that could postpone action on spending.

The state devoted almost $25 billion to education spending this year. Cuomo’s proposed increase for education spending is $1 billion, which is lower than the increase proposed by the Senate ($1.2 billion), Assembly ($1.8 billion), or the state’s policymaking body ($2.1 billion).

The governor’s proposal also makes controversial changes to the “foundation aid” formula, which was designed, in part, to provide a boost to needier schools. Advocates call Cuomo’s change a “repeal” of foundation aid, though Cuomo’s office rejects that language.

Will the governor get his big free tuition package?

The governor indicated on Tuesday afternoon that college affordability was almost decided, saying “we basically have an agreement.”

But what’s in the deal?

The governor’s proposal, which he unveiled as his signature budget item this year, would provide free tuition at state schools for families making less than $125,000 per year. The Senate and the Assembly both presented different college affordability packages.

Leaders in the Senate suggested increasing the state’s current Tuition Assistance Program (TAP), which can be used at both public and private colleges.

The Assembly’s budget allows students more flexibility to qualify for aid. Currently, the governor’s plan requires students to be full-time in order to receive funding, which is defined as averaging 15 credits per semester. The Assembly’s plan would allow students to take two 12-credit semesters.

The Assembly’s budget would also let students reserve a third of their Pell grants to pay for non-tuition expenses, instead of requiring that students use Pell grant money to fund tuition first. It would also let families making up to $150,000 per year take advantage of the plan in the fourth year of the program.

What’s at stake for charter schools?

The governor proposed lifting the charter school cap in New York City and creating one cap for the state. Charter school tuition could also be unfrozen this year.

The sticking point for both measures is the Assembly, whose budget rejects the governor’s proposals to provide more help to charter schools. Mayor Bill de Blasio also spoke out against the changes, arguing they shifted costs to the city “to an exorbitant degree.” (Charter school advocates reject that analysis.)

Additionally, the governor’s budget would provide more money to charter schools moving into private space.

Anything else that’s interesting?

Of course.

State officials will decide whether to provide more money for My Brother’s Keeper, an initiative to help improve the education of boys and young men of color. Last year, the program got off the ground with $20 million and state officials said they’re looking for the same this year.

The State Education Department made a wish list of things they would like to see from the legislature. Among their priorities are changes to testing, including reinstating world language Regents exams and creating some project-based assessments.

Whether the legislature honors the Regents’ priorities is important because Chancellor Betty Rosa suggested her vision for rethinking education policy in New York state hinges on the ability to get funding from the legislature.

“As policymakers, we are very actively involved in saying: These are the areas that we are very concerned [about],” Rosa said in an interview with Chalkbeat. “We want to make sure that these are the areas that we get funding in order to move the educational agenda for the state forward.”

Funding fight

In Education Secretary Betsy DeVos, Colorado’s teachers union finds a useful face for the opposition

PHOTO: Department of Education
U.S. Education Secretary Betsy DeVos.

The Colorado Education Association, the state’s largest teachers union, is working to fuel opposition to a bill that would boost charter school funding by associating it with U.S Secretary of Education Betsy DeVos.

The union on its Facebook page published an image of DeVos and branded Senate Bill 61 as a “Betsy DeVos-Style Privatization Bill.”

The bill, which has bipartisan sponsors in both chambers, would require school districts to equally share money from local tax increases with charter schools. It was recently approved by the state Senate — but not without a fierce fight from a bloc of lawmakers who taught in district-run public schools.

The union isn’t the only group using DeVos’s image to oppose legislation making its way through the statehouse. A new political nonprofit, Colorado Children Before Profits, launched its own website linking DeVos and President Donald Trump to the charter school funding bill, and two other bills that would change the way Colorado funds schools.

DeVos, a Michigan billionaire who has long supported charter schools and vouchers for private schools, became an unexpected political lightning rod early in Trump’s administration.

PHOTO: CEA/Facebook
The Colorado Education Association posted this image to its Facebook page earlier in March.

In Colorado, the union and a group of parents protested outside U.S. Sen. Cory Gardner’s downtown Denver office, urging him to oppose her confirmation. Gardner ultimately voted to confirm DeVos.

DeVos has no formal role in the push for Senate Bill 61, which soon will be considered by the state House of Representatives.
But “there’s a natural tie,” argues Kerrie Dallman, CEA’s president.

“Betsy DeVos has long been connected to the movement to radically expand charter schools, as well as grow education vouchers and tax credits,” Dallman said. “We’re concerned because there is so little accountability in that movement, and a lack of transparency.”

Luke Ragland, president of Ready Colorado, a conservative education reform organization, said the union’s use of DeVos is “typical D.C.-style politics.”

“The teachers union’s latest propaganda campaign is shameful,” Ragland said in a statement. “They are spreading demonstrably false information in an attempt to politicize an issue that has had longtime bipartisan support in Colorado. Senate Bill 61 is a uniquely Colorado solution, supported by local leaders in both parties.”