It’s always interesting to see Wall Street’s take on one of its best customers — the Broward County School Board.
The school board racked up roughly $2 billion in debt during its recent lobbyist-fueled building boom. As quick as the board could borrow the money, it was shoveled out the door to favored contractors. After its spree the board has another problem — tens of thousands of empty seats.
Fitch Ratings has dropped the board’s credit rating outlook from stable to negative, citing “concerns about the district’s ability to accommodate substantial budgetary shortfalls with ongoing expenditure solutions while maintaining at least the current modest level of financial flexibility.”
That’s another way of saying the board looks like its in some deep shite, financially speaking.
The Fitch report, which maintains an “A+” rating on the existing board debt, lists the usual reasons for the board’s current financial problems: reduced state funding, less tax revenue due to the real estate downturn, the lack of federal stimulus money, etc.
“Officials plan to close a $141 million funding gap, equal to nearly 8% of spending, with a variety of recurring and one-time measures including meaningful reductions in teaching and administrative staff ,” Fitch tells us.
I guess they are “meaningful,” especially when you talk to one of the 1,400 teachers whose positions are being eliminated and the children who counted on them. The report goes on to talk about reduced district contributions to the Florida Retirement System, which is expected to save as much as $85 million a year.
Fitch also notes that the five-year capital improvement plan has a “sizeable” $1.3 budget. Then it notes perhaps the most dire news of all: Of that $1.3 billion, a whopping billion dollars of it will go to pay off the debt.
The report even addresses the scathing grand jury report that found the school board had wasted hundreds of millions of those dollars it now owes back.
Fitch reviewed the findings and district response to the Statewide Grand Jury report that was released in February 2011 which investigated the functioning of the school board and district staff. The Grand Jury and Florida Department of Law Enforcement found no specific violations of any criminal law and returned no indictments. Although the district has established an ethics committee that addresses many of the issues identified by the report, Fitch remains concerned about the findings’ indications of management and governance weakness.
As do we. Read the report here.