Investor service downgrades school district bond rating

Coupeville School District’s recent budget shortfalls, mostly caused by declining enrollment, have led to a lower credit rating on outstanding bonds.

Taxpayers won’t be affected because the bonds are protected by the state School Bond Guarantee Program, which pledges state payment of voter-approved school district general obligation bonds and enhances the rating.

Moody’s Investor Service in September downgraded the district’s rating from A1 to A2 and assigned a negative outlook on the rating.

Superintendent Steve King said there won’t be an impact to the district and its $7 million in outstanding bonds.

Over the last two years, enrollment has declined unexpectedly, which resulted in less funding coming from the state.

The report released by Moody’s cited budget approvals that have dipped into reserves to pay recurring expenses.

The report states the district “has little room for error in estimating enrollment or managing expenses.”

In August, the school board signed a resolution directing administration to restore reserves to at least 6 percent of budgeted expenditures by the completion of the 2021-2022 budget.

King said this year the district has taken a number of steps to help increase the fund balance, including cutting three teacher positions and three classified positions and reducing out-of-district travel.

He said enrollment numbers recently increased by 40 students, which will increase funding.

King said the raises awarded to teachers last year, which occurred after a hike in state funding, will continue to be sustainable.

“The projections are good on all of that,” he said.

The district increased teacher salaries by an average of 17 percent in 2018 and 4 percent this year. Administration has received similar salary increases in the same time frame.

The report on the downgrade acknowledged King’s recent efforts and also said the district’s rating is stabilized by “a large and diverse tax base” with above-average resident income.

King said he’s optimistic about the district’s future.

“Because of increased enrollment, we feel like the reserves are going to build back and the long term looks good,” he said.

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