Fitch Ratings has issued a warning about legislation that would force Florida’s school districts to share a portion of their property tax revenue for capital projects with charter schools.
Fitch believes a Florida bill that could force public schools to divert a portion of their budgets to charter schools presents a challenge to already cash-strapped districts.
The bill, currently on the floor of the Florida Senate, would divert a portion of the 1.5 mills the districts use to fund capital expenditures to charter schools. This millage normally serves as the first source of funds for lease payments on school district certificates of participation (COPs). The state Board of Education estimates that 20 districts (of the state’s 67) use their entire capital millage to pay for bond debt service.
If districts are forced to divert this millage to charter schools, we expect some to struggle to find revenue in other parts of their budgets. Most Florida school budgets were narrowed by tax base losses due to the reduction in residential real estate prices across the state in addition to cuts in per-student state funding. And in the last few years, the state legislature has shifted 0.5 mill of the 2.0 mill capital outlay levy to operations.
If the bill becomes law in its current form, we expect some districts to struggle to find room in their budgets to make lease payments on COPs. The bill would also divert resources school districts rely on to fund facilities maintenance, fleet replacement, and other capital needs on a pay-as-you-go basis. Many Florida districts have recently completed major construction programs, and short-term enrollment levels have dropped, alleviating this risk in the near term.
However, the bill’s future is uncertain. On Feb. 15, an amendment to a Florida House bill (that would make the House version match the Senate bill) failed in a panel vote. This puts the Florida Senate and House far apart on this legislation. Fitch will continue to monitor these proceedings.
Additional information is available on www.fitchratings.com.