Pass / Fail | So Cal education, LAUSD, the Cal States and the UCs

Credit rating for California school districts could be downgraded if Props 30 & 38 fail

The fate of pro-education Propositions 30 and 38 will be decided by voters on Nov. 6.
The fate of pro-education Propositions 30 and 38 will be decided by voters on Nov. 6.
David McNew/Getty Images

Public support for Propositions 30 and 38 is plummeting despite expansive, and expensive,  campaign efforts across the state by their respective champions: Governor Jerry Brown and attorney and millionaire-ess Molly Munger.

Critics have accused Brown and Munger of using scare tactics about the imminent collapse of the public education system to elicit more “Yes” votes for the tax initiatives intended to shore up funds for education. 

But Moody’s Investors Service says the forecast for California school districts is dire, and many are at risk of having their credit rating downgraded if both ballot measures fail.

The projections in the report, "California School Districts Face Mounting Credit Pressure If Tax Initiative Fails in November Election," are bleak:

“As many as 150 of the 327 California school districts it rates to face some degree of fiscal pressure if both propositions are defeated. The weakest of these are likely candidates that Moody's would place on review for downgrade following the election.”

A downgraded credit rating would lead to higher interest rates on loans. That, according to Moody’s, would be much more costly for taxpayers, as more school districts have turned to borrowing as a result of budget cuts.

In the worst instances, districts chronically low on revenue may no longer qualify for loans. Their only options to remain afloat would be a state bailout or face bankruptcy. 

Related Articles:

Molly Munger goes on the attack against Gov. Brown's measure

At PCC: Confusion and complacency on Prop. 30

Gov. Brown rallying students to vote for Prop 30 tax proposal at UCLA