Moody’s warns investors over Texas school finance problems
Moody’s weekly credit newsletter reported to investors that Texas could face some fiscal crimping after a state district court ruled this week that the state is inadequately funding its schools.
The state’s good Aaa/stable bond rating could face some impact if the Texas Supreme Court agrees with the lower court and the state is forced to put billions more into schools.
The newsletter notes that the state’s Rainy Day Fund is forecasted to reach $11.8 billion over the next two years – “a very healthy cushion.”
“Nonetheless, dedicating more state funds to school funding could crowd out spending on other functions at a time when there is significant pent up demand to restore spending cuts implemented over the economic downturn. Fixing the school finance system is a long-term structural issue for the state that won’t be solved by one-time use of the Economic Stabilization Fund or other reserves,” the newsletter states.