A Supreme Court ruling in Washington State upholding lottery funding for charter schools is credit negative for traditional school districts, according to Moody's Investors Service.
The Supreme Court published
“The ruling is credit negative for school districts in the state because it creates greater competition for enrollment, which is the primary driver of district revenue,” wrote William Oh, a Moody’s analyst.
At this point, while charter schools compete against traditional schools in the state, there are not enough of them to represent the same kind of hit to the budgets seen in California’s major metro areas.
In fact, Moody’s said the impact will only be felt by a few districts within the state.
“Given the relatively small size of lottery funds available and the legal restrictions on charter schools, however, the negative credit effect will likely be restricted to a few districts within the state,” Oh said.
The state’s 10 charter schools had a combined enrollment of 2,500 students in grades K-12 in fiscal year 2018, which ended Aug. 31. Two additional charter schools are expected to open in fiscal 2019.
There were 1.1 million children enrolled in a public K-12 schools in Washington in 2018, so charter schools as a whole constitute a negligible portion of overall enrollment, Oh said.
The ruling in El Centro de la Raza v. State of Washington upheld the use of lottery funds for the charters. State lawmakers authorized the lottery funding after a state Supreme Court ruling in 2015 said the state could not supported charters with money allocated for common schools.
The 12 charter schools are located in, and compete with, school districts largely near major metro areas. Four are within the boundaries of Seattle School District No. 1, three are within the limits of Pierce County School District No. 10 in Tacoma, two are in Spokane County School District No. 81, and there is one each in King County School District No. 415 in Kent, King County School District No. 406 in Tukwila and Walla Walla County School District No. 140 in Walla Walla.
