Sacramento City School District Bond Rating Drops Amid Budget Crisis

The Sacramento City Unified School District is grappling with a significant budget shortfall — and its bond rating also hit a low point this week.

Rating agency Standard and Poor’s dropped the district's general obligation bond rating to “BBB,” which the district wrote in a statement is “the lowest investment bond rating.” The bottoming-out of the district’s rating means that lenders will view SCUSD as riskier.

Spokesperson Alex Barrios said on Wednesday that all labor groups need to come to the table to help resolve fiscal challenges, which includes trimming $35 million from its next two budgets.

“Our District’s financial future is in jeopardy unless all employee partners come together immediately to collaborate with the District and make significant budget cuts,” the district wrote in statement.

Sacramento State education professor Julian Vasquez Heilig explained that the the district’s borrowing costs will rise due to higher interest payments. He also reminded that banks benefit from the district's struggles.

"Ultimately, this is why Wall Street has been very supportive of charter schools,” he said, adding that the district's financial crisis allows banks to charge more for both public and charter schools.

The district’s lower rating will not impact current bond obligations, but the rating could dip again if SCUSD does not hit its June deadline to adopt a balanced budget.