Philly schools’ credit rating has gotten a boost, a move that could save taxpayers money

The Philadelphia School District’s credit recently got a boost.

Moody’s Ratings this month upgraded the school system’s credit rating to its highest level in decades, citing its “solid financial position” and “strong relationship with the City of Philadelphia along with its large and dynamic economic base.” Moody’s also said the district’s credit outlook was positive.

The rating change could make financing available at lower rates, saving taxpayers money on the district’s $3.3 billion in outstanding debt.

And the upgrade to Baa2 positive follows a May decision by Fitch Ratings to boost the district’s credit to investment grade for the first time.

“The district’s transparency and disclosure is excellent with frequent and regular financial disclosures, and the district has exhibited satisfactory budget management,” Moody’s analysts wrote.

Superintendent Tony B. Watlington Sr. said in a statement that he was “beyond thrilled” by the rating improvements.

“These upgrades validate that we are good stewards of our finances and our improved performance in nine out of 13 academic areas suggest that investing more resources in our schools and scholars will result in an additional return on investment,” Watlington said.

The school system in 2024 upped its fund balance by $100 million because of an infusion of federal COVID-19 relief funds, but that historic reserve high will be needed in coming years to cover a looming structural deficit. (The district is alone among Pennsylvania school systems in its inability to raise its own revenue; it depends largely on the city and state for funding.)

Moody’s noted some credit challenges, including the district’s inability to raise its own revenue and the structural deficit, which could translate to an actual deficit, or a need to cut employees or programs in the next few years, if the city and state do not come through with additional funding.

An additional credit risk Moody’s cited was “marked competition from outside charter and cyber schools.”

Philadelphia operates the nation’s eighth-largest school system, with about 117,000 students in 216 schools, and nearly 65,000 more in charters. It has a budget of $4.5 billion.

The Moody’s upgrade continues a streak of good financial news for the school system. After 41 years of junk-bond credit rating and various financial crises, Philadelphia schools in 2018 received a Moody’s upgrade to investment grade.