After California Tenure Law Ruling, Credit Rating Improves

Even as teachers rail against a court decision that removes tenure and seniority from California schools, the districts themselves got a piece of good news on Monday.

Credit rating agency Moody’s noted that this ruling will help California schools financially.  Generally speaking, the higher the credit rating, the lower the interest rate a district will pay when borrowing money.

“The ruling is credit positive for school districts because greater employment flexibility will lead to increased budgetary flexibility,” the note said.

Last month, Moody’s praised California for passing “rainy day fund” legislation that will make state revenue available during economic downturns, reports Dan Walters of The Sacramento Bee.

“This credit positive development reflects the new emphasis that California…places on building reserve to cushion its finances from economic downturns,” Moody’s says in its periodic bulletin on credit trends.

Moody’s currently gives California schools a credit rating of A1 stable.

In a Superior Court ruling last week, California public school teachers’ jobs are no longer safeguarded under practices like tenure and seniority.  Los Angeles County Superior Court Judge Rolf Trieu has ruled these job protections to be unconstitutional.

“Plaintiffs claim that the challenged statutes result in grossly ineffective teachers obtaining and retaining permanent employment, and that these teachers are disproportionately situated in schools serving predominantly low-income and minority students,” the decision said.

The landmark decision could cause other states around the country to take a look at their own statutes in an effort to find out “what’s wrong with education”.

Currently school districts spend 75-80% of their budgets on salaries and benefits.  The ruling could help change that by keeping ineffective teachers off the payroll.  According to Kathleen Pender of SFNews, California school districts must approve or deny tenure after only two years of employment.

It currently costs $40,000-50,000 and 2-10 years of time to remove such a teacher.  For a student, one year with such a teacher has been found to cost them $1.4 million in earnings over their lifetime.

“Every day administrators are spending thousands upon thousands and countless hours trying to dismiss ineffective teachers. That money should be spent on procuring new supplies, instituting new programs, improving teacher salaries, securing critical services for both the professionals and the students, and reducing class size.”

If academic performance improves as a result of the ruling, districts like Oakland, San Diego, and Los Angeles could benefit the most.  These districts see the most students enrolled in private charter schools, with Oakland leading at 25.4% of students.

This brings the district’s total per-student funding down.  If performance ratings progress, it is believed that fewer students will choose to enroll in charter schools, keeping enrollment in public schools up.