Milwaukee Public Schools’ Credit Takes Hit Over Missing Financial Report

MPS's Credit Rating Downgraded

The fallout from Milwaukee’s late and incomplete financial report continues to grow.

S&P Global Ratings on Wednesday announced a credit downgrade for Milwaukee's school system.

"S&P Global Ratings placed its 'A+' long-term ratings on Milwaukee Public Schools (MPS) Wis.'s outstanding series 2016A and 2017A redevelopment lease revenue bonds; series 2015A, 2016B, and 2016C taxable redevelopment lease revenue bonds; and 'A' long-term and underlying ratings (SPUR) on the district's series 2003C and 2003D taxable pension funding bonds, all of which were issued by the Redevelopment Authority of the City of Milwaukee (RACM), on CreditWatch with negative implications," the S&P wrote on Wednesday.

The credit downgrade is the latest consequence of MPS’s failure to tally its spending from last year.

MPS has already lost nearly $81 million in state aid because of the missing financial report for the 2022 school year. MPS also lost its Head Start funding, but that was part of a different scandal at the school district.

The city’s school district turned-in its missing 2022-2023 financial report to the Wisconsin Department of Public Instruction in November. But DPI said it’s still waiting on a full audit of those numbers.

That’s why S&P on Tuesday downgraded the school district’s credit.

"To date, the district has not issued its final 2022-2023 audited financial statements," S&P Global Ratings credit analyst David Smith is quoted as saying in S&P’s piece. "The ratings' placement on CreditWatch with negative implications reflects our view that there is at least a one-in-two chance of a lower rating in the next 90 days, pending the finalization of the district's 2022-2023 audit and our assessment of whether its credit quality has deteriorated due to financial reporting irregularities.”

The credit downgrade will simply make it more expensive for Milwaukee Public Schools to borrow money.

There’s no indication that MPS is looking to borrow money, though the school district has said it is looking at a budget gap. That gap is despite a quarter-billion dollar tax increase that voters approved last spring, just before news of MPS’s financial scandal broke.

DPI has placed Milwaukee Public Schools on a corrective action plan to get the district’s finances back in order. But MPS has already missed some of the deadlines in that plan.

Milwaukee Public Schools are also late with the financial report from the 2023-2024 school year, and may be late with the report from this current school year once it wraps up in the summer.