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The Serna Center \u2013 headquarters of the Sacramento City Unified School District \u2013 on Thursday, Feb. 5, 2026.<\/p>\n
JOS\u00c9 LUIS VILLEGAS<\/p>\n
jvillegas@sacbee.com<\/p>\n
S&P Global Ratings, one of the nation\u2019s leading credit rating agencies, downgraded Sacramento City Unified School District\u2019s underlying bond ratings earlier this month amid the district\u2019s ongoing budget crisis, warning that the ratings could be cut again within a year.<\/p>\n
The development came as the district is working to close an unprecedented $170 million deficit and avoid state receivership, which would place the district under strict oversight while any emergency loan and interest are repaid.<\/p>\n
S&P Global Ratings downgraded the district\u2019s underlying rating on its California general obligation bonds to BBB from A- and its lease-revenue bonds to BBB- from BBB+, placing the bonds in the \u201cadequate capacity\u201d category and at the lowest investment-grade level, respectively.<\/p>\n
The downgrade reflects the agency\u2019s belief that the district\u2019s general fund and reserves have deteriorated quickly because the board failed to make timely budget cuts and increased ongoing spending without matching revenue growth, the agency said.<\/p>\n
\u201cThe outlook is negative,\u201d the agency wrote in its June announcement<\/a>.<\/p>\n \u201cWe could lower the rating further if the district\u2019s structural imbalance leads to sustained deficit reserves, without a credible plan to restore in a reasonable timeframe, and an inability to make timely debt service payments on its GO (general obligation) or lease revenue bonds outstanding.\u201d<\/p>\n The agency added that it could revise the outlook to stable if the district continues making the budget cuts needed to balance its operations and rebuild reserves.<\/p>\n S&P\u2019s downgrade also follows a move<\/a> by Fitch Ratings, another leading U.S. credit rating agency, which downgraded SCUSD\u2019s bond rating from A+ to BB-, pushing the district into speculative-grade territory in May.<\/p>\n \u201cState control could improve the district\u2019s credit quality,\u201d Divya Bali and Karen Ribble, directors at Fitch, said in May. \u201cWe will monitor the district\u2019s fiscal health and may incorporate the benefits, if any, of state control if that should be the outcome.\u201d<\/p>\n The school district uses bond funding to finance facilities construction, and changes in the rating can affect borrowing costs.<\/p>\n The district\u2019s efforts to find long-term budget savings have made uneven progress, with its business office\u2019s latest projection<\/a> showing a cash crunch by November and deficits growing to nearly $284 million in 2026-27 and nearly $510 million by 2028-29.<\/p>\n Related Stories from Sacramento Bee<\/p>\n
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