S&P outlook, reserves and financial health: trustees hear monthly financial report
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Summary
Finance staff told the board the district’s 23–24 financial report scored 'superior' with a 92, but S&P cautioned that reserves have deteriorated and the outlook could move to "double-A negative" unless fund balance is rebuilt in two years; trustees discussed reserves and potential corrective actions.
Finance staff reviewed the district’s first-financial report and S&P commentary during the Nov. 17 meeting, describing both strong indicators and near-term risks.
Moises Santiago summarized the 23–24 financial indicators and S&P feedback, telling trustees the district’s financial report earned a 'superior' designation and a score of 92 for the referenced year. He warned, however, that S&P noted a rapid deterioration in reserves and said the district’s outlook could be changed from "stable" to "double-A negative" if fund balance is not rebuilt within two years.
"Our reserves have to be at least no less than 4 months," Santiago said, describing the agency’s expectation that the district restore a multi-month reserve level to maintain rating stability.
Santiago and trustees discussed one-time recoveries (including recapture appeals and TEA adjustments) that are improving near-term cash flow and the administration’s plans to put nonrecurring revenues aside instead of spending them. Finance staff also noted a surplus in the referenced year and described several technical indicators (days cash on hand, net position, and critical solvency measures) that underpinned the superior rating.
Trustees asked follow-up questions about the two-year corrective window S&P described, what operational changes would be required to generate surpluses and how recapture and state payments factor into short-term liquidity. Finance staff said there will be no immediate operational disruption but emphasized that long-term corrective measures (surplus budgets, replenished fund balance) are necessary to avoid a downgrade.
No board action was taken on the credit outlook at the Nov. 17 meeting; staff committed to more detailed budgeting work and to providing trustees with options for increasing reserves.