Austin schools’ shrinking reserves lead to Fitch downgrade
Rich Saskal
A decrease in Austin Independent School District’s budget reserves led to a Fitch Ratings downgrade on Wednesday, which followed outlook revisions to negative by two other rating agencies this year.
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Fitch cut the Texas school system’s underlying unlimited tax bond
The rating agency said it “expects reserves to decline to about 11% of spending in fiscal 2026 before improving to at least 15%, supported by cost-saving measures in the fiscal 2027 budget and proceeds from one-time property sales.”
In September, Moody’s Ratings revised its outlook on the district’s underlying Aaa rating to negative from stable due to a “trend of deficit spending has materially weakened financial ratios, particularly in the general fund.”
KBRA, which has an AAA underlying rating for the district, changed its outlook to negative in July, saying the move “reflects increased risk with respect to the Austin Independent School District’s ability to maintain a level of reserves consistent with the rating level as it works to restore structural budget balance following three years of significant fund balance draws.”
The district did not immediately respond to a request for comment.
Austin ISD, which received voter authorization for $2.44 billion of bonds in 2022, shuttered several schools at the end of the 2025-26 school year to help deal with financial challenges. Its school board approved an $887 million
The district’s declining enrollment and its effect on per-pupil funding revenue could further pressure the district’s budget and financial resilience, Fitch said.
Most of the district’s $2.46 billion of outstanding general obligation bonds as of June 30, 2025, are rated triple-A through the Texas Permanent School Fund’s bond guarantee program.
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