On May 14, Summit School District received notice of downgrades in both its bond rating and its issuer rating. Where the district had an Aaa bond rating before, it now has an Aa1 bond rating. Where it had a Aa1 issuer rating before, it now has an Aa2 issuer rating. 

The ratings are handed down by Moody’s, a financial services company that provides credit ratings. 

According to Moody’s, a bond rating assesses credit risk on financial obligations like bonds, and an issuer rating is an opinion on an entity’s ability to meet its financial obligations.

The downgrade is “driven by a multiyear trend of deficit operations,” the report states.

The Moody’s report indicates the district’s unassigned reserves levels were around 26% of the 2023-24. This means 26% of general fund budget was restricted as reserves and not available for use. The unassigned reserves accounted for around 11% of the 2024-25 general fund budget.

“Governance is a key driver of the downgrade and reflects the governing body’s decision to use fund balance to fund staff salary increases, coupled with the intention to maintain reserve levels much lower than those historically held,” the report states.

The report details the district anticipates ending the fiscal 2025 year with a $1.2 million general fund deficit, and this is contributing to dwindling reserves. It outlines the district currently has around $59 million in total outstanding debt, and that its long-term liabilities for the 2024 fiscal year were equal to 370% of revenue.

According to the Summit School District, it was one of two districts in Colorado that had an Aaa bond rating. 

Chief financial officer Kara Drake said the downgrade doesn’t impact existing debt for bonds the district has issued. 

“However, when and if the district decides to pursue new bond issuances, it will come at potentially a higher rate, because our credit score went down,” she said. 

Communications director Kerstin Anderson said reserves were spent on teacher salary increases. She said negotiations led to a 4.86% increase in salary spends in 2023, a 11.7% increase in 2024 and a 4.8% increase in 2025.

“Summit School District remains in strong financial standing,” Anderson said.

The Moody’s report stated the district’s management said it plans to maintain general fund balance just over the 10% reserve, which is the lowest it can be per the Summit School District Board of Education’s policy, for the fiscal year 2026.

Moody’s laid out ways in which the district could get back to a Aaa bond rating, including maintenance of general fund reserves over 20% of revenue and declining the long-term liabilities ratio to under 250% of revenue.

At a May 29 meeting board of education meeting, members briefly discussed the matter.

“Were we Aaa? Which is awesome, yes, but do most of the districts in Colorado maintain the double Aa rating? Yes. So, we’re in with a pack,” board member Lisa Webster said

Board member Johanna Kugler said she wanted to see more district committees and stakeholders looped into conversations around the balance of supporting taxpayers with providing teachers and staff livable wages.

“To some degree, it’s more important to have our great teachers on the ground than overly worry about that third ‘a,'” board member Julie Shapiro said.

Board president Consuelo Redhorse read a letter submitted by the District Accountability Committee in relation to the budget and reserves. The letter showed support for the current budget plan, but highlighted the importance of maintaining reserves.

“We are concerned about being able to maintain the 10% reserve mandated by the board,” the letter said. “We feel that maintaining this 10% reserve is critical, and that we need to look for further efficiency, since we believe there may be less funding in future years.”