The Wauwatosa School District’s “narrowing financial position” and a cash balance below its target level was cited by the credit ratings agency Moody’s in the agency’s decision to downgrade the school district to aa2 credit, or two steps below Moody’s highest rating.
The downgrade comes one month after the school district chose to spend down much of its cash balance to pay $3.5 million as part of the City of Wauwatosa’s settlement of a property tax dispute with Froedtert Hospital. The district will have the option later this year of recouping that money through a one-time levy increase, though that still may not be enough to return the district to its former aa1 credit rating.
“Available fund balance and liquidity have narrowed over the last three years because of a large investment in staffing costs,” Moody’s said March 13 in announcing the credit rating change. “[District] management projects a modest operating surplus in fiscal 2026 that will leave available fund balance across operating funds (general and debt service) around 12% of revenue,” which would be short of the district’s 17% target.
The new aa2 rating “reflects the district's strong local economy, somewhat narrow financial position and moderate leverage,” Moody’s said. “Strong resident income and wealth metrics are key credit strengths, particularly given recent voter support for an increased operating levy.”
“Voter support” is a reference to the 2024 passage of a referendum granting the district permission to exceed the state’s levy limits by $16.1 million in each of the four subsequent years, to cover “operational expenses, including salaries, benefits, and instructional and co-curricular programming.”
Even so, the Moody’s downgrade has opened the district to criticism from the four school board candidates who are running an anti-incumbent campaign together as the self-identified "2030 Slate" in the April 7 election.