The Arizona Supreme Court decided last month that the state formula for school district funding is not constitutional, a ruling that has Stalled the closing of several school district' bond financings, Moody's Investors Service said.

At least seven school bond issues that were priced but not closed before the July 21 ruling cannot be delivered until the court clarifies the intent of its ruling, Moody's said in a release last Thursday.

The rating agency said that the ruling left "unclear" whether other schools that want to issue debt can do so legally Under the existing funding formula that the high court struck down. The formula has been used since 1978.

The court said that the legislature should change or develop a new funding formula. The court instructed the Maricopa County Superior Court to monitor the legislature, and to determine if lawmakers act "within a reasonable time" to revamp the formula.

But the court did not define "reasonable time," which it needs to clarify, Moody's said.

The rating agency said that it will "monitor the legislature's reaction to the court ruling," but will not at this time take rating actions on any outstanding school district ratings.

In its ruling, the court found disparities among school district facilities and traced them to the reliance on local property taxes for capital needs.

The court said the current system of state formula funding for districts "does not satisfy the constitutional mandate of a general and uniform School system,"according to Moody's.

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