LOS ANGELES -- Standard & Poor's Corp. said in today's CreditWeek Municipal that voter approval of a school voucher proposal on the Nov. 2 California ballot would have an uncertain financial impact on the state.

Passage of the initiative, known as Proposition 174, will probably not result in credit rating downgrades to the state or its school districts, at least in the short-term, the rating agency said.

"Reasonable assumptions indicate that no immediate dramatic change in credit quality is likely to occur, although there will be costs to the state and possibly local school districts," the rating agency said.

"Depending on the unknown amount of migration between public and private schools, the impact on the state could range from a $1 billion cost to $1 billion increase" in revenues, the rating agency said. "The most likely effect would be probably an unwelcome, but manageable, cost."

Currently in California, about 5.2 million pupils attend public elementary and high schools and 550,000 students attend private schools.

Citing estimates provided by the California Department of Finance, the rating agency said if public school funding per pupil remains constant, the state will "break even" or gain money if 14% or more of students now in public schools shift to private schools.

The finance department estimates that the state would gain $1,100 for each departing public student, Standard & Poor's said. The calculation is the difference between the average state contribution of $3,700 per pupil to public schools [apart from local funding] and the $2,600 required state contribution per private student under the proposed initiative.

"The net result at current funding levels is that the more students that leave the public system, the better off fiscally the state becomes -- although picking up the cost of existing private students still will be expensive," the rating agency said. "If 6% of public students go private, the state would lose $144 million in 1995 and $861 million in 1997," the rating agency said.

If the measure passes, significant numbers of students are not expected to immediately transfer into private schools, Standard and Poor's said. Thus, the immediate impact of the voucher initiative would be manageable at state and local levels, the rating agency said. The rating agency said it would take time to create new private schools or for existing ones to expand capacity significantly.

Recent polls suggest that the proposition will not pass, according to Standard & Poor's, but the rating agency said "the possibility exists that a voucher mechanism will be implemented at some point, apart from the outcome of this election."

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