A growing trend of school district consolidations in Minnesota could improve the overall credit quality of participating school systems, according to Standard & Poor's Corp.
In last week's CreditWeek Municipal, the rating agency said that about 31 of the state's 400 school districts will undergo consolidation of some or all of their operations by July 31.
Ellen Hennessy, an associate at Standard & Poor;s, said that consolidation may strengthen a district's financial flexibility and capital programs.
"It's definitely a positive thing. It looks like it will result in improved financial positions for these districts," Hennessy said.
School districts that merge "can gain depth and diversity in their economics and tax bases, potential reduction of debt ratios and financial efficiencies," Standard & Poor's said.
In addition, the state helps to offset the cost of consolidation by giving the merging districts $600 per students, payable over four years.
The rating agency said that a consolidated district could be eligible for a rating upgrade if it achieves one or more of the following goals: better fiscal accountability, improved financial performance, reduced administrative costs, lower debt ratios, and enriched classroom programs and resources.