State’s Bond Rating Linked to Education Levels
By Emily Wagster Pettus
JACKSON – Grab the nearest kindergartner and tell her this: Stay in school and study hard because Mississippi’s long-term economic outlook depends on you. If you slack off and drop out before getting a decent level of education, your state government — that is, your fellow citizens — might have to pay higher interest rates to retire long-term public debt 20 years from now.
Sound like an exaggeration? Consider this nugget from the Nov. 5 news release in which the Fitch credit rating agency announced it was downgrading Mississippi’s bond rating outlook from stable to negative:
“The state’s socio-economic profile is relatively weak, with wealth and educational attainment indicators that significantly lag national levels.”
Poverty and low education levels not only weaken a person’s quality of life; they also hurt the financial outlook for state government.
Mississippi’s bond rating remains AA+, only one step below the highest AAA level, but the agency warned the rating could be lowered unless officials take steps to shore up state government finances. A lower bond rating would make it more expensive for state government to borrow money.
In addition to citing poverty and relatively low education levels, Fitch said Mississippi’s unfunded liability for public employees’ pensions is too high. It also said the negative bond rating outlook reflects Mississippi’s slow recovery from the recession and continued use of one-time money to cover recurring government expenses.
Sure, education should be its own reward. But lawmakers who set education budgets are more likely to be moved by economic arguments: A state is a more attractive to investors if it has more people who’ve finished high school and college, because those people are more likely to have marketable job skills.
Fitch is one of the three leading U.S. credit rating agencies, along with Standard & Poor’s and Moody’s Investors Service. The rating agency is not connected to Mississippi’s state treasurer, Lynn Fitch, although the Republican did joke at a recent Mississippi Economic Council meeting that her last name ought to help the state get a better bond rating — a lighthearted comment that came several days before the bad news about the downgrade of the bond rating outlook.
Republican Tate Reeves served two terms as state treasurer before being elected lieutenant governor in 2011. It’s probably no coincidence that Reeves says often, in speeches and in response to questions, that he wants to increase education attainment levels in Mississippi. It’s the same phrase he would’ve heard from bond rating agencies when he was treasurer.
“It is my view that charter schools are not some panacea. They’re not going to solve all of our educational challenges overnight,” Reeves told reporters in February 2012. “They are simply another tool in the toolbox to improve education attainment levels in Mississippi.”
The Legislature enacted a law this year to facilitate creation of several charter schools, which are public schools that receive tax dollars but are free from some state regulations. Supporters see charter schools as a path toward innovation. Critics see them as shaky experiments that will drain limited dollars from some of the poorest schools in the nation. The first charter schools are expected to open in 2014 or later.
Lawmakers and Republican Gov. Phil Bryant also want to establish a “third-grade gate,” to prevent children from advancing into higher grades if they can’t read proficiently by then. Keep that in mind while talking to that cute little kindergartner about her role in the state’s economic future: No pressure, sweetie, but you might want to put down that video game and go read a book.