LOCAL GOVERNMENT / TAXES

Fitch Just Showed Escambia What a Downgrade Looks Like—And the Property Tax Vote Hasn’t Even Happened Yet

The Escambia County School District’s outlook just went negative. Reserves are already below the safe line. This is the warning Moody’s, S&P, and Fitch gave Florida voters earlier this month. Now, it’s playing out in real time, before a single ballot is cast.

On June 26, Fitch Ratings affirmed the Escambia County School District’s bond ratings—but quietly changed something that matters more than the letter grade. The district’s Rating Outlook moved from Stable to Negative.

• Nine days ago, I wrote about what Moody’s, S&P, and Fitch were telling Florida voters about the property tax amendment on the November ballot: cut property tax revenue without a replacement plan, and local governments get squeezed into reserve drawdowns and credit downgrades.

The school district report isn’t about that amendment. It’s a separate, ongoing problem—declining enrollment as more families use school choice options, plus rising costs. But it shows precisely the mechanism the rating agencies warned about, already in motion, in our own backyard.

What Fitch Actually Found

The district held onto its ratings: ‘AA-‘ on its Issuer Default Rating and sales tax revenue bonds, ‘A+’ on its certificates of participation. The outlook is what changed, and Fitch was specific about why.

“The Negative Outlook reflects the district’s fiscal 2025 reserve decline and the expectation of further reserve weakening in fiscal 2026 amid continued near-term operating pressure.”

• Unrestricted general fund reserves fell to 4.9% of spending in fiscal 2025—just under the 5% floor Fitch treats as the minimum for its current financial resilience grade.
• Fitch is projecting more reserve erosion in fiscal 2026, not stabilization.
• The driver is declining traditional enrollment tied to expanded school choice. School vouchers take money away from public education.
• Fitch only kept its current assessment by adjusting the district’s reported 4.9% up to 5.0% in its model—essentially extending credit on the assumption the district gets this fixed. That’s a one-time grace, not a cushion.

The number to watch is 5%. Fitch’s own rating sensitivities spell out what happens if reserves stay below that line: a downgrade in the district’s “financial resilience” assessment, which feeds directly into the overall bond rating. The district has two years—the length of this Outlook period—to prove it can hold the line.

• Can a school board fixated on removing books from school libraries turn around the district’s finances?

The Connection to November

This is a different revenue problem than the one driving the property tax amendment. But the warning from Fitch, S&P, and Moody’s in their amendment analysis was never really about one ballot measure. The warning about what happens to local government finances when revenue shrinks faster than spending can adjust.

Escambia County and the City of Pensacola are watching the same metric that Fitch just flagged for the school district. If the property tax amendment passes in November and reserves get drawn down to cover the gap, the county and city could be looking at their own version of this June 26 report—a Negative Outlook, then a downgrade if the trend doesn’t reverse.

Why a Downgrade Actually Costs Pensacola Money

• Lower ratings mean higher interest rates on every future bond issue—for school construction, roads, water and sewer systems, public safety facilities.
• Those higher borrowing costs get passed to taxpayers, the opposite of what an exemption amendment promises.
• Reserve drawdowns leave less cushion heading into the next recession or hurricane season—exactly when local governments need flexibility most.
• Fitch’s own sensitivities note a sustained 60% increase in long-term liabilities without matching income growth could also trigger a downgrade—another lever local boards need to watch as they finance capital projects.

Bottom Line

The Escambia County School Board has focused on removing books, not on its financial crisis.

• Can an elected superintendent make a difference? The school board wants a local politician, not a trained educator, to run the school system. The board has rigged the vote by insisting it occur in August, not November.

Three board members are up for re-election—Kevin Adams, Paul Fetsko and David Williams—on August 18. Are they just distracting the voters from the real problem?