We raised the rating on Andover Regional School District Board Of Education one notch to AA- from A+ due to the continued positive fiscal results leading to rapid increase in reserve levels. There were two upgrades in the portfolio as well. In another case, we lowered the rating on Saddle Brook Township Board Of Education one notch to 'A' from 'A+' due to higher-than-anticipated special education costs leading to significant fund balance drawdowns. For instance, we lowered the rating on Edgewater Borough Board Of Education three notches to 'A' from 'AA' due to significant reductions in reserves and liquidity levels related to above-average enrollment growth and the state-mandated tax-levy cap that limits revenue generation. That said, negative rating actions in the portfolio were not simply caused by COVID, but driven by a confluence of factors. The COVID-19 induced economic recession and the associated cuts to state aid contributed to additional financial risk for a number of New Jersey school districts. Additionally, at 97%, the majority of the ratings have a stable outlook, while less than 1% have positive and 2% negative outlook. Two school districts have had positive rating actions and six others had negative rating actions on their general obligation bonds. Since May 2020, New Jersey school district credit quality remained stable, with only 3% experiencing rating movement. S&P Global Ratings maintains ratings on over 300 school districts within the state. The stability is supported by expected modest yet continued economic growth, predominant reliance on municipality-guaranteed property taxes, and strong budgetary performance despite the maintenance of lower reserves than most out-of-state peers. New Jersey school districts have demonstrated relatively stable credit quality in recent years, even through the COVID-19 pandemic, and S&P Global Ratings expects their credit quality to remain stable in the near term.

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