Indiana public school districts need to get their finances in better shape and quit borrowing so much money. If they don’t, higher interest payments will eat into their general fund and cause possible downsizing. This is because one financial institution is looking at the debt Indiana public schools carry and are not liking what they see.

The rhetoric that comes out of public school administrators on finances of their school districts are about to be tested after Standard & Poor’s does a 90 day audit. If they don’t like what they see, higher interest rates may happen. Here’s more from WFYI.org:

The credit rating agency Standard & Poor’s says that it has placed a 90-day watch on loans to Indiana districts due to uncertainty that districts can pay off their debt in a timely manner. The warning was triggered by a new interpretation of Indiana law, as originally reported by Chalkbeat Indiana.

When districts borrow money – if they can’t pay off their loans, the state is obligated by law to pay in their place. It keeps districts with good credit ratings, and therefore low interest. But that technique has raised concerns.

“We believe there is uncertainty that intercept payments will always be made available to ensure timely payment of debt service in full on this ‘AA+’ rated debt,” S&P said in a statement.

A drop in credit rating could mean big bucks for local school districts. It would affect interest rates for all 261 public school districts in the state.

Just how much will it cost schools i.e. taxpayers? Here’s what one school district would face in extra payments on interest:

Wayne Township officials told Chalkbeat the changes from S&P could cost the district more than $1 million in additional interest on bonds it plans to issue in the coming months.