On May 22, 2025, the U.S. Supreme Court issued a split decision effectively upholding a lower court ruling that blocked the establishment of a religious charter school in Oklahoma. In S&P Global Ratings' opinion, the outcome supports credit stability for the charter school sector by maintaining the long-standing funding framework under existing charter school laws. However, the lack of a definitive ruling means the decision could allow the court to possibly reconsider the issue in a future case.
What's Happening
Last month, St. Isidore of Seville Catholic Virtual School v. Drummond reached the U.S. Supreme Court. The question before the court was whether a religious institution like St. Isidore could operate as a publicly funded charter school without violating the Establishment Clause of the First Amendment, which prohibits the government from establishing or favoring any religion.
In April 2023, the state's charter school authorizer, Oklahoma Statewide Virtual Charter School Board, approved the establishment of St. Isidore of Seville Catholic Virtual School as a publicly funded charter school with a religious affiliation. Subsequently, Oklahoma's attorney general filed a lawsuit against the board, arguing that the approval violated both state and federal constitutional provisions separating church and state. In June 2024, the case went before the Oklahoma Supreme Court, which ruled that establishing St. Isidore violated Oklahoma statutes and the Oklahoma Constitution. Under Oklahoma law, a charter school is a public school. The Oklahoma Charter Schools Act requires that all charter schools be nonsectarian in their programs, admission policies, and other operations.
Why It Matters
The outcome of this Supreme Court decision supports credit stability for the charter school sector by maintaining the long-standing funding framework under the charter school laws in 47 states plus Washington, D.C. that consider charter schools as public schools and generally require that they be nonsectarian in order to receive public funding.
What Comes Next
The Supreme Court was evenly divided in its decision allowing the Oklahoma Supreme Court's ruling to stand, which means the decision may not set a precedent nationwide and the court could revisit this issue at another time. Charter authorization frameworks and funding reliability are key aspects of our credit analysis and any material modifications to the framework could have consequences for a school to pay its debt service obligations on time and in full.
Related Research
- U.S. Charter Schools 2025 Outlook: Stability For Now, With Pockets Of Pressure, Jan. 22, 2025
- U.S. States 2025 Outlook: Eyes On Washington, Focus On Budgets, Jan. 7, 2025
This report does not constitute a rating action.
| Primary Credit Analyst: | Robert Tu, San Francisco + 1 (415) 371 5087; robert.tu@spglobal.com |
| Secondary Contacts: | Jessica L Wood, Chicago + 1 (312) 233 7004; jessica.wood@spglobal.com |
| Luke J Gildner, Columbia + 1 (303) 721 4124; luke.gildner@spglobal.com |
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