Moody’s Investors Services last week affirmed its Aa2 rating on the Cedar Rapids School District but revised the outlook to negative, warning of narrowed reserves and ongoing challenges to replenishing its fund balance.
Potential cuts in future state aid and declining enrollments trends could contribute to the district’s future challenges, analysts said.
The Aa2 rating applies to just under $31 million of unlimited-tax general obligation debt.
The school district serves Cedar Rapids, the hub of the eight-county region in east-central Iowa. The district reported an enrollment of nearly 17,000 students in fiscal 2011, marking an average decline of 1.4% since 2008, Moody’s said.
School officials said the decline is due to residents who left the area after the massive 2008 flood.
The district had seen relatively stable finances before 2009, but since then has begun to see some weakness in its total fund balance.
Pressure increased in late 2009 after Iowa Gov. Chet Culver ordered 10% cuts to local school districts, and state aid to the Cedar Rapids system came in $8.4 million less than budgeted.
Since then, the district has cut costs and is considering options for raising new revenue.
“We believe management’s willingness to raise revenues in light of the ongoing national economic stagnation and reduce expenditures is consistent with the Aa2 credit profile,” Moody’s analyst Nora Wittstruck wrote in a recent report on the outlook revision. “However, ongoing maintenance of the rating will hinge on the district’s ability to achieve improved financial flexibility and liquidity within the indicated timeframe by the end of fiscal 2013.”
