Moody's Investors Service said it has downgraded St. Clair County School District #189 (East St. Louis), Ill.'s general obligation rating to Ba1 from Baa1.
Concurrently, the ratings are placed under review for possible downgrade.
The district's general obligation unlimited tax pledge provides for a property tax levy that is unlimited as to rate or amount to be used for repayment of the district's outstanding bonds.
The downgrade to a Ba1 rating reflects the district's projected operating budget deficit in the current fiscal year, as its restructuring plan has not resulted in expected savings during fiscal 2013.
The downgrade is also based on a projected negative cash balance, which could occur as soon as May 2013, necessitating a $9.0 million supplemental appropriation from the state of Illinois (GO rated A2/negative outlook).
The rating also incorporates a declining tax base in St. Clair County (GO rated Aa2) with a weak economy and low socio-economic characteristics, as well as above average debt burden with a below average amortization schedule.
The rating remains under review for possible downgrade pending the resolution of a number of contingencies that could impact the district's immediate cash flow as well as longer term ability to regain structural balance and rebuild reserves.
The timing of receipt of the supplemental aid is unclear. Further, the district is working to develop a potential state aid intercept bond issuance for cash flow needs, which may occur as soon as May 2013 without additional revenues. This would reduce state aid necessary for operations and debt service in fiscal year 2014.
Additionally, the district is working to finalize its fiscal 2012 audit.